Generative AI will drive IT budgets, but the spending is likely to be spread around a bevy of business units too. The more likely outcome is that generative AI spending for projects will be spread around business units and be absorbed in the budgets that run the entire enterprise.

That's the early take from technology CEOs and it's likely on target. Generative AI use cases are often department specific and intertwined with transformation efforts and process reinvention.

In other words, generative AI rhymes with the way software-as-a-service played out in the enterprise. SaaS spending was often driven by business leaders. For instance, CMOs and sales leaders drove spending. HR leaders spent on Workday. Developers led cloud spending well before centralized IT became involved. Once SaaS matured central IT was used to consolidate SaaS contracts and deployments. Once model ops come into play enterprise IT will play that centralization role again.

For now, the bet here is that generative AI spending will spread and become business--just like digital transformation did.

Deloitte's US State of GenAI Report for the second quarter noted:

"There are many ways to define and measure value—especially for a technology with the transformational potential of Generative AI. Although financial return on investment (ROI) is important, value drivers such as innovation, strategic positioning and competitive differentiation can be even more important."

The upshot to that passage is that all of those value creation goals are likely to run through different CxOs and budgets going forward. Follow the value creation goals and it is clear every budget is going to have a generative AI component. 

Here's how enterprise technology CEOs see generative AI budgets developing today. The talk of broadening AI budgets beyond IT is still early, but I'm willing to bet we'll hear similar comments in the quarters ahead.

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ServiceNow CEO Bill McDermott said:

"I do see the budgets not only going up in IT, but also just see genAI becoming more of a business imperative. And if you can increase productivity, take cost out and show that in a value case this money will be spent and maybe different people approving it, but the money will be spent.

I believe that a lot of the business operating spend will be moved to GenAI technology use cases that serve the business."

This AI budget theme and process transformation storyline will likely resurface at Knowledge 2024 May 7-9 in Las Vegas.

Alphabet CEO Sundar Pichai said "AI transformation is making everyone think about their whole stack." Translation: It's a stack that will be both horizontal across a business and vertical by business function.

Microsoft CFO Amy Hood noted:

"It's about spending in other areas that we don’t traditionally think of as being in the IT budget spend under a CIO. It’s spend being done by the Head of Customer Service; it’s spend being done by the Head of Marketing. And I do think that will be important as we think about the opportunity ahead."

Satya Nadella, CEO of Microsoft, said generative AI is being wrapped into transformation, process optimization and culture change projects. "OpEx dollars will go into (GenAI) tool spend. We see that in customer service. We see that in sales. We see that in marketing. Anywhere, there’s operations," said Nadella.

"One of the interesting rate limiters here is culture change inside of organizations. I think culture change means process change. At the end of the day companies will have to take a process, simplify the process, automate the process and apply these solutions," said Nadella.

This post first appeared in the Constellation Insight newsletter, which features bespoke content weekly and is brought to you by Hitachi Vantara.

What's clear from AWS' results is that cloud budgets are going up and the company's approach to Amazon Bedrock, Amazon Q and model choices is resonating. AWS is likely to garner more of the IT budget pie even as AI budgets are spread around, but don't be surprised if boardrooms start asking about Amazon Q, automation and agents to carry out tasks.

Amazon CEO Andy Jassy said:

"We have a lot of growth in front of us, and that's before the generative AI opportunity, which I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the Internet.

All of this generative AI set of workloads, which will transform every experience, is going to be built from scratch on the cloud largely."

What's unclear is whether that building will be carried out by business units, IT or some centralized AI transformation department. Either way the genAI money is going to be spread around the enterprise.

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