4 ms·

Companies need AI services revenues, not cost savings

43 points by _benj 2y ago

jzebedee 2y ago
https://archive.is/BxY2q https://archive.is/BxY2q
passwordoops 2y ago
The main title "Data centres have turned Big Tech into big spenders" is now reflective of the content than the subtitle which is used here
rrherr 2y ago
"Data centres have turned Big Tech into big spenders: Companies need AI services revenues, not cost savings, to fuel data centre boom" https://archive.is/BxY2q https://archive.is/BxY2q
- ethbr1 2y ago
  Only enough, the content is perfectly summarized by the final sentence: >> [Large infrastructure-owning tech] Companies need AI services revenues, not cost savings, to fuel the data centre boom.
abakker 2y ago
In the surveys I have run on this topic, enterprise tech buyers are split on the issues. CEOs and line of business execs definitely want to see revenue, but almost no companies think of themselves as having successfully made any money on AI. CIOs and tech VPs on the other hand really see AI as a lever to pull increase the effectiveness of automation efforts. IT really sees AI as a cost lever. In a study we just did on outsourcing, buyers as good as say that they expect the value from AI to be in the reduction of staff at their outsourcing providers, and there's plenty of evidence that the cost lever is what people want. Net, in a rising cost environment organizations see more value in cost reductions than output gains, at least for most back office and IT functions. Source: https://isg-one.com/research/isg-index-insider/articles/index-insider--are-ai-savings-driving-or-delaying-outsourcing-activity https://isg-one.com/research/isg-index-insider/articles/inde... - my research
- ethbr1 2y ago
  In my observation, outsourcing is caught in the middle here. The work that was outsourced is (a) formulaic, (b) simple enough to be clearly documented, & (c) high-volume. That's literally the wish list for good automation opportunities: why have a human automaton do something when a CPU can? Especially when you've already documented it ad nauseum. And to large degree, this is a problem of large outsourcing shops' own making. They were content to get fat and dumb off labor arbitrage vs upskilling their talent and trying to provide higher value-add. They all have their tiger teams, but the bulk revenue is putting lower-cost employees on higher-billable-rate contracts.
  - abakker 2y ago
    A core issue here, though, is that contracts add a wrinkle into the "automate everything" approach. Often, it is the clients themselves who resist adopting the automations proposed by the outsourcers. It's why, when businesses say they want efficiency, I start with the Efficiency = Output / Cost equation and ask if they want to increase output, or decrease cost. Most companies buying outsourcing want to reduce cost, most outsourcing providers want to increase output.
- swatcoder 2y ago
  That sounds right as expectations, based on general industry sentiment and not wanting to be left flat footed in case those expectations play out. But it's going to take many more years of exploring the space to assess what happens to the departments where those CIO's and tech VP's pull on those levers. There are many examples of anticipated cost reduction strategies sending companies/departments/teams/industries over a cliff like Wile E Coyote when all the inherent limitations and side effects finally start to materialize. Revenue is a little more obvious and sure. You're either expanding a business line and generating revenue... or you're not. Finding good revenue-generating solutions would better protect the industry from facing a very bleak winter because it would more quickly confirm that there's tangible money to be made in there somewhere.
  - abakker 2y ago
GregBanner28 2y ago
[dead]

43 points by _benj 2y ago

https://archive.is/BxY2q https://archive.is/BxY2q

The main title "Data centres have turned Big Tech into big spenders" is now reflective of the content than the subtitle which is used here

rrherr 2y ago

"Data centres have turned Big Tech into big spenders: Companies need AI services revenues, not cost savings, to fuel data centre boom" https://archive.is/BxY2q https://archive.is/BxY2q

ethbr1 2y ago
Only enough, the content is perfectly summarized by the final sentence: >> [Large infrastructure-owning tech] Companies need AI services revenues, not cost savings, to fuel the data centre boom.

abakker 2y ago

In the surveys I have run on this topic, enterprise tech buyers are split on the issues. CEOs and line of business execs definitely want to see revenue, but almost no companies think of themselves as having successfully made any money on AI. CIOs and tech VPs on the other hand really see AI as a lever to pull increase the effectiveness of automation efforts. IT really sees AI as a cost lever. In a study we just did on outsourcing, buyers as good as say that they expect the value from AI to be in the reduction of staff at their outsourcing providers, and there's plenty of evidence that the cost lever is what people want. Net, in a rising cost environment organizations see more value in cost reductions than output gains, at least for most back office and IT functions. Source: https://isg-one.com/research/isg-index-insider/articles/index-insider--are-ai-savings-driving-or-delaying-outsourcing-activity https://isg-one.com/research/isg-index-insider/articles/inde... - my research

ethbr1 2y ago
In my observation, outsourcing is caught in the middle here. The work that was outsourced is (a) formulaic, (b) simple enough to be clearly documented, & (c) high-volume. That's literally the wish list for good automation opportunities: why have a human automaton do something when a CPU can? Especially when you've already documented it ad nauseum. And to large degree, this is a problem of large outsourcing shops' own making. They were content to get fat and dumb off labor arbitrage vs upskilling their talent and trying to provide higher value-add. They all have their tiger teams, but the bulk revenue is putting lower-cost employees on higher-billable-rate contracts.
- abakker 2y ago
  A core issue here, though, is that contracts add a wrinkle into the "automate everything" approach. Often, it is the clients themselves who resist adopting the automations proposed by the outsourcers. It's why, when businesses say they want efficiency, I start with the Efficiency = Output / Cost equation and ask if they want to increase output, or decrease cost. Most companies buying outsourcing want to reduce cost, most outsourcing providers want to increase output.
swatcoder 2y ago
That sounds right as expectations, based on general industry sentiment and not wanting to be left flat footed in case those expectations play out. But it's going to take many more years of exploring the space to assess what happens to the departments where those CIO's and tech VP's pull on those levers. There are many examples of anticipated cost reduction strategies sending companies/departments/teams/industries over a cliff like Wile E Coyote when all the inherent limitations and side effects finally start to materialize. Revenue is a little more obvious and sure. You're either expanding a business line and generating revenue... or you're not. Finding good revenue-generating solutions would better protect the industry from facing a very bleak winter because it would more quickly confirm that there's tangible money to be made in there somewhere.
- abakker 2y ago

GregBanner28 2y ago

[dead]