IBM: AI spending expected to surge 52% beyond IT budgets

In customer service, AI use cases, particularly for personalized responses and follow-ups, could grow by 236% in the next 12 months.

AI spending is expected to surge 52% beyond IT budgets, according to findings from a new global study by IBM’s Institute for Business Value. Driving this surge will be the retail industry as it looks to embed more AI into its products and services.

According to the study, retail and consumer product executives are dramatically shifting their focus toward AI, as brands prepare for the next phase of AI-driven transformation across the enterprise. Specifically, retail and consumer products companies surveyed say they plan to allocate an average of 3.32% of their revenue to AI in 2025.

Equivalent to US$33.2 million annually for a US$1 billion company, this investment is set to span functions such as customer service, supply chain operations, talent acquisition, and marketing innovation, highlighting AI's expansion beyond traditional IT applications.

The retail industry continues to experience faster digitalization as it looks to meet customer demands and remain on top of the competition. While the e-commerce industry remains highly competitive, the retail industry is hoping its digitalization efforts can improve its performance, as customers are now looking for the best user experience.

For Dee Waddell, Global Industry Leader, Consumer, Travel & Transportation Industries at IBM, AI is no longer just a tool, it's a strategic imperative.

"Retail and consumer product companies are at a tipping point where embedding AI across their operations can help define not just productivity gains, but the future of brand relevance, engagement and trust,” said Waddell.

In fact, key findings for the study showed a rapid adoption across the enterprise. The survey revealed that 81% of executives and 96% of their team are already using AI to a moderate or significant extent. Moreover, the executives indicate they want to expand AI usage to more sophisticated use cases. This includes having AI in integrated business planning where they plan to increase usage by 82% in 2025. To ensure the workforce can work with AI, 31% of employees will need to learn new skills to work with AI in 2025, increasing to 45% within three years.

In customer service, AI use cases, particularly for personalized responses and follow-ups, could grow by 236% in the next 12 months when compared to the prior year based on survey responses. Notably, responses indicate that 55% of these improvements are expected to involve human-AI collaboration, while only 30% would be fully automated—highlighting the need to equip employees for seamless AI integration.

With customer service expected to drive AI adoption, the study also revealed that investment in ecosystem platforms could skyrocket this year. These tools that facilitate exchange of data and AI models are already seeing increased demand by companies as they look to implement AI securely as well.

Tech partners will have the opportunity to drive this adoption, with 89% of growth in the AI ecosystem expected over the next three years. Key areas businesses would look to partners include how they accelerate their AI adoption and blend AI capabilities withing their business efficiently.

At the same time, 87% of surveyed executives also claim to have clear AI governance frameworks. This is essential, given the amount of data that will be used to get the best outcome for their AI use cases. However, the study also revealed that fewer than 25% have fully implemented and continuously review tools to manage risks like bias, transparency, and security. This reveals a critical gap in operational oversight.

The report highlights that leading brands can shift their perspective on AI from a mere tool for boosting productivity to a foundational driver of enterprise innovation. This transformation necessitates reimagining governance structures and implementing reskilling strategies.

As such, retailers should design AI initiatives that align closely with their brand objectives and actively engage with strategic partners, such as start-ups and technology firms. Breaking down silos between finance, technology, and business teams is equally crucial. By promoting cross-functional collaboration, these stakeholders can collectively develop compelling business cases that showcase how AI can secure a sustainable competitive edge.