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IDC TRENDSPOTTER

In Central and Eastern Europe, Banking, Retail, and Manufacturing Sectors Lead Spending on Cognitive/AI Technologies

2018 by Lubomir Dimitrov

In Central and Eastern Europe, Banking, Retail, and Manufacturing Sectors Lead Spending on Cognitive/AI Technologies

The global wave of digital transformation is impacting all organizations. Technologies like artificial intelligence, machine learning, and cognitive computing are changing business models across industries. The CEE industries that are currently the biggest investors in cognitive and AI systems are banking, retail and process manufacturing. Stringent compliance requirements are key drivers for financial organizations seeking innovations in fraud and risk detection. Companies in these sectors will continue to invest heavily in cognitive-based technologies, adopting advisors and recommendations to better match products with clients. However, the greatest spending growth over the 2016-2021 forecast period is expected to come from the healthcare sector, where investments related to cognitive/AI will be applied to diagnosis and treatment systems. Technology investments by organizations in this sector are expected to record a CAGR exceeding 55%.

Although the adoption of cognitive and AI technologies will happen slightly slower in CEE compared to most other regions, the majority of CEE organizations to implement cognitive solutions as a key part of their IT infrastructure. The intelligent applications based on cognitive computing and AI will continue to transform companies' business models, impacting the way they operate and interact with customers. Spending on cognitive/AI software platforms will grow slower than on other technologies throughout the forecast period, but it will be important part of companies' investments, representing the foundation for the development and implementation of cognitive applications and providing tools for making predictions and recommendations.

Organizations in CEE will invest mainly in cognitive software throughout the forecast period, as spending for this technology will retain a market share exceeding 50% over the coming years. This includes cognitive applications, which will continue to be the largest category within all cognitive and AI technologies in terms of all spending, and cognitive software platforms, which facilitate the development of intelligent, advisory, and cognitively enabled solutions. Cognitive/AI-related services (business services and IT consulting) represent the second-largest investment category, while spending on hardware (primarily dedicated purchases of servers and storage) will account for the smallest share of spending on cognitive/AI implementations, and will also be the slowest growing area of spending, despite a robust CAGR of 36.3%.

Which use cases will drive the market?

The top three cognitive/AI use cases in terms of investment levels in CEE in 2018 are: automated threat intelligence and prevention systems ($12.21 million), presented mainly in banking, government, telecommunications and utilities industries; fraud analysis and investigation ($8.88 million), stemming mainly from banking, securities, and investments services, as well as insurance entities; and supply and logistics ($7.40 million), with manufacturing and retail as the leading industry users. Combined, these three use cases will represent over one third of all cognitive/AI systems spending in 2018. The use cases that will post the highest CAGRs over the 2016-2021 forecast period are automated claims processing (57.2%), diagnosis and treatment systems (54.4%), and automated customer service agents (49.9%).

"As organizations adopt cognitive/AI technologies, their business models as a whole will evolve," explains Lubomir Dimitrov, senior research analyst at IDC. "Use of cognitive systems is fast becoming a business imperative, as business needs and challenges are achieving scales, velocities, and complexities that are beyond human abilities. Companies will increasingly rely on the new intelligent systems and less on human cognition for their operations."

Spending to rise continuously through 2021

Spending on cognitive technologies and AI systems in Central and Eastern Europe (CEE) is expected to reach $83.9 million in 2018, representing an annual increase of 41.2%. According to the new update to the Worldwide Semiannual Cognitive Artificial Intelligence Systems Spending Guide from International Data Corporation (IDC), CEE spending on cognitive and AI solutions will continue to grow significantly, posting a compound annual growth rate (CAGR) of 44.2% over the next five years, with revenues reaching more than $247.2 million by the end of 2021.

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International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly-owned subsidiary of International Data Group (IDG), the world's leading media, data and marketing services company. To learn more about IDC, please visit www.idc.com.

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