Q+A: How to stop your AI budget blowing out
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Why are Australian businesses’ AI budgets blowing out?
Welcome to Fear and Greed QA, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer. Australian businesses are spending more on artificial intelligence, but many are struggling to work out what they're actually getting for their money. New research from Elastic suggests one in three businesses exceeded their AI budget last financial year, while only 8% are tracking AI's contributions. to revenue or cost savings. Despite that, half plan to increase their AI spend over the next 12 months, Jeremy Pell is Country Manager ANZ at Elastic, great supporter of Fear and Greed. Jeremy, welcome to Fear and Greed QA.
Thanks, Sean. Great to be here.
I reckon that this is the ultimate question right now. What are we spending on and are we getting a return for it? So let's break that down. One in three businesses went over their AI financial uh their AI budget last financial year. Yet half are increasing spending. What's going on? That doesn't sound rational.
No, you're you're right. You know, if you think about just how you would go and ask for money kind of two years ago, mm-hmm, you'd have to build quite a robust business case to say, I'm gonna get this outcome off the back of it. But for some reason, all of those basic fundamentals have gone out the door with AI. You know, it's uh spending more, it's not really linked to the business outcome yet. Yes, we're seeing some sort of benefits, but nowhere near amount as the the budgets that are increasing. So people are going over those budgets. They're continually spending and people are actually even throwing more money at it. And I think the biggest concern there is that the budgets aren't growing the same pace that the AI AI is growing.
So unfortunately some businesses have had to make that decision of how am I going to fund these AI initiatives? Where's it going to be coming from? So it's coming from different parts of the business to fund these AI strategies.
I wonder sometimes with these new technologies, whether that's just part of the life cycle of it. People do throw money at it and maybe you're not measuring it properly, maybe you're not quite sure where it's going, but you kinda have to do it, or is that not the case?
What’s causing AI spend to exceed budgets despite limited ROI tracking?
It is. If you aren't spending in AI, you're going to be left behind. So there is definitely an element of that. I also think that we're at the height of expectation of at the moment where people are now spending a whole bunch of money to try and keep up with it. And we will start to see it plateau out as the cost of tokens and things come down. Um, but also as it starts to measure the business outcomes and people can start to really uh attribute it to how the business is either c saving money or growing revenue.
So attribution's a good one. The it the really striking number in the research is that only eight percent are tracking AI's contribution to revenue or cost savings. Is that a function of people kind of not making the effort, or is it just too hard to do?
It's a it's a bit of both, really. Um being able to manage a cost in an AI world is quite difficult. Um, you know, it's all a lot to do with the data that you're putting inside these models. So how you're actually storing your data, how you're putting your data in there is the thing that is creeping up those costs. So being able to bring the AI to your data versus always just putting your data into these models is crucial. Um, but then being able to then measure it, uh I always think think the token maxing was kind of so last week. And now we're getting to a point where it is all about uh token to revenue maxing or token to value uh maxing. So how could we actually link it to a business benefit being revenue up?
or value out. And once you get that equation right that it's actually moving the needle in either one of those buckets, then you can start to double down and invest further.
Okay. So let's just explain token maxing to people. It might be last week, but many listeners won't quite know what you mean by it.
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Chapters
7 chapters
1
Why are Australian businesses’ AI budgets blowing out?
0:06–2:07
2
What’s causing AI spend to exceed budgets despite limited ROI tracking?
2:07–4:06
3
How can companies start measuring AI’s contribution to revenue or cost savings?
4:06–6:06
4
What is “token‑maxxing” and how does it affect AI costs?
6:06–7:19
5
How can organisations put effective caps and business cases on AI usage?
7:19–9:12
6
When should you use cheaper models versus frontier models for AI tasks?
9:12–10:15
7
Why are solid data foundations critical before scaling AI?
10:15–11:10
Speakers
1 identifiedMore from FEAR & GREED | Business News
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