Despite all of the hype (or perhaps because of it), CFOs have yet to jump into the generative artificial intelligence (GenAI) bandwagon. A recent survey by Deloitte, as well as comments by IT vendors and software development firms, show that financial executives remain extra cautious about investing in a technology that has been portrayed as an overall game changer for business.
Money-cautious: A majority (63%) of CFOs consulted by Deloitte for its latest CFO Signals survey said they expect to spend less than 1% of their company’s budget in GenAI. About a third see their organizations spending between 1% and 5% of the budget in GenAI.
The <1% response was the most common across the board for companies of all sizes: from the smaller ones (less than US$1 billion in annual revenue) to the bigger players (over US$10 billion in annual revenue), as well as everything in between.
CFOs in small-to-medium size companies (between US$1 billion and US$5 billion in annual revenue) were the only ones which showed willingness to spend between 10% and 25% of their budgets in GenAI. Nevertheless, even those represented a small portion (2%) of that specific group.
Not as important: Over a third of the CFOs surveyed consider GenAI to be “neither important, nor unimportant” to achieving their business strategy.
42% see it as either not important or not very important.
24% see it as important or very important.
More info needed: A lack of precise information was a common thread running through the CFOs’ responses.
CFOs pointed to GenAI use cases (39%), cost, benefits and potential returns (28%), better understanding of risks/limitations (16%) and more information on the technology’s potential (16%) as factors that would help in their decision making processes.
Most of the respondents said that their organizations are currently experimenting with the technology (42%) or reading/talking about it (24%). Only 15% said they are building it into their strategy, while 17% state that it’s still too soon to tell.
There’s also a lot of concern about internal factors, such as lack of talent, potential compliance risks and a lack of data infrastructure and tech needs.
Growing skepticism: Although the AI hype train has shown no signs of slowdown, more skeptics are challenging superlative claims surrounding the technology.
“A lot of money is going to flow into AI, there’s going to be all of these startups doing AI-related stuff,” commented Christopher White, founder of IT staffing agency RadHires and digital products developer sneakers, in a previous interview with NSAM. “A lot of them are going to flame out; there’s going to be a few big ones that do truly interesting stuff, which have ridiculous exits”.
Tracking the market: Nearshore IT vendors noticed that several clients grew extra cautious during the first half of 2023, particularly when it came to projects that didn’t show solid returns.
Vendors expect that wariness to remain even as business picks up in the second half of 2023 and into 2024.
NSAM’s Take: As if building GenA-based products wasn’t challenging enough, IT vendors will have to face another, perhaps bigger challenge right after: coming up with an effective sales pitch.
Rumblings of a recession have been going for months, and financial executives seem to be sticking with the tech they know and understand. Bold experiments, though exciting, are not regarded as the wisest business move in the current climate.
CFO wariness does not mean that tech spending will dip. Forecasts still see increases in tech investment, though the money seems to be flowing in the direction of technologies that solve more urgent needs (like cybersecurity) or that have a proven track record of impact on business operations (like cloud).
Nearshore IT vendors have described the years of the COVID pandemic as a period of bonanza for digital spending, a situation that allowed them to “cruise” through the sales process. Under the current climate of macroeconomic pressures, they know they’ll have to put extra effort into their marketing strategies, with a focus on clarity and transparency.
The hype around GenAI will eventually die down. Once the field is less saturated with information, C-executives will be able to assess its actual applications for business and spend accordingly. Even then, we wouldn’t be surprised if budgetary priority is still given to cybersecurity, cloud infrastructure and data architecture.