This is how AI is going for businesses in 2024

Learn how top companies blend off-the-shelf and custom AI solutions to boost efficiency, drive innovation, and gain a competitive edge.

Understanding how AI can be applied to business is best achieved by studying the experiences of others. Not every organization is eager to embrace the first mover advantage, and many prefer to be second movers. 

There is nothing wrong with this approach. 

By learning from the failures and mistakes of others, you can streamline your own AI adoption. It helps to de-risk investments, as developing AI solutions can get quite costly. If you don’t have the budget to hire seasoned experts from the Big Four consulting firms, leveraging the insights gained by those who do is a great alternative. 

One way to tap into those learnings are industry insights.

McKinsey’s recent report, “The State of AI in Early 2024,” provides valuable information into how companies are implementing AI across various business functions. Over the last year, AI adoption increased by 17%, likely driven by the rising popularity of ChatGPT and greater accessibility to generative AI tools. 

According to the report, organizations are adopting a balanced approach, utilizing both existing off-the-shelf solutions and developing highly customized AI models. The implementation ratio is approximately 53% for off-the-shelf solutions and 47% for custom models.

This mix allows companies to leverage ready-made tools for immediate efficiency gains while also investing in tailored solutions that align closely with their unique operational needs. 

Although the scale currently tips towards off-the-shelf AI solutions, I anticipate a gradual shift towards bespoke solutions as organizations gain more experience with AI. As organizational talent develops expertise, companies will identify gaps in existing products and increasingly appreciate the enhanced capabilities that custom AI solutions offer.

The future will see a rise in AI solutions that are highly customized and deeply integrated into business workflows. Companies will prioritize AI systems that can be tailored to their specific processes and data, ensuring a seamless fit with their operations. 

But first …

Where are companies currently adopting AI?

The most accessible and immediate applications of AI are currently concentrated in marketing, sales, product development, and information technology (IT). However, other functions such as human resources (HR), strategy, and various knowledge-based roles are beginning to show promising results in terms of return on investment (ROI). Early adopters are also expanding their reach of AI solutions across various functions, with over half of organizations reporting using AI in two or more business verticals. 

The reason why this is important - not from a perspective of making companies feel they are behind if they haven’t followed suit, but understanding that there are so many use cases and functions where AI could be applicable. 

In fact, for each one of these functions, there is no need to reinvent the wheel. 

The saying of “work smarter, not harder” is totally appropriate here.

If you are an IT consultancy or a marketing agency, look at existing use cases in the industry, there is a chance either a solution for what you need to make your business already exists, or there is a paved path to learn from.

Should you invest in off-the-shelf AI solutions or develop bespoke AI solutions?

It depends.

There is no one-size-fits-all approach to AI investment. Your strategy should be guided by a few key factors, starting with how central AI is to your business strategy and how much you’re willing to invest. Are you ready to go all-in, or would you prefer to test the waters and experiment first to mitigate risks?

The good news is that both approaches have their benefits. 

Let’s explore the advantages of each.

Time and Cost

Off-the-shelf solutions are generally more affordable and faster to deploy than custom-built AI systems. They are ideal for companies looking to quickly enhance their capabilities without significant upfront investment. These solutions provide ready-made tools that boost efficiency and can be implemented with minimal disruption to existing operations.

In fact, minimal disruption is probably one of the biggest drivers for adopting off-the-shelf tools, as they “buy time” for companies to figure out their overarching AI strategy that could lead to disruption in their business and operating models. 

On the other hand, bespoke solutions are tailored to your specific business needs, offering a higher degree of customization and alignment with your unique processes and data. While they require a more substantial initial investment and longer development time, they can deliver significant long-term value by addressing specific business challenges and optimizing workflows.

From a timeline perspective, as an example, the time to implement off-the-shelf solutions is anywhere between 1-3 months vs 6-12 months for bespoke solutions, on average.  

Tax Implications

Investing in custom AI solutions can be classified as capital expenditures (CapEx). These investments are considered long-term assets that organizations can write off their taxes at the end of the year. This financial incentive makes the development of bespoke AI solutions more attractive, as it can alleviate some of the upfront costs associated with AI development.

Off-the-shelf AI solutions can enhance internal processes by providing ready-made tools that boost efficiency. These solutions are often subscription-based or pay-per-use, falling under operational expenditures (OpEx). 

Subscription-based AI tools are considered a routine part of business expenses. They allow companies to access advanced AI capabilities without the substantial investment required for custom solutions. This approach can be particularly beneficial for smaller businesses or those that need to deploy AI quickly and efficiently .

Though OpEx doesn’t offer the same tax benefits as CapEx, these AI products still help businesses improve their operations without the need for extensive development efforts.

Competitive Advantage

Custom AI solutions are tailored to fit an organization’s proprietary processes and data. This customization allows companies to integrate AI deeply into their workflows, creating specialized models that align closely with their operational needs. When AI solutions are designed with a company’s unique context in mind, they can significantly enhance efficiency and productivity, providing a competitive edge in the market.

In contrast, off-the-shelf solutions can still offer significant benefits. They can enhance internal processes by providing ready-made tools that boost efficiency and streamline operations. This approach can be particularly beneficial for smaller businesses or those that need to deploy AI quickly and efficiently without substantial upfront investment.

What does the future of AI hold for organizations?

Ultimately, the decision between off-the-shelf and bespoke AI solutions should be based on your specific business needs, strategic goals, and available resources.

By carefully weighing the benefits of each approach, you can make an informed decision that aligns with your overall business strategy.

Investing in bespoke AI solutions will be seen as a strategic move to secure long-term value. These solutions will not only address immediate challenges but also provide scalable and adaptable tools that can evolve with the business.

While off-the-shelf AI solutions currently dominate, the future points towards a growing preference for bespoke AI solutions.

This shift will be driven by the increasing expertise of organizational talent, the identification of gaps in existing products, and a greater appreciation for the capabilities and advantages that custom AI solutions can provide.

Continue to experiment, up-skill your workforce and be strategic about the future of your organization with AI.

AI is a superpower, if used wisely.