“Is AI a hype?”

Over the past 2 years, that has been on many people’s minds, from investors to end users, professionals to entrepreneurs, bankers to lawyers!

Now, while there are many ways to test out “hypes”, one that I like to use is the “Commercialization Factor”, which means if actual customers are spending money on something.

And yes, we have all spent on hype before (remember cryptocurrencies, Myspace, 3D televisions?). But in the business arena where costs are often scrutinised, continuous and increased spending are definately indications that the situation is less hype, and more real!

This is why we’re going to look at the recent Ramp report that highlights the surge in #AI spending. If the brand is new to you, Ramp is a company that helps businesses manage their money by automating expenses, paying bills, and keeping track of finances – all in one easy-to-use platform. In other words, it’s like having an assistant that handles all the money stuff so businesses can focus on growing and doing what they do best.

In this article we will look at the highlights from Ramp’s Summer 2024 Business Spending Report, which reveals a 375% year-over-year increase in AP spending on AI vendors, signalling a profound shift in how companies prioritise technology in their budgets.

And, of course, I’ll also share with you what all these means, regardless of whether you’re running a small business or leading the people development initiatives in a large organisation.

What are the insights from the spending of 25,000+ companies?

Summary of Key AI Spending Insights

Before you get your hands on the full report, here are some highlights that I found useful:

💡 AI as a Long-Term Strategic Investment

Businesses are no longer just experimenting with AI; they are embedding it into their core operations. The significant increase in spending, such as the 375% year-over-year rise in AP spend on AI vendors, indicates a shift towards viewing AI as a critical, long-term investment.

💡 The Rise of Foundation AI Models and Targeted AI Solutions

Companies are increasingly investing in foundational AI models like OpenAI (ChatGPT) and Anthropic (Claude), with the former leading the list of software vendors that companies purchased from for the first time in 2024. This dual approach ensures both broad capabilities and precise solutions to challenges.

💡AI’s Impact on Creative and Operational Efficiency

As businesses cut back on traditional advertising spend, which dropped by 5.2% this quarter, they are reallocating budgets toward AI tools that enhance creativity and operational efficiency. This shift allows companies to do more with less, driving both innovation and cost savings.

💡Sustained Value in AI Partnerships

High retention rates, with 70.4% of customers continuing to spend with top AI vendors after 12 months, suggest that businesses find lasting value in these tools. Companies are building long-term relationships with AI vendors, ensuring continuous innovation and support.

💡The Shift in Software Spending Priorities

Smaller businesses are leading the charge in increasing their investments in AI, as seen in the growth of AI spending among small SMBs. Meanwhile, larger companies are being more cautious, balancing innovation with budget scrutiny, with some larger SMBs and mid-market companies even reducing their SaaS/software expenditures.

Here’s the link to Ramp’s full report.

…or read on if you’d like to know my thoughts on these stats, as an AI enabler in the learning and development space, and also as an entrepreneur.

Actionable Insights that we can apply

Insights Behind the Insights

Here’s what I know for sure.

AI is not just a tool for IT departments; its implications are far-reaching, impacting various aspects of business operations and strategy.

AI is also no longer a toy; there are actual use cases with real results, and the longer we stay in the spectator box with a “let’s see how things turn out” mentality, the more our competitors will zoom ahead of us.

After going through the report, here are my thoughts.

And because our site visitors are a combination of L&D professionals and business owners, I figured I’d give my thoughts in both contexts while citing relevant examples, too.

Adopting AI for Strategic Growth

AI is becoming a long-term investment that’s integral to people development and overall business growth.

For HR and L&D leaders, this means leveraging AI to enhance training programs, personalise learning experiences, and improve employee engagement.

Case in point: PwC, a global leader in professional services, uses AI-driven tools to personalise employee training programs. This has resulted in a 32% increase in training completion rates and a significant boost in employee satisfaction.

If you’re a business owner like me, AI offers a pathway to operational efficiency and scalable growth.

Small businesses like Greenhouse Software, for one, have integrated AI into their talent management systems, streamlining operations and driving growth.

Enhancing Creative Functions

AI tools are increasingly used to improve creative output, streamline content creation, and reduce the need for additional headcount.

This is relevant for both HR teams creating training materials, and businesses looking to innovate in their marketing and product development.

The New York Times, for example, has successfully used AI to enhance its content creation process, using AI to analyze reader preferences and tailor articles accordingly.

On a smaller scale, startups like Tailor Brands use AI to automate the creation of logos and branding materials, allowing businesses to develop high-quality creative assets without a large design team.

Maximizing Productivity with AI

AI’s ability to automate routine processes and optimise operations is a game-changer. Whether it’s in HR processes like onboarding or in business operations like supply chain management, AI can significantly enhance productivity.

