Call it the AI paradox. At the same time that top executives are waxing enthusiastically about the value of artificial intelligence, many are putting the brakes on investing in the technology, and even backing away from implementation.
Start with the positive news. In a survey of 100 supply and procurement decision-makers conducted for software vendor Ivalua in April of this year, 98% of respondents with “fully deployed” AI tools said they’re “prepared” for geopolitical risk, and nearly half saw themselves as “very prepared.”
But how many are actually embracing AI? In the Ivalua survey, 77% of respondents said they were currently rolling out the technology in procurement or supplier management — but just 36% said they view AI as a top supply chain priority.
Even worse, according to a recent survey of more than 1,000 business executives by S&P Global, the share of companies abandoning initiatives in generative AI before they reach production soared from 17% to 42% in the course of a year.
The failures exposed some unexpected headwinds for businesses. According to S&P Global, those with higher project failure rates “are notably more prone to encountering resistance from customers and employees, and have a greater level of concern surrounding reputational damage.”
By contrast, those with lower failure rates “have a more holistic approach to project prioritization and are comparatively more likely to consider compliance, risk and data availability criteria when selecting projects.”
What’s more, the S&P survey found that the percentage of organizations experiencing positive results from GenAI investments “has fallen across every enterprise objective assessed.”
“Considering the investments that organizations have made into generative AI, and the clear opportunity costs, the performance of these applications is concerning,” S&P Global said.
But does the fault lie with the technology, or the failure of businesses to commit to it? Ivalua chief marketing officer Alex Saric says many AI-driven transformation efforts are being stalled by “policy paralysis.” Executives are rattled by near-term uncertainties in the economy, markets and the geopolitical landscape. They’re suffering from “a lack of visibility into what conditions are going to be a few months from now.”
As a result, he notes, a clear majority of businesses are cutting back or pausing AI initiatives, while an even larger majority realizes the need to invest more heavily in technology tools aimed at identifying and mitigating risk.
Saric sees the current slowdown in AI rollouts as the outcome of “a radical shift” in organizational priorities, with executives refocusing on controlling costs and alleviating top-line pressures.
But Saric doesn’t believe that cost control and risk mitigation have to come at the expensive of innovation. “In fact,” he says, “the two should go hand in hand.” He notes that 59% of the executives surveyed by Ivalua still cite innovation as a priority, “indicating that leaders aren’t abandoning transformation, but many are adjusting timelines under pressure.”
Executive sentiment about the impact of AI on procurement and spend could depend on how surveyors frame the question. There’s a lot of enthusiasm about the ability of AI to improve operational efficiency, Saric says, but so far, the technology hasn’t displaced a lot of people. “So it may not be impacting the bottom line right now.”
As AI deployments mature beyond pilots, Saric says, companies will increasingly see its value in automating manual tasks, cutting costs, making sourcing events more competitive and managing suppliers on an ongoing basis.
And those companies that consider themselves “very prepared” to deal with geopolitical risk? They’ve achieved a better understanding of AI’s potential as well as its limitations, Saric says. That includes using the technology to relieve humans from the need to focus on day-to-day tactical activities.
Aspects of AI, especially GenAI and large language models, may well be stuck for the moment at the “trough of disillusionment” stage of Gartner’s technology Hype Cycle. But that’s no reason to pull back from investing in the technology, Saric says.
“There’s a real risk that near-term disruption becomes a long-term excuse to pause innovation,” he says. “However, risk is a constant in global supply chains, and the real differentiator is how leaders respond. The most resilient organizations adapt their strategies without abandoning them, acting decisively to innovate and strategically to become stronger and more competitive.”
