STAMFORD, Conn.--(BUSINESS WIRE)--New survey research from leading global technology research and advisory firm Information Services Group (ISG) (Nasdaq: III) finds two-thirds of enterprises are using managed service providers (MSPs) to support their generative AI (GenAI) initiatives.
Sixty-five percent of the enterprises surveyed for the new ISG Market Lens™ GenAI Use Case Study report they are using MSPs for GenAI initiatives, while 35 percent of enterprises are building their GenAI capabilities in-house.
The main reasons enterprises choose to engage a provider to support their GenAI initiative, the study found, are to acquire expertise and knowledge and address in-house capability limitations. Speed and the need to accelerate projects are also a factor.
Most providers are delivering traditional managed services such as application maintenance and infrastructure services, along with GenAI-specific services such as data preparation or governance.
“Companies are applying their own version of the ‘engineer’s triangle’ concept – trying to balance expertise, cost and capacity – when deciding to use an MSP for GenAI initiatives,” said Alex Bakker, ISG distinguished analyst and co-author of the study. “Though outsourcing is often viewed as a transfer of expertise from an enterprise client to a provider, outsourcing for GenAI use cases is perceived as a two-way street, giving organizations access to skills they don’t yet have and enabling them to build skills internally at the same time.”
Businesses that are building GenAI capabilities in house rather than using MSPs say they possess specialized knowledge and are developing AI solutions tailored to their unique business requirements.
A January 2024 ISG Market Lens AI Study found many enterprises consider innovation to be an internal strength, a point that is reinforced by the results of the new study, which finds the companies that are choosing not to engage MSPs are using in-house expertise to build GenAI capabilities and resources. Relatively few organizations cited cost considerations or data privacy and security concerns.
Access to specialized AI skills remains a challenge, however, with 45 percent of enterprise respondents to the January 2024 study citing a lack of skills as their top challenge.
“The skills shortage remains challenging and is driving the need for external support from managed service providers,” said Michael Dornan, principal analyst and co-author of the study. “GenAI has moved quickly, but many enterprises already wish they had started earlier, logged successes or failures faster, and used external support more in that learning process.”
The study predicts enterprise spending on GenAI initiatives will increase by 50 percent in 2025, as companies expect to achieve a greater share of their return on investment (ROI) in the technology in the coming year.
“Enterprises are hoping for big productivity, efficiency and cost improvement gains from GenAI, but with enterprise spending averaging $2.6 million on each GenAI use case, organizations will need more scaled projects to reach their goals,” Bakker said. “For the foreseeable future, we believe the growth of GenAI and the associated talent shortage will continue to drive growth in MSP contract activity.”
The ISG study surveyed 201 executives in G2000 enterprises in the Americas and Europe with decision making responsibility for their organization's biggest GenAI use cases, in August 2024.
ISG Market Lens™ buyer behavior studies combine findings from surveys of senior-level global executives with expert ISG research and analysis on market trends and strategic business initiatives. Recent studies explored mainframes, AI, cloud, application development and maintenance , BPO, cybersecurity, global capability centers and sustainability.
Contact ISG for more information on ISG Market Lens research.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including AI, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
