AI as a service market is anticipated to grow at a significant CAGR of 17.7% during the forecast period (2024-2031). The market growth is attributed to the growing adoption of AI as a service in no-code or low-code Machine Learning (ML) services, ML frameworks, and Application Programming Interfaces (APIs). With little risk and no significant upfront costs, AI as a service (AIaaS) empowers people and organizations to experiment with AI and deploy it for large-scale use cases. AIaaS enables companies to integrate AI-powered tools and functionalities into their systems. Organizations can deploy AI without having to invest in resources to design and implement it from the start using AIaaS. Thus, it provides a low-risk and economical solution. According to the International Trade Administration (ITA), in May 2022,AI global funding doubled to $66.8 billion, and a record 65 AI companies reached $1.0 billion + valuations, up 442.0% from the previous year. Each year, more and more companies and governments globally adopt AI solutions.

Market Dynamics

Increasing Expansion of Cloud AI Services

The growing incorporation of AI services in the cloud from major IT companies like Google, Microsoft, and Amazon is contributing significantlytowards market growth. These companies invest substantial resources in creating cloud AI platforms and provide them as a service to enterprises of all sizes, facilitating enterprises' access to and adoption of AI solutions without requiring them to invest in expensive infrastructure and knowledge. The demand for cloud AI solutions is anticipated to increase overall as more companies look to leverage AI and ML to accelerate innovation and expansion. The cloud AI industry has new opportunities owing to the growing usage of hybrid clouds.

Growing Trend Toward Specialized AI Services

The growing adoption of specialized AI services to perform a specific task or solve a specific problem is also contributing towards market growth. It is also known as narrow AI or weak AI. Typically, specialized AI systems receive a lot of training data relevant to the task or issue they are intended to address. Specialized AI, in contrast to general AI, is created to excel at a particular activity or task domain. It is widely utilized in sectors including hiring, healthcare, banking, and manufacturing and usually calls for a lot of training data. Specialized AI services, such as generative AI, facilitate the application of AI to apps and business operations by providing developers with prebuilt ML models.

Market Segmentation

Our in-depth analysis of the global AI as a service market includes the following segments by technology, cloud type, offering, and vertical.

• Based on technology, the market is sub-segmented into machine learning, natural language processing, context awareness, and computer vision.

• Based on cloud type, the market is sub-segmented into public cloud, hybrid cloud, and private cloud.

• Based on the offering, the market is sub-segmented into infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS).

• Based on vertical, the market is sub-segmented into BFSI, healthcare and life sciences, retail, IT & telecommunication, government and defense, manufacturing, energy & utility, and others (automotive, education, agriculture).

Machine Learning is Projected to Hold as the Largest Segment

Based on thetechnology,the global AI as a service market is sub-segmented into machine learning, natural language processing, context awareness, and computer vision. Among these machine learning, sub-segment is expected to hold the largest share of the market. This is attributed to the development of ML platforms, including reinforcement ML algorithms, supervised ML algorithms, unsupervised ML algorithms, and others in the region.  For instance, in April 2023, Fujitsu Ltd. introduced the platform Fujitsu Kozuchistreamlining access to AI and ML solutions.  The new platform enables customers from a wide range of industries including manufacturing, retail, finance, and healthcare to accelerate the testing and deployment of advanced AI technologies for the unique business challenges

Software as a Service (SaaS) Sub-segment to Hold a Considerable Market Share

Based onthe offering,the global AI as a servicemarket is sub-segmented into infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). Among these, the software as a service (SaaS) sub-segment is expected to holdaconsiderable share of the market.The segmental growth is attributed to the increasing SaaS solutions that provide cost-efficiency by offering subscription-based models and reducing hardware, software licenses, and Telecom infrastructure expenses.For instance, in May 2023,Nokia announced an expansion of its fixed network solutions suite available through a SaaS delivery model, with the launch of AVA fixed network insights enabling operators to strengthen their customer service offering while reducing operating costs.

Regional Outlook

The globalAI as a service market is further segmented based on geography including North America (the US, and Canada), Europe (the UK, Italy, Spain, Germany, France, and the Rest of Europe), Asia-Pacific (India, China, Japan, South Korea, and Rest of Asia- Pacific), and the Rest of the World (the Middle East & Africa, and Latin America). 

Increasing Adoption of AI as a Servicein Asia-Pacific

• In emerging countries such as China and India, the use of AI as a service is rapidly growing, thus, accelerating the industry's demand.

• According to the Ministry of Foreign Affairs, the People's Republic of China, in November 2023, the AI industry is developing rapidly and has become a new engine for the country's economic growth. In 2022, the number of AI companies in China exceeded 4,300. The value of the industry was higher than 500 billion yuan ($69.685 billion)

Newly Funded Artificial Intelligence Companies in Each Year that Received an Investment of More Than $1.5 Million

Source:ourworldindata

Global AI as a Service Market Growth by Region 2024-2031

North America Holds Major Market Share

Among all the regions, North America holds a significant share owing to the presence of numerous prominent companies and AIaaS in the region. The growth is mainly attributed to the growing numbers of AI startups with increasing adoption of AI technologies in large industries and IT infrastructure, government regulations regarding data security, and cloud application and security information services contribute the regional growth. According to the US Census Bureau, in November 2023, businesses in the information sector reported greater levels of AI use than the national average, 13.8% of businesses indicated that they were currently using the technology.Only 3.8% of businesses reported using AI to produce goods and services, according to the most recent Business Trends and Outlook Survey (BTOS).

Market Players Outlook

*Note: Major Players Sorted in No Particular Order.

The major companies serving the global AI as a servicemarket include Amazon Web Services, Inc., Google LLC, IBM Corp., Microsoft Corp., and Nvidia Corp., among others. The market players are increasingly focusing on business expansion and product development by applying strategies such as collaborations, mergers, and acquisitions to stay competitive in the market. For instance, in February 2024, Wipro and IBM Corp. expanded their partnership to offer new AI Services and support to clients. The Wipro enterprise AI-ready platform leverages the IBM Watson AI and data platform, including watsonx.ai, and watsonx.data, and watsonx.governance and AI assistants, to deliver to clients an interoperable service that helps accelerate AI adoption. Also, in May 2022, SK Telecom launched an AI service named ‘A. (A dot)’ as an open beta version for Android on One Store and Google Play. 

Recent Development

• In January 2024, the European Commission launched an AI innovation package to support AIstartups and SMEs. The Commission through Horizon Europe and the Digital Europe programme dedicated to generative AI, will generate an additional overall public and private investment of around €4.0 billion ($4.3billion) until 2027.

• In July 2023, NEC Corp. developed generative AI that is customizable for each customer to create new value for companies in response to business changes caused by new technologies. The new ‘NEC Generative AI Service’ provides licenses for proprietary large language models (LLM), dedicated hardware, software, consulting services, and more.

The Report Covers

• Market value data analysis of 2023 and forecast to 2031.
• Annualized market revenues ($ million) for each market segment.
• Country-wise analysis of major geographical regions.
• Key companies operating in the global AI as a service market. Based on the availability of data, information related to new product launches, and relevant news is also available in the report.
• Analysis of business strategies by identifying the key market segments positioned for strong growth in the future.
• Analysis of market-entry and market expansion strategies.
• Competitive strategies by identifying ‘who-stands-where’ in the market.