Artificial Intelligence Will Make Its Mark Within Next 3 Years

Artificial intelligence (AI) is currently a technology still percolating in the depths of IT departments and the fever dreams of industry pundits, but it may only be a matter of a couple of years that it bursts across many day-to-day business processes.

That is one of the key takeaways from a recent survey of 835 executives from Tata Consultancy Services (TCS). The survey shows 84% see the use of AI as "essential" to competitiveness, and half see the technology as "transformative." But for now, it's still only in widespread use among a handful of practitioners -- eight percent of executives use AI mainly as a workhorse for IT departments, mainly to detect security intrusions, user issues and deliver automation.

Looking into the near future, everyone expects a lot out of AI. At least 32% of executives believe that by 2020, AI will be helping to guide their sales, marketing or customer service functions. Another 20% see AI's greatest potential impact in non-customer facing corporate functions, including finance, strategic planning, corporate development, and HR. However, the survey's authors caution, "it’s clear that most companies are still quite unsure where they should be using cognitive technologies. This is the case for even the most advanced users of the technology — the leaders in our survey."

The TCS survey report's authors point to potential examples of AI at work: "AI systems used in finance can spot customers with credit problems before credit is granted. HR departments have huge amounts of digital data today that they could use to identify unhappy, highly productive, highly influential, and other employee types. AI is guiding customer service representatives to more quickly resolve customer problems and anticipate future purchases, quickly and securely reconciling mass overnight transactions for financial institutions."

Unfortunately, as feared, there will be some job losses dues to AI. Executives in the study estimate AI will eliminate somewhere between four and seven percent of job roles by 2020.  At the same time, those companies in the TCS survey charging full speed ahead -- seeing revenue and cost improvements from AI -- expect to also need at least three times as many new jobs in each function by 2020, due to expanded business opportunities.

The survey's authors identified companies with the greatest revenue and cost improvements from AI as the ‘leaders’ in the sample, while the ‘followers’ are firms with the smallest revenue and cost improvements. Leaders outspent followers by a factor of five (in terms of spending as a percent of company revenue). Leaders generated average revenue increases of 16% from AI initiatives in 2015, versus 2014, whereas laggards saw a modest 5% revenue growth.

The TCS report makes several observations the habits of effective AI leaders.

Leaders are using AI more broadly across their organizations. "AI leaders and followers alike are using the AI technology to automate the IT function. However, AI leaders were more frequently using AI in other areas than followers. The functions with the biggest differentials in usage were:

• Corporate level (31% of leaders vs. 12% of followers)
• Distribution and logistics (20% of leaders vs. only 6% of followers)
• Human resources (25% of leaders vs. 12% of followers)
• Finance and accounting (35% of leaders vs. 22% of followers)

AI leaders focus on areas directly affecting the bottom line. In the course of the study, "one thread emerges about where the focus should be: on business activities involving enormous amounts of daily digital interactions that can have an immediate impact on a company’s ability to make or lose money, and which require nearly real-time responses." These include potential customer payment problems -- the survey found "83% of leaders using AI in their corporate center are using it to identify potential revenue and profitability problems from data in their financial systems." another 45% of AI leaders are using the technology to help protect and secure their corporate systems.  Another area is ensuring the performance and stability of crucial products and services powered by digital technologies, such as self-driving cars or sophisticated online services.

Leaders are more proactive about addressing job-loss fears. "A much higher percentage of leaders (72% vs. 48% of followers) said it was important or highly important to address employees’ layoff fears. In addition, nearly four out of five leaders (79%) say it’s important or highly important to determine whether to use AI to replace or support people." The leaders also predicted a higher average percentage of new functional jobs created as a result of using the technology: an average 25% increase per function vs. only 7% for followers.

Most leaders already use AI in their IT departments. "In deploying AI, the best companies at using the technology in our survey don’t overlook using it in their IT function. In fact, the greatest percentage of leaders (40%) believe the IT function will be the site of AI’s greatest beneficial impact to the organization by 2020. Only a quarter of the followers believed the same." The reason AI is so important to the IT department, the TCS authors state, is that "IT operations, to a large degree, is still manual work that depends on tacit knowledge, experience, and intuition. IT people gain that expertise after years of running systems. With new systems and applications being introduced at a high rate, and with soaring volumes of digital data, it’s gotten much harder for IT professionals to make and implement IT operational decisions quickly."