McKinsey Wonders How To Sell AI Apps With No Measurable Benefits

Software vendors keen to monetize AI should tread cautiously, since they risk inflating costs for their customers without delivering any promised benefits such as reducing employee head count. From a report: The latest report from McKinsey & Company mulls what software-as-a-service (SaaS) vendors need to do to navigate the minefield of hype that surrounds AI and successfully fold such capabilities into their offerings. According to the consultancy, there are three main challenges it identifies as holding back broader growth in AI software monetization in the report.

One of these is simply the inability to show any savings that can be expected. Many software firms trumpet potential use cases for AI, but only 30 percent have published quantifiable return on investment from real customer deployments. Meanwhile, many customers see AI hiking IT costs without being able to offset these by slashing labor costs. The billions poured into developing AI models mean they don't come cheap, and AI-enabling the entire customer service stack of a typical business could lead to a 60 to 80 percent price increase, McKinsey says, while quoting an HR executive at a Fortune 100 company griping: 'All of these copilots are supposed to make work more efficient with fewer people, but my business leaders are also saying they can't reduce head count yet.'

Another challenge is scaling up adoption after introduction, which the report blames on underinvestment in change management. It says that for every $1 spent on model development, firms should expect to have to spend $3 on change management, which means user training and performance monitoring. The third issue is a lack of predictable pricing, which means that customers find it hard to forecast how their AI costs will scale with usage because the pricing models are often complex and opaque.

Read more of this story at Slashdot.