[S1.04] AI Development Agency Business Model

“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles.”
– Azim Premji, Chairman of Wipro Limited
Wipro Limited is an Indian multinational corporation that provides information technology, consultant and business process services since 1945, now having 234,000+ employees and yearly revenue of US$11 billion

The inception of IT Development Agency (the company that offers IT Outsourcing Services) cannot be tied down to an exact date, not in the same way that a corporate entity opening its doors can. However, it is generally agreed by industry insiders that IT outsourcing officially began in the 1980s. In 1989, Eastman Kodak struck a deal with IBM. The computer giant was tasked to design, build, and manage a data center on behalf of Kodak. At the time, Kodak is said to have transferred hundreds of their own staffers to IBM’s Integrated Systems Solution Corporation (ISSC).

During its long journey of IT Outsourcing services, millions of technologies, and solutions are created to satisfy the needs of global business. AI is just one new technology among those technologies and solutions, but in this big picture, AI Development Agency (offering AI Outsourcing Services) become the fastest growth technology. This topic is the 4th topic of our series of AI Business Models, with a detailed guide and explanation.

AI Business Model Blog Series

After years of serving our clients in the AI domain, we are impressed with many different AI approaches to products/services from our clients. So we love to classify them as a Blog Series for AI Business Models, our 1st Blog Series (S1) to bring a summary on this topic and share it with any AI founders, or entrepreneurs out there who dream of building their own AI kingdom. Some may already have their business but they can also refer to market research to grow their AI business.

Series name: AI Business Models, a detail guide and explanation
Series blogs:
- S1.01: AI Business Models Overview
- S1.02: AI Education Business Model
- S1.03: AI Consultant Business Model
- S1.04: AI Development Agency Business Model (this blog)
- S1.05: AI Software as a Service (AI SaaS)
- S1.06: AI Platform as a Service (AI PaaS)
- S1.07: AI Infrastructure as a Service (AI IaaS)
- S1.08: AI Business Models transition possibilities

AI Vertical, Horizontal, and Hybrid approaches

Similar to AI Consultant business, there are many different approaches to operating AI Outsourcing services, but we can categorize them into 03 following:

• AI Vertical Development: split by technologies
• AI Horizontal Development: split by applied domains, specified user cases
• AI Hybrid Development: mix between Vertical and Horizontal

Refer [S1.03] AI Consultant Business Model to capture again these 03 approaches.

AI Vertical Development

AI Vertical focuses on technologies, some companies offer Outsourcing services on specific technologies. AI technologies are so big, but we can classify them vertically as 04 big themes:

• Machine Learning (Predictive AI):  consulting data analysts and AI models that can help to learn from data and provide output from data like forecasting, and classification, ... There are 03 types of Machine learning which are: Supervised learning, Unsupervised learning, and Reinforcement learning.
• Deep Learning: consulting big data analysts to acquire knowledge from big data, consulting how to use publicly trained AI models to apply to the specific business user case. In this zone, we can see a lot of popular user cases such as ORC, Object detection, TTS/STT, NLP (LLM), GenAI.
• Robotics: consulting on robot design, construction, and operation, this links both to hardware and software consulting.
• Expert Systems: Computer programs designed to mimic human experts's reasoning and decision-making abilities. A good example of this zone is Self-driving cars which were successfully established in the US.

Focus on AI Development Agency business, the zones Machine Learning and Deep Learning are now open for AI Development. The Robotics and Expert Systems are still more in-house development due to the complexity and the secret technology of each company now. Considering the total cost spent in AI globally, we can see the top 04 Vertical focuses are: Machine Learning, NLP, and Computer Vision, where Machine Learning cost spent is 3 times more than NLP and 9 times more than Computer Vision.

AI Horizontal Development

AI Horizontal Development focuses more on business user cases and how AI empowers digital products. Some companies can only focus on typical user cases, such as AI chatbot Development.

So we can see that AI Horizontal Development approaches may focus on:

• Specific on the selected domain(s): follow 01 or multiple domains in-depth and provide all AI Development applied in that domain. (Example: fintech, ed-tech, mar-tech,...)
• Specific on user case(s): follow one or multiple user cases in depth and provide all AI solutions/options applied in that user case. (Example: chatbot, product recommendation, investment recommendation,...)

At Investidea, we more focus on this approach which is more focused on user cases and go deep into each user case and provide more customization on this.

AI Hybrid Development

AI Hybrid Development mix 02 above approaches, flexible depending on the request from the client. In the consulting domain, no matter what approach you are applying, the most important thing is you must find the best niche zone in which you have a very competitive advantage to use as a unique selling point.  

Highlight on market

Referring to the high-level statistics of this business model, we can see a big CAGR (considering as market growth rate) of 37.2%, same as 37.46% in AI Consultant Business Model, smaller than 47.2% in AI Education, but the value estimated $1,345.2B in 2030, a little bigger than $1,190.4B in AI Consultant. This value is more than 20 times the value of AI Education market in 2023, value of $55.4B. Another interesting part of this statistic showing the fastest growth region is Asia-Pacific, same as AI Education. With the advantages of the young and talented resources, it is no doubt that Asia-Pacific will lead the market in the near future.

There is no doubt that IBM, Infosys, and FPT Software are the big giants in this AI Development Agency Business Model, we can see clearly from their capacities and investments in AI. From Clutch.co, the IT listing company, we are also seen to see a lot of listed companies serving AI Developing services.

NineTwoT hree is one of the samples of a strong AI Development Agency based in Boston, MA, US, led by Pavel Kirillov, CTO since Mar 2013. Starting his career path as a PC Network Technician and moved more to Web Developer, Software Engineer, IT Manager, and CTO. This is typically a great example of an AI Development Agency founder's career path, especially from the technical side as a CTO.

At Investidea, we are now at the rank 140/7604 Clutch global rank for AI Developing services. We are an example of AI adaptation and injection, we offer AI Developing services besides our strong experience in IT Consulting & Developing services and AI Consulting services.

Action Recommendation

AI is again a very large topic, so AI Development Firms working in this field always face a very challenging on large of domains.

• Condition to start: the most important of AI Development Agency is technical resources, you need to have a great CTO and a clear roadmap to build strong AI resources. From here you can provide AI Developing services to build AI systems. Again, AI is a big domain, so we just need to focus first in at lease 01 vertical technical zone.
• Condition to scale: find your developing approach (Vertical, Horizontal or Hybrid) go very deep in that field, and turn it become your unique selling point in the market. The scale of your company is likely the number of AI resources you can build.
• Condition to success: having your great client pipeline, and network where you can generate a lot of requests for developing with scale. Success in this domain is close to success in resources/talent management. So stay close to your resources and always challenge them by AI projects with new frameworks, and new solutions every day.
• Skill needs: a lot of technical and resource management skills are needed to master AI technologies.

Ready to start your own AI Developing Business? From Investidea, we would love to talk more with other AI Development firms to open an AI Alliance. Together, we can fulfill the diversification of technologies, domains, and user cases, which can help us to grow together, and serve our clients better.