Execs Confused and Horrified by the Huge AI Bills After Thinking They Could Replace Workers for Free

[WhiteTara]

https://finance.yahoo.com/technology/ai/articles/execs-confused-horrified-huge-ai-135718505.html

snip
The bad news is that this situation has created a world-historic financial market that, by some metrics, is looking worse than the run-up to the Great Depression. The good news is that this future of an AI takeover is looking increasingly unlikely, at least at the industry's current pace, a fact which is now dawning on some of the biggest rubes and dupes in the corporate world.

snip
The KPMG report, initially flagged by the Register, surveyed 2,145 senior execs across 20 countries, finding that an astonishing 29 percent of them had no idea where the growing costs associated with AI were coming from.

A further third confessed that their own cluelessness about AI economics was a barrier to successfully deploying AI in the workplace, the Register notes.

snip
"As usage-based pricing models become more common, many organizations are still building the capabilities required to forecast, monitor, and manage AI spending effectively," the report authors write. Translation: one third of execs had no plan for how to actually use AI productively, a fact which is becoming increasingly clear now that the meter is running.

The finding underscores what many workers forced to use AI tools on the job have come to suspect: that an alarