The company said that despite this year's growth being somewhat less than in previous years, investment in AI would show a quick recovery.
Looking ahead, IDC said it saw revenues exceeding US$300 billion in 2024, with a five-yer compound annual growth rate of 17.1%.
As to the break-up, the company said software would bring in the most revenue in 2020, nearly 80% of the total. Of this, about US$120.4 billion would come from AI applications, while software platforms would deliver the remainder (US$4.3 billion).
While software would remain the largest category throughout the forecast period, it would also see the slowest growth with a five-year compound annual growth rate of 16.7%.
"The role of AI applications in enterprises is rapidly evolving," said Ritu Jyoti, program vice-president, Artificial Intelligence Research at IDC. "It is transforming how your customers buy, how your suppliers deliver, and how your competitors compete. AI applications continue to be at the forefront of digital transformation initiatives, driving both innovation and improvement to business operations."
CRM AI applications are expected to take centre stage within the AI applications market, both in terms of size and growth opportunities, in the coming years. "Customer experience is the new brand. Leading CRM vendors are driving the intersection of CRM and CX, that help build strategies that improve both your customers' and your employees' experience with your business," added Jyoti.
Adobe took the top spot for AI-centric CRM applications while Microsoft was top in AI non-centric CRM applications. In ERM AI applications, Ceridian and Intuit took the top spots in AI-centric and AI non-centric types, respectively.
As for the rest of the AI Applications market, IBM was in first position under AI-centric types while Microsoft occupied the top spot under AI non-centric types.
IDC said the second largest AI category was services which would reach US$18.4 billion in 2020, an increase of 13% year-on-year. Within the AI services market, AI IT services accounted for about 80% of revenue with AI business services delivering the rest.
"The pandemic has interrupted the momentum of AI services market growth in nearly all regions," said Jennifer Hamel, research manager, Analytics and Intelligent Automation Services. "However, enterprise demand for AI capabilities to support business resiliency and augment human productivity will sustain double-digit expansion in 2020 even as other discretionary projects experience delays."
IDC said rising demand for expertise in embedding AI-enabling technologies in business analytics and intelligent automation programs had created a highly competitive and fragmented AI services vendor landscape. The Worldwide Semiannual Artificial Intelligence Tracker publishes more than 150 companies under AI services and the top five were IBM, Accenture, Deloitte, Infosys, and Cognizant who together captured roughly a third of the worldwide AI services market in 2019.
The company said it expected AI hardware (server and storage combined) revenues to reach US$13.4 billion in 2020, representing 10.3% year-on-year growth, which is a significant drop from the previous year when it grew 33.4%.
Within this market, AI storage is forecast to grow 11.4% this year, slightly ahead of AI server, which is expected to grow 10.1%. However, from a size perspective, AI server is responsible for more than 80% of total AI hardware revenues. The overall hardware market is forecast to have a strong recovery with 35.5% year-on-year growth next year, led by AI storage, which is expected to grow 43.1% year-on-year.
Amita Potnis, research director in IDC's Enterprise Infrastructure Practice, explained: "While the overall market has seen a slowdown due to the COVID-19 pandemic, investments for AI and analytics infrastructure will continue, and perhaps increase, in specific industries such as life sciences, healthcare and media and entertainment. Storage will see stronger growth than servers owing to new data generation, along with existing datasets that will be curated to support AI models with increased adoption of high-performance parallel file systems and all-flash object stores.
Peter Rutten, research director in IDC's Enterprise Infrastructure Practice, said, "The AI server market is expected to return to its previous growth trajectory in 2021, but with the US not having the pandemic under control, 2021 growth in the US will be lower than in China and Western Europe."
IDC said the top three companies in AI server were Dell, Hewlett Packard Enterprise, and Inspur. They were the only three with double-digit market share in that space. In the AI storage market, Dell Technologies, NetApp, and Hewlett Packard Enterprise held the top three positions.
Graphics: courtesy IDC