EY NASSCOM AI Adoption Index

EY NASSCOM AI Adoption Index: is AI still incubating in your organization or driving innovation?

The EY NASSCOM AI Adoption Index, reveals that India is leapfrogging in AI maturity, but some dichotomies still exist.


In brief 

  • The EY NASSCOM AI Maturity Index aims to measure and analyze the preparedness of Indian enterprises in converting the AI opportunity into tangible economic value, year-on-year.
  • As per the index, ~60% of AI-led value-add is expected from five sectors.

India’s techade hinges on world-leading AI adoption

Global Artificial Intelligence (AI) investments more than doubled between 2020 and 2021, to a high of $77 billion in 2021, from $36 billion in 2020. While the scope of AI-driven opportunities is discussed widely, it is equally important to focus on India’s preparedness in converting AI’s potential to tangible national value. 

A General purpose technology (GPT), AI packs transformational impact for India due to a rich and diverse data economy. Large-scale investments funneled into making the country digital-ready over the past decade have strengthened India’s ability to address societal and environmental problems and drive equitable growth.

How is the EY NASSCOM AI Adoption Index different?

The EY NASSCOM AI Adoption Index aims at introducing an AI maturity assessment for end-user enterprises, starting with four core sectors, and potentially working up the sectoral diversity and comprehensiveness of the index in its future versions to reflect India’s advances in this space.

There is a strong correlation between India’s ambitious trillion-dollar digital economy and $5 trillion GDP goals by FY2026-27 and maturity of AI adoption. There is a positive and significant correlation between usage of AI and the growth of Total factor productivity (TFP). 

  • In line with the India’s AI maturity score, a majority of the organizations showcase the following characteristics across key AI parameters:

    AI Strategy: Function Level
  • AI Budget: Ad-hoc or basic
  • Talent Strategy: Gig model, with a shift towards developing inhouse AI talent
  • AI Project Management Strategy: Designing/Partially implemented
  • Data Readiness: Transitioning to standardized data
  • Technology Stack: Modernized
  • Audit and Control: Well documented frameworks

A look at few key insights of the study

Strategy and impact: A majority of Indian organizations are transitioning towards the middle stage of maturity with defined AI strategy and implementation of limited use-cases with a vision to scale up these solutions.

65% of organizations have AI strategy defined
either at a functional or enterprise level

Investment: A majority of the organizations in the intermediate stage of AI maturity have need-based or basic AI budget allocations leading to lower percentages of IT spend on AI. It still is a shift from 2020 when vast majority of corporations did not have an AI budget.

     68% of organizations have an ad-hoc or basic   
AI budget.

People and operations: With a burgeoning number of STEM graduates and digital natives, India is one of the biggest talent hubs for AI. There are over 40+ GCC’s focused on AI/ ML in India.

52% either have no PM methodology for AI or
are still designing one.

Data and technology: 1 out of 2 organizations surveyed have standardization and data readiness at either BU or enterprise level. A majority of organizations interviewed also indicated a shift towards an enterprise wide data lake in the near future to improve data readiness and access.

44% either have inadequate or silo-ed data,
limiting them from scaling AI solutions.

Knowledge output: Organizations prefer AI start-up incubation and in-house AI-labs for innovation. However, there is a limited focus on sponsoring AI research. Expanded industry-academia collaboration can bring diverse points of view and lead to innovative solutions.

59% of organizations approach AI innovation
via start-up incubation and in-house AI labs.

Ethics, governance and controls: 3 out of 5 organizations have duly documented ethical and governance framework in place. With increasing role of AI applications, the need for an integrated AI ethical framework becomes very important.

60% possess audit and control frameworks to
mitigate risk and drive continuous
improvement.

A look at the AI footprint in core sectors

As per the overall sector scores, all the sectors fall in the “Enthusiast” stage. This signifies that all the sectors are beyond their phase of exploring the possibilities of AI and are now enthusiastic about what they can achieve by leveraging AI.

Industrials and Automotive: Sector Score: 2.52 | Level:  Enthusiast

Industrials and Automotive sector has traditionally lagged in its AI adoption pace but is gaining momentum with focus on Proof of concept to-production, formal AI strategy, and Cloud investments. The organizations in this sector use AI majorly to improve shopfloor operations with 24x7 operations, lesser defects and lower downtime.

78% already have a defined AI strategy
at function or enterprise level

Automotive players additionally use AI to drive innovation and product/service development in form of autonomous, self-driving vehicles, and aftermarket services like predictive maintenance and insurance etc.

