“At the point where I have to replace the legacy system or I’m dead, I have to forget about the earnings,” says Muratovic. “I’ll let the street know it’s going to take huge investments. I’ll have to take a step-function improvement and rearchitect my core enterprise, the data layer, infrastructure layer, and the applications layer, and all the agents that go on top of that.”
The companies that have the most at-risk business models may be more willing to do this, and do it earlier, saying there are CIOs taking more progressive strategies around AI.
Does AI-first make sense?
The highest probability and potential to go AI-first are the small, nimble companies that don’t have baggage, says Muratovic. For larger enterprises, he adds, “very few are brave enough and can afford to go and burn the boats in the world of AI because they’re responsible to shareholders.”
And if the adoption of the internet taught us anything, it’s that slow and steady is sometimes a perfectly fine approach. And not every company or business process that could be replaced by AI should. Or it might be too early for really big projects and large enterprises that can’t turn on a dime.
“The idea of a company on the scale of Insight and taking something like ERP or sales tools and replacing those with AI, that’s a huge undertaking,” says Hughes. “That’s years and millions of dollars. I don’t know whether the market is quite ready for that yet. You have to make some clear decisions about where you’re going to introduce AI into your technology stack and draw boundaries. That’s probably going to be the way a lot of organizations are able to move forward.”
Gartner’s McDonald agrees that most companies take an incremental approach, and it often works. “Walmart didn’t shut down its stores just because they were opening an online presence,” he says. But in other areas, there are companies evolving to be AI-first, he says, such as in the software space. In fact, in some at-risk areas, the biggest companies are the most vulnerable because of their entrenched thinking.
“An overemphasis on ROI is the kiss of death,” he says. “If you don’t leave room to think about how you’re changing your business with AI, all you’ll be keeping up is the cost savings that everyone else is delivering. You might have a cost advantage, but that’s only a six-month advantage. But everyone’s using AI to lower their costs.”
Truly AI-first companies are doing it differently, McDonald adds. “They’re challenging their model. The companies I’m talking to think less about how to save money and appease the board or CEO, and more about how to set up to take advantage of AI in their marketplace.”
There’s a practical, mathematical limit to how much companies can lower their costs, but, he adds, there’s no limit to the amount of revenue growth you can get.