Feature
The price of a digital workplace is expected to go up as more business introduce generative AI into their tech stacks. How much it will increase depends on several factors, including the scope of the project, the specific AI technologies and tools used, the size of the organization, and the level of customization required.
AI Costs Add Up
The Future Processing Consultancy published research in March that gives some sense of the costs associated with a generative AI implementation, albeit without the additional costs associated with integrating it into the existing digital workplace tools. The report offered three major insights:
1. Cost Drivers
Development, hardware, data quality, feature complexity and system integration all influence an AI project's expenses. Depending on these elements, costs can range from $5,000 for basic models to over $500,000 for advanced solutions.
2. Ongoing Upkeep
AI system maintenance includes regular updates, computational resources, model retraining and regulatory compliance. Leveraging cloud services and effective management can help reduce these ongoing costs.
3. Development Strategy
AI costs can vary widely depending on whether the project is developed internally or outsourced to specialists. A strategic, lean approach to AI adoption can lead to substantial cost savings and long-term value, with ROI encompassing both tangible and intangible benefits.
The result is that while many workplace leaders are looking at investing heavily in AI, it is adding another financial burden on workplaces that are struggling to operate in a very tight economic and business climate.
Related Article: High Cost Is a Barrier for Corporate Generative AI Use, But Not for Long
The True Cost Isn't an AI License Fee
One of the biggest cost factors associated with AI adoption is the fact that all of the frontier model companies with enterprise products require year-long commitments for each license, and often require a minimum amount of licenses, AI Consulting Lab founder Marcus McGehee told Reworked.
Big companies are making huge investments in generative AI tools like ChatGPT enterprise, Microsoft Copilot 365 and Google Gemini for Workspace, but are doing little to no training for their employees on how to actually use these tools in a practical way in their day to day work, he continued.
"Lack of training and education" lands at the top of the list of why workers aren't using AI more in AI industry surveys, he added. This disconnect highlights a significant issue: companies are paying top dollar for powerful AI tools but failing to equip their employees with the knowledge and skills to use them effectively.
“It's like buying a high-performance sports car and then letting it sit in the garage, collecting dust. The potential is there, but it's wasted without the proper training and guidance,” McGehee said.
AI has the power to significantly return the cost of the license and then some, he said, but only if the person using the tool is trained properly and given examples of what a good use of the tool could look like.
“Essentially, the true cost of AI isn't just the license fee; it's the fee plus the missed opportunity that comes with untrained employees and untapped potential,” he said. "On top of that, as companies adopt multiple AI tools for different tasks and departments, the cumulative cost of licenses can quickly add up like forgotten streaming subscriptions.”
Related Article: What AI Upskilling Looks Like at Every Level of the Organization
Weighing Initial Outlay Against Future Benefits
The initial investment for technology and training can be substantial, and ongoing maintenance adds to the financial burden, said Vengo AI CEO and co-founder Jason Sherman.
Scaling AI solutions as the business grows can further increase costs. To effectively manage these expenses, it is crucial to conduct a comprehensive cost-benefit analysis that evaluates the immediate financial outlay as well as the potential long-term savings and operational efficiencies AI can bring.
For example, while the upfront costs can be high, Sherman said, the automation of routine tasks and improvements in productivity can result in significant cost savings over time. Investing in scalable and adaptable AI solutions allows businesses to align technology with their growth trajectory without incurring excessive additional costs.
Balancing these financial aspects with the transformative benefits of AI requires a strategic approach. “It’s essential to plan proactively and make informed decisions to ensure that the investment in AI technology not only addresses current needs but also supports future growth,” he said. “By carefully managing costs and maximizing AI’s potential, businesses can achieve a favorable balance between expenditure and the substantial advantages that AI offers."
Related Article: Modeling Business With AI
Avoid AI Over-Provisioning
AI is pushing up digital workplace costs in several ways, Abhinav Girdhar, founder of Appy Pie, said.
First, integrating AI technologies requires significant upfront investment in software, hardware and cloud solutions. Organizations also face increased training expenses as employees need to learn how to use AI tools effectively, often through specialized programs, he said.
Ongoing maintenance and support for AI systems can further elevate operational costs, as IT resources are needed to ensure everything functions smoothly. Finally, AI’s reliance on large volumes of data increases expenses related to data management, storage and security.
Focusing on scalable AI tools can help avoid over-provisioning and reduce long-term costs. Investing in comprehensive training programs empowers employees to maximize the use of AI tools, while optimizing data management practices can minimize storage expenses.
“Regularly assessing the return on investment for AI initiatives allows organizations to identify opportunities for cost reduction while still benefiting from AI capabilities,” Girdhar said.
Avoid AI for AI's Sake
Overall, while AI offers numerous benefits, the associated costs of implementing and maintaining AI-driven digital workplaces are significant and are contributing to the overall increase in digital workplace expenses, Louis Balla a partner at ERP consultancy Nuage, told us.
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As an implementer of intelligent ERP solutions, he said that while AI can increase the cost of running a digital workplace for some companies, with the right approach, AI can reduce total costs.
He cited the example of a telecom company which installed an AI for network fault prediction. He said the six-figure investment paid for itself within a year through reduced truck rolls and overtime. He has also worked with a manufacturer to apply AI for demand forecasting. By improving accuracy from 65% to 82%, it trimmed $3 million in excess inventory costs.
“The companies struggling with uncontrolled AI costs often take a disjointed, 'technology-first' approach,” he said. “They deploy trendy tools without a specific business case, then struggle to gain value or scale benefits.”
The key is starting with a concrete ROI target, he added, like reducing customer churn or supply chain waste. Digital workplace leaders need to evaluate if AI can realistically achieve that goal, and if the ROI justifies the investment. “If not, AI may not be the right solution. With a pragmatic, business-led approach, AI can cut costs, not increase them. But AI for AI’s sake rarely pays off,” he said.
The Cost of Remaining Competitive
Implementing and maintaining AI-driven digital workplaces involves significant upfront costs, but according to Carepatron CEO Jamie Frew, these investments are both essential and highly beneficial.
The initial expenses — such as developing advanced algorithms, training employees and ensuring strong data security — are justified by the long-term benefits, including reduced manual labor, fewer errors and the ability to deliver more personalized and effective solutions to users.
In his work with the healthcare sector, he sees AI-powered automation as a means to decrease operational costs by streamlining repetitive tasks. Additionally, AI-generated insights can enhance decision-making, leading to better patient outcomes and promoting more sustainable business practices.
Frew emphasized that the considerable financial commitment is a necessary one to remain competitive and provide the highest level of service in an increasingly digital landscape.