Index Insider: Generative AI Means There Won’t Be a Steady State in IT Projects

Hello. This is Alex Bakker and Dennis Winkler with what’s important in the IT and business services industry this week.
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We recently completed our ISG Buyer Behavior Study on the insurance industry. In it, we interviewed 120 senior IT and business leaders about their technology and business objectives, challenges and plans.
While it may not be particularly surprising at the end of 2023 to say that AI will be a disruptive force, the data from this study highlights a particularly interesting duality: IT departments need AI to "keep the lights on" and need AI to innovate. (See Data Watch)
When we asked insurance companies about the status of different technology transformation initiatives, they said they are moving two major categories into steady state – cloud migration and training. More companies have pushed these two kinds of initiatives into steady state since our study last year as they have needed to shift project time and budget into more transformative or innovated technologies.
We also found that insurers are investing in exploratory initiatives for generative AI and automation/AI/ML. In last year’s study, companies reported that their automation and AI initiatives were mostly in the "work in process" phase, with only 19% saying they were doing exploratory work. Generative AI was not even a choice in last year's study.


AI Will Disrupt Steady State Initiatives Chart

What's the Point?
The advent of generative AI has significantly disrupted the "art of the possible,” and companies are only beginning to take into account the new capabilities that generative AI will bring to the table. We expect that, as these exploratory initiatives mature, spending on other projects will be reevaluated in light of new capabilities.
Our research on applied generative AI indicates that code generation and pair programming are early applications of generative AI. There is also evidence that the advancements in natural and fluent conversational systems powered by generative AI will significantly impact employees in call centers and sales functions.
The insurance industry, in this case, is likely a microcosm of the larger market. About a third of respondents to the ISG Buyer Behavior Study on the insurance industry say they are moving cloud computing, training and employee support initiatives to steady state, but we expect generative AI will impact both the capabilities of the technology and the economics of those projects to such a significant degree in the next two years that every decision about active projects will need to be completely re-assessed. In short, we don't expect to see a steady state for a long time.


About the authors

Alex Bakker

Alex Bakker

Alex leads the Primary Research Team where he focuses on study design, panel research, and interview based research for ISG. In addition to leading the Primary Research practice at ISG, Alex also serves as the lead analyst on provider pursuit effectiveness, and helps IT service providers understand how they can improve performance in the competitive process. 
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Dennis Winkler

Dennis Winkler

Dennis Winkler is a Director in the ISG Insurance industry vertical. With more than than 25 years of experience as a business process and technology consultant, he has advised hundreds of companies on their sourcing strategies, including establishing shared service centers and outsourcing relationships around the globe. Dennis has worked with numerous insurance clients, including AIG, Chubb, Transamerica, ING/VOYA, CNO, Global Atlantic, Assurant and others.