Pricing and cost analysis is a process that helps organizations derive and forecast the real cost of products or services over a specified period of time. This analysis takes into account every cost component, and also gives a competitive advantage when negotiating with suppliers by helping organizations understand the true cost of goods and services. Additionally, the outcome of pricing and cost analysis can help procurement leaders understand the detailed cost drivers in a particular category.
In this artificial intelligence procurement intelligence report, we have estimated the pricing of major cost components. Data processing & management, hardware, labor, and software form the biggest cost component of artificial intelligence implementation. Further, the cost is dependent on the type of data available, the complexity of problem being solved. For example, in developing an AI-based solution, prototype development cost start from USD 25,000 onwards. Maintenance costs upwards of USD 320,000. The costs of software are from USD 30,000 to USD 50,000. The annual skilled labor costs can be at least USD 320,000. Thus, the average costs for custom AI solutions come up to around USD 500,000.
When procuring a package of products or subscribing to services, every business and their procurement staff look forward to getting the best deal possible. Rate benchmarking involves comparing the prices/costs of multiple sets of products/services to determine the best combination that can potentially assist the procurement team in obtaining the best rate.
The geographical location and nature of the firm are critical factors in examining rate benchmarking in the artificial intelligence category. For instance, artificial intelligence services in the U.S. are typically costlier than services in India. For example, in U.S the average rate of a lead developer is the highest starting from USD 85 - USD 125 per hour, as compared to India which is around USD 32 - USD 65 per hour. This is due to a number of factors, including the availability of skilled labor, and the regulatory environment. The cost of AI services changes based on the size of the project. For example, a small business that is simply looking to implement an AI-based solution will likely pay less than a large enterprise that is looking to build a complex AI-based platform. Prices vary depending on the complexity of the artificial intelligence application. As an example, a basic application may cost between USD 900 - USD 5,000 whereas a highly complex application may cost from USD 150,000 - 300,000.
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One of the major expenses associated with providing a good or service is labor cost. Therefore, if a company is offering its goods or services at reasonable pricing, it must decide if the category in focus should be kept in-house or outsourced. Before choosing a supplier and creating a bargaining strategy, the firm that decides to outsource must comprehend the variations in the compensation structures of suppliers.
According to our research, developers at NVIDIA Corporation, Advanced Micro Devices, Inc., and Microsoft Corporation receive a 15% – 20% higher average salary compared to the salary earned by developers working in companies such as AiCure LLC, and ARM, Inc. However, the year-on-year growth rate in all of these organizations is heavily influenced by the Key Result Areas (KRAs).
It may be difficult for organizations to keep up with all the most recent changes in their supplier landscape. Organizations can concentrate on their core services by outsourcing the tasks involved in intelligence collection. Currently, our newsletter service can help businesses keep on top of the most recent advancements and innovations, which will help to prevent supply chain disruptions. We have recognized the following developments in the artificial intelligence category over the last two years:
In June 2023, IBM announced its partnership with The All England Lawn Tennis Club for the 2023 Wimbledon Championship. During the competition, the company plans to use IBM Watson's generative AI technology to provide commentary for video highlights. Furthermore, the IBM AI Draw Analysis will provide information into how advantageous the draws would be for each singles player.
In March 2023, Enlitic Curie, a platform that simplifies workflow management of radiology departments, was released by Enlitic. Curie|ENDEX, which uses NLP and computer vision to analyze and process medical pictures, and Curie|ENCOG, which uses AI to identify and secure Protected Health Information, are both hosted on this platform.
In August 2022, Atomwise established an exclusive, strategic research cooperation with Sanofi for AI-powered medication development. As part of the agreement, Sanofi will use Atomwise's AtomNet platform for computational discovery and research on up to five therapeutic targets.
In July 2022, Clarifai announced the debut of its free 'Clarifai Community' service, allowing anybody to share, create, and utilize The World's AI. Furthermore, it announced the creation of the 'AI Lake' product category, which aggregates and centralizes a business's AI resources and provides capabilities for sharing throughout the enterprise.
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Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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