Gen AI will disrupt the overwhelming majority of the software market, but its relative impacts will differ across a wide range of industry categories.
Industry overview
Impact detail
McKinsey & Company
Market size, 2023, $ billion
Industry overview
Information services/
data aggregation
New business models may emerge, as incumbents offer access to insights based on their underlying data assets; focus on new modes of consumption and discovery/ingestion of data is likely to grow.
Adoption of gen AI use cases (incl. co-pilots, auto-generation, personalization etc.) changes how customers are likely to engage and use solutions.
This AI sub-segment is likely to see continued investment and innovation as companies build gen AI tools; existing data solutions may continue to be leveraged if they can stay competitive.
Rising demand for gen AI and AI features in application development, but existing solutions are likely to be leveraged if they can stay competitive.
Automation streamlines staffing and reshapes customer engagement via gen AI assistants. At the same time, reductions in the number of “expert” users along with growing in-house development and rates of switching vendors will counteract some of the impact.
Gen AI changes the mandate and unique value of ad-hoc software by taking over querying, forcing incumbents to re-invent themselves against platform players.
New use cases such as the automation of labor-intensive efforts and workflows, as well as low switching rates and the rise of semi-expert users, will drive higher usage of cloud-based solutions. The relative ease of shifting to the cloud will also quicken the pace of migration from on-premises solutions.
Gen AI provides an opportunity for incumbents to re-invent how they handle traditional (eg robotic process automation) tasks while exploring more end-to-end AI automation tasks and becoming an AI automation platform.
Collaboration and communication
Customer service
Customer relationship management (CRM) and enterprise resource management (ERM)
Analytics/visualization
Enterprise automation
Data and AI development
Net impact
Re-imagining of core product, increased accessibility, and broadening of addressable user base, including the rise of semi-expert users, alters how customers leverage the software and their likelihood of switching.
Content creation
Impact detail
Source: IDC, McKinsey analysis
Source: IDC, McKinsey Gen AI CIO Survey, October 2023 (n = 250), McKinsey analysis
Level of disruption/reimagining
Very High
Medium
High
Med-High
Software categories by market size and level of disruption/reimagining
268
130
120
118
93
129
57
39
32
31
18
Content creation
Collaboration and communication
Data and AI development
Application development
and integration
Analytics/visualization
Cybersecurity
Enterprise automation
System infrastructure
Customer service
Information services/
data aggregation
Customer relationship management (CRM) and Enterprise resource management (ERM)
Software categories
Application development and integration
System infrastructure
Cybersecurity
Smaller impact to OS, computing, and IT Services due to their essential nature to technology operations, but key innovations are likely to continue.
As gen AI increases the level of threats, including AI-generated deep fakes, providers will need to implement new features for prevention and remediation.