Banking, Financial Services and Insurance (BFSI) : Sector Score: 2.42 | Level:  Enthusiast

30% of the surveyed BFSI companies, across size and sub-sector classification, are yet to begin a planned AI journey and are still exploring AI for applicability, viable use cases through PoCs, and a clearly explainable RoI.

73% primarily focus on innovation through AI

The sector has been indulging in producing novel solutions, such as digital lending, fraud detection and auto underwriting, to improve customer experience and reduce operational costs using AI. The momentum is now shifting towards differentiation and ensuring data safety via AI.

CPG and Retail: Sector Score: 2.51 | Level:  Enthusiast

The industry is in a perpetual state of upheaval and development, contending with rapidly changing customer buying patterns and a shift in focus from the street to the online. There is a constant need to build novel solutions to improve customer experience catering to their ever-changing need, with a huge emphasis on consumer data privacy continuing as the key area of focus for the future.

75% are in the process of developing a formal
AI Strategy

The sector has expansion, optimization and innovation at the core of its AI initiatives with undefined or functional level AI strategy. The focus is now on scaling-up the ongoing efforts, developing a structured PM methodology, transitioning to modern systems and data standardization.

Healthcare: Sector Score: 2.35 | Level:  Enthusiast

47% of the surveyed healthcare companies, across size and sub-sector classification, are yet to begin a planned AI journey and are still exploring AI for applicability, viable use cases through PoCs, and a clearly explainable RoI.

88% are in the process of developing a formal
AI Strategy

For a data-intensive sector that can benefit immensely by a shift to AI-led preventive healthcare strategies, from predominantly curative, this indicates a massive need for AI advocacy and RoI demonstration.

Impediments to AI Adoption

The impediments to adoption of AI vary greatly from one sector to another. However, an aggregate view demonstrates that objectively quantifying the benefits of AI remains the top barrier to adoption and there has been no change since 2020. This is one area where there has been a gradual shift to Proof-of-Value in addition to Proof-of –Concept to demonstrate organizational value-add.  Similarly, the external enabler ecosystem has remained passive as indicated by the majority of the respondents across verticals. Having a budget for AI projects is the chief concern for the Industrial and Automotive sector as well as Healthcare. Thus, the top 3 challenges remain unchanged since 2020. However, cultural and behavioral impediments have moved within the top 4 in 2022.

 The way forward

India’s AI maturity score of 2.45 reveals the latent
value from the use of AI waiting  to be unlocked in this
techade – the $500 billion opportunity by FY2026.

Survey findings indicate a strong desire and the know-how to adopt AI, and a reasonable sense of the roadblocks ahead. A majority of enterprises seek to resolve their operational efficiency and market growth challenges with the use of AI. Many of these objectives can be realized with already proven AI use cases – either adopted by more progressive enterprises in India or by global companies. What is needed to quickly implement those solutions is a decisive leadership vision and AI strategy, strong technology infrastructure and data standards, and clear outcome definitions. 

India has world-leading AI talent. However, it lacks in skills that need a combination of depth of AI experience in specific domain areas to develop, test, and deploy focused AI solutions. This challenge further exacerbates when combined with AI-specific project management experience, an area where Indian enterprises seem to be lagging significantly. 

Indian enterprises prefer AI start-up incubation or inhouse AI labs to drive innovation, however, there is limited emphasis on partnership with academia to quickly create concepts that have a high potential for lab-to-market success. A majority of the patent filing within the country is driven by research and academic institutes. However, very few get implemented as real-world AI solutions.

While companies have started experimenting with AI, the frameworks to measure success continue to be legacy – project based RoI or time and budget success. However, digital transformation projects, increasingly with most having AI solutions embedded in them, require a different set of metrics to be defined and linked with organizational success KPIs, to measure the continual and cross-functional impact of AI.

AI Adoption Index will provide a benchmark for organizations to effectively strategize their AI ventures with adequate focus on budget planning, operations streamlining and in-house talent building. The Index will help shape a culture to innovatively, and responsibly harness the value AI can potentially unleash.

Download the full pdf

Summary

This index is the first detailed assessment of AI adoption trends in India, beginning with four key sectors that could contribute ~60% of AI’s potential value-add of $450-500 bn to India’s GDP by 2025.

Indian enterprises have established the foundation to scale their AI initiatives, with greater adoption of public/hybrid Cloud and data standards, building world-leading AI talent, and early adoption of responsible AI models. The road to $500 bn. value-add will propel India to the Expert-Evangelist stages rather rapidly.

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