Why AI solutions have just three months to prove themselves
Even to the most casual observer, it's obvious that just every vendor in the software business is busy "AI-washing" their offerings to give the appearance of keeping up. For example, the term "AI" was mentioned at least 50 times on the earnings calls of 12 Standard & Poor 500 companies, according to research by FactSet. The information technology sector had the highest number (50) and percentage (91%) of companies citing "AI" on Q1 earnings calls.
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At the same time, technology managers see actual progress underneath all the AI pronouncements. At least 77% agree or strongly agree that "software companies have genuinely advanced AI technology in their products beyond merely capitalizing on the AI hype," according to a survey of 1,940 executives and managers, both in the business and technology sides of the house.
The survey, conducted and published by G2, shows these AI products are hot items. More than half, 56%, report that their organization had purchased an AI platform within the last three months.
Most, 57%, expect to see ROI within three months of a software purchase -- especially for their AI tools. Three in four (75%) of AI-savvy companies expect even faster ROI than for typical software purchases.
At this point, the ROI of AI is being measured by employee productivity: 44% cited this as their key metric. The next highest measure was cost savings at 42%.
AI functionality has become a critical component of software purchases across the software landscape. In addition to investing in core AI infrastructure, buyers are also looking for AI capabilities baked into other purchases. Technology teams want solutions with AI functionality across a range of organizational areas, including data analytics (80%), collaboration (78%), information security (78%), sales/CRM tools (75%), and marketing solutions (73%).
The G2 study also looked at trends in overall software buying habits; aside from the AI frenzy, it found greater caution. Overall a majority, 52%, expect to increase spending in 2025, while only 8% foresee a decrease. This remains flat from 54% expecting to increase spending in G2's survey from a year ago. Technology managers have grown more cautious and are pickier about which products they choose and -- as mentioned above -- expect a three-month ROI.
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Buying cycles are increasing due to stricter vetting processes, the study's authors state. Purchases are taking longer -- 49% of buyers took four months or more to make a purchase decision on a $20,000+ piece of software, rising from 41% last year.
The purchase slowdown may be because tech teams must defer final decisions to their financial and legal departments. At least 41% of buyers in the survey identified a C-suite employee -- or the CFO or highest-ranking financial officer -- as the person ultimately responsible for signing off on a purchase decision.
The CFO always -- or frequently -- holds the final decision-making power (79%), while the legal team tends to slow or block purchases in 61% of the cases. The more AI-savvy users in the survey (72%) were most likely to complain about being held up by their legal departments.
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Software users are most likely to rely on their peers for making purchasing decisions while poo-pooing traditional analyst reports and vendor websites, the survey shows. Product review websites are the most consulted information source, according to 31% of tech professionals and managers -- up from 23% in 2023, 18% in 2022, and 13% in 2021. Independent peer forums and communities follow closely behind. Close to 1 in 10 called vendor websites "unreliable sources of information" -- up from 3% last year.