This is what’s happening at The Coca-Cola Company, which leveraged AI to optimize its supply chain operations, reducing costs by 20% and improving delivery times. Shifting from process to people, HR departments at companies like Unilever use AI-driven tools to streamline recruitment, cutting the time-to-hire by 50% and ensuring a better fit between candidates and roles.

Strategic Long-Term Investments

Securing long-term AI partnerships is crucial for ensuring ongoing innovation and support. Both L&D professionals and business owners need to consider these partnerships as strategic assets that will drive future success.

For example, Microsoft’s long-term partnership with OpenAI has been a cornerstone of its AI strategy, leading to the development of innovative products like Azure OpenAI Services.

Smaller companies, such as the e-commerce platform Shopify, have also benefited from long-term AI partnerships, integrating AI across various business functions to enhance performance and customer experience.

Getting your workforce to be AI-ready

Key Takeaways For L&D Professionals

For HR, Training and L&D professionals operating in large SMEs and MNCs, the surge in AI spending presents both opportunities and imperatives:

🎯 AI is No Longer Optional

As AI becomes deeply integrated into business operations, HR and L&D leaders must embrace these tools to remain competitive. AI-driven personalization can enhance employee training and development, leading to better outcomes and higher engagement.

Accenture, a global consulting firm, implemented an AI-powered training platform that personalizes learning paths for employees based on their roles and career goals. This initiative led to a 25% increase in training engagement and a noticeable improvement in skill acquisition across the company.

🎯 Enhancing Efficiency and Creativity

AI can take over routine tasks, freeing up managers and executives to focus on more strategic initiatives. Additionally, AI tools can help create more engaging and personalized training materials, improving the overall learning experience.

For instance, IBM uses AI to automate its onboarding process, ensuring that new hires are seamlessly integrated into the company. This has reduced onboarding time by 40% and allowed HR teams to concentrate on developing strategic programs that enhance employee retention and satisfaction.

Note: Previously, we discussed how AI can help employees in the execution of Secondary Tasks, freeing time and energy to focus on Primary Tasks. Click here if you’d like to read the full article.

🎯 Building Strong AI Partnerships

Establishing long-term relationships with AI vendors ensures continuous innovation and tailored solutions. This is crucial for HR and L&D teams aiming to keep up with the rapid pace of technological advancement.

Deloitte has built a strong partnership with an AI vendor to evolve its HR analytics platform continuously. This partnership has enabled Deloitte to provide more precise insights into employee performance and engagement, helping the company make data-driven decisions that align with its strategic goals.

The early waves of AI are advantageous for small and medium business owners and entrepreneurs

Key Takeaways For Business Owners

If you’re building your own venture, like yours truly, understanding the implications of increased AI spending is key to future-proofing their operations:

⭐️ Investing in AI for Scalability

AI tools is essential for scaling operations efficiently. By integrating AI into various business processes, companies can achieve more without proportional increases in staff, driving both growth and profitability.

Stitch Fix, an online personal styling service, has successfully used AI to scale its operations. By integrating AI into its inventory management and customer styling processes, the company has been able to serve millions of customers without a corresponding increase in staff, resulting in significant revenue growth.

⭐️ Effective Resource Management

AI can help manage resources more effectively, from inventory management to customer service, reducing waste and improving decision-making. This is particularly valuable for businesses looking to optimize their operations.

You probably have heard about Zara, the global fashion retailer, and how it leverages AI to manage its inventory and supply chain, ensuring that the right products are available in the right locations at the right times. This has led to reduced inventory costs and improved sales margins, giving Zara a competitive edge in the fast-paced fashion industry.

⭐️ Leveraging AI Partnerships for Innovation

Long-term partnerships with AI vendors can provide businesses with access to cutting-edge tools and support, ensuring they remain at the forefront of their industries. Who would say no to the invitation to stay ahead of the curve?

Netflix, your default “chill partner” after a long day’s work, has established a long-term partnership with AI vendors to enhance its content recommendation system. This partnership has been instrumental in keeping Netflix ahead of its competitors, driving customer engagement and retention by offering highly personalised viewing experiences.

It’s Not Too Late To Ride The Wave

The surge in AI spending highlighted by Ramp’s report is not just a trend; it’s a clear indicator of the future direction of business strategy.

For HR and L&D leaders, embracing AI is essential for staying competitive and driving employee engagement.

For business owners, AI represents a strategic asset that can optimise operations and fuel growth.

No doubt, there are benefits to being prudent and observing the waters before taking a dip. But when everyone is clearly having fun, how long can we stay on the sidelines?