[HN Gopher] Companies need AI services revenues, not cost savings
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Companies need AI services revenues, not cost savings
Author : _benj
Score : 32 points
Date : 2024-05-16 18:43 UTC (4 hours ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| passwordoops wrote:
| 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 wrote:
| "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
| ethbr1 wrote:
| 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 wrote:
| 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/inde... - my research
| ethbr1 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| I agree with you 100%. Remember RPA? Well...it's really
| telling to me how 5 years on from that hype cycle, stuff
| still isn't automated.
|
| Where I am maybe a little more cynical than you is that I'm
| not sure anyone in corporate IT has a long-termist view
| anymore. budgets in IT seem to have risen less than inflation
| in the last few years, while software, hardware and services
| prices have...not. "Digital" everything has added cost, most
| large enterprises are already partly outsourced and have
| taken the easy gains from labor arbitrage, and have now been
| signed up by the CEO to somehow deliver AI for the business.
|
| Its sad to me because most of every business would cease to
| function entirely without functioning IT, but it tends to
| have been run as a cost center to be minimized/extracted
| from, rather than a function like sales or marketing which
| are seen as being directly attached to revenue.
| 015a wrote:
| Yeah; a few weeks ago a family member asked me if I was
| concerned that AI is going to eat up all the software
| engineering jobs. I'm pretty unconcerned about it; but I am a
| little more concerned that hiring decision makers will
| _think_ that it can.
|
| One of the reasons why I strongly feel that we're headed at
| lightspeed into an AI winter is: there's so much hype
| happening in the space right now that we're already seeing
| companies say things like "we're able to downsize 70% of
| department X thanks to productivity increases from AI". These
| efforts will almost universally and inevitably fail; not
| necessarily because AI will never be capable of doing what
| some business leaders believe it can, but because it can't do
| this _yet_ , with agency. In a few very limited cases we'll
| see companies use this as an excuse to just lay off excess
| fat in the org, but it'll be far more common to see a pattern
| of layoffs + we're AI now -> profit up -> that's weird this
| company isn't developing nearly as many new things... -> re-
| hiring equal to or exceeding the layoffs -> company is never
| the same.
|
| AI hype right now is burning bridges with underdelivery;
| we're making too many big bets too early. In 20 years it'll
| be the case that someone will be trying to sell a
| substantially more capable AI system, and some business
| leader says "that looks awesome, lets give it a try in this
| random inconsequential corner of the business no one cares
| about" _because_ 20 years ago her predecessor bet the farm on
| GPT-4, lost the company billions over the next decade, and
| shareholders are now far more hesitant; despite the fact
| that, in 20 years, it might be The Time.
| abakker wrote:
| The reason I'm not as doom and gloom as this, is because it
| happens with every single cycle. Over promising and
| underperforming is basically every tech that comes to
| enterprises, because no technology helps people agree on
| what to do, what is important, what works, or when to do
| it. Only people decide that stuff, and people decide based
| on facts and preferences, though not often in that order
| :).
|
| There's a reason people joke that CIO stands for "career is
| over".
| jzebedee wrote:
| https://archive.is/BxY2q
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