The Copilot corporate spending surge for Microsoft and OpenAI is only beginning after a year of hype.

• In 2024, it appears that the spending on enterprise software licenses for generative AI like ChatGPT will increase across the economy.
• Over half of large corporations plan to buy gen AI software like Microsoft Copilot in the next six months, according to CNBC.
• According to a survey of the CNBC Technology Executive Council, a group of top tech officials from large corporations across various industries, the majority of respondents believe that remote work will continue to be a significant part of the future of work.

In 2024, most corporations will prioritize investing in AI technology to enhance the experiences of their employees and customers.

Over half of top technology officers across various industries plan to buy enterprise-level gen AI software, such as Copilot, in the next six months. Meanwhile, one-third of them have not yet made a purchasing decision, and only 13% said they would not be acquiring similar gen AI capabilities.

According to a survey of 22 top tech officers conducted in late November and early December, more than half (59%) of the respondents say their company's new investments in artificial intelligence capabilities are accelerating. The remaining executives are evaluating new investments in AI but are being more cautious. No respondent said they will not be making new AI investments in 2024.

Microsoft's spending plans should be positive news for the company, as Wall Street has already factored in significant gains for its shares, which have increased by 55% this year, more than double the S&P 500 return year-to-date.

Microsoft's Copilot is the torch bearer for the broader AI market, as it is the only game in town around a full AI platform, according to Wedbush Securities analyst Dan Ives.

Microsoft shares have increased from $240 to over $370 since the introduction of ChatGPT in late November 2022, despite recent boardroom drama that threatened the startup's existence. Analysts predict that gen AI revenue could reach as high as $10 billion annually, and Microsoft has put price targets as high as $600 on the company over the next three years. OpenAI has received billions in investment from Microsoft.

"Given the buzz surrounding generative AI and Microsoft's aggressive advertising campaign for Microsoft 365 Copilot, it's no wonder it ranks first," said Jason Wong, a Gartner analyst.

A Gartner survey revealed that 82% of IT buyers ranked Microsoft 365 Copilot among their top three most valuable new 365 features.

Microsoft's release of Copilot for 365 in November is expected to increase corporate spending, as an early pilot program that began in May and involved 600 customers was largely ignored by Gartner clients due to concerns about cost, data, and legal issues.

Although some corporate buyers are still hesitant to meet the minimum requirement of 300 seats for the software that costs $30 per user per month, many companies that previously skipped the early pilot are now adopting the gen AI, Wong said. In August, Alphabet launched Duet AI for Google work apps at $30 per month for corporate users.

Microsoft has highlighted customers such as Visa, BP, Honda, and Pfizer using Copilot, as well as professional services firm partners including Accenture, EY, KPMG, and PwC. Some companies are already deploying the AI on a massive scale, with PwC, for instance, rolling out ChatPwC to 75,000 workers by the end of this year.

Joe Atkinson, a member of the CNBC Technology Executive Council and PwC chief products & technology officer, stated that the hype surrounding AI is greater than anything he has witnessed in the past 30 years, and it is fully justified. AI will revolutionize everything.

Gartner's research indicates that the initial spend on a product priced at $30 per user may not be as widespread among big companies as expected. According to Wong, anecdotal evidence from thousands of inquiries suggests that companies are unlikely to implement the product across their entire workforce immediately.

How companies will begin to spend billions on AI

According to Gartner, the initial focus for test groups will be on IT or specific business functions, such as sales and marketing, where there is a need for AI to solve a core problem. This is expected to last for three to six months, with the majority of buyers starting in the first half of 2024.

Gartner predicts that the 300-seat minimum for AI implementation may be eliminated, but Wong emphasizes that Microsoft wants organizations to invest in the technology. He believes that the more content and knowledge that is shared among users, the better AI will perform. However, if there are only a few users, it may not be very helpful, so organizations need to consider the limitations of the available seats.

Copilot has been found to increase productivity and improve the quality of work in smaller groups, as evidenced by Microsoft's recent Work Trend Index report, which found that 77% of Copilot users don't want to give it up and 70% said they were more productive with it.

A survey of thousands of U.S. workforce employees, conducted by CNBC, found that 72% of workers who use AI reported increased productivity.

According to the CNBC TEC survey, nearly half of tech executives believe that up to 25% of their employees are already using gen AI in their work. Additionally, the survey found that companies are allocating their AI spending between the customer and the workforce. One-third of respondents indicated a greater focus on AI for the customer, while one-quarter said the primary focus is on AI for the workforce.

According to Gartner, the future of enterprise deployment lies in broad connectivity to other data sources beyond 365 work apps, such as ERP, CRM, supply chain, financial, and legal systems. Wong emphasized that Copilot's value comes from integrating other sources, not just generating emails and creative Powerpoints. However, he acknowledged that it is still early days in making this process smooth and compliant for companies, with all the necessary apps and plugins available.

Enterprise software vendors, including Salesforce, SAP, Workday, and Adobe, are rolling out products with embedded gen AI features and charging more for them. Organizations must decide what these offerings do for employee experience and which features will drive adoption. Microsoft is also embedding third-party AI on its Azure cloud platform, such as Mistral, and developing its own open-source AI, Orca.

The fear of missing out (FOMO) and the desire to keep up with others could lead to an initial overspend or overly cautious budget in a U.S. market that includes a healthy dose of FOMO and organizations already asking "Will I fall behind?"

Despite the excitement surrounding the growth of gen AI spending, it is still significantly outpaced by companies' cybersecurity budget requirements. In 2024, Gartner predicts that enterprises will spend $114.8 billion on security compared to $21.8 billion on generative AI. This means that for every dollar spent on gen AI, only $5 will be allocated to security. According to Gartner's chief forecaster John Lovelock, for every dollar spent on IT as a whole, only one-half of a cent will be allocated to gen AI.

Microsoft is currently leading the way in gen AI spending, with its vast install base and wealth of data in the Office suite, email, Teams, SharePoint, and OneDrive. This allows companies to quickly leverage gen AI, as long as there are proper governance and safeguards in place.