April 10, 2018
Artificial intelligence (AI) is a widely-discussed topic in the software market. To assess how software vendors are using AI, we conducted a survey of two dozen ePurchasing and contract lifecycle management (CLM) vendors about how they were creating, sourcing, offering, and pricing AI features and functions. The key finding in our report (see AI Drives Improved Decision Making And Productivity In ePurchasing And CLM)? At least in these software categories, software vendors are primarily including AI features and functioning as enhancements to existing products, with hopes for premium pricing but not expecting that.
Other key findings from our survey to twenty-three vendors that offer ePurchasing and/or CLM products:
- AI consumes 18% of the R&D budgets of these vendors.
- Machine learning, semantic analysis, and natural language processing are the most common areas of investment.
- Vendors tend to use their own employees to develop their AI functions, and their own client data to train and tune these functions.
- The two top value propositions for clients from AI functions were making better decisions and improving productivity.
- Over half the vendors we surveyed reported that they already had AI-enhanced products in the market, with the rest expecting to do so in 2018.
In many ways, the most important finding for the AI market was how few vendors really expected to charge more for their AI-enhanced products. Only 13% expected to charge a premium. 61% thought that there might be some opportunities to charge higher prices for some AI functions but not overall, and 17% said that they would include AI with no increase in pricing:
If this pattern holds in other software categories, AI will not be a major new source of application revenues. Though the first movers who embed these capabilities into their products may be able to get away with charging a premium for a while, competition will keep this from lasting long. Instead, app vendors will shoulder the cost of adding AI to their products rather than generating additional revenues from doing so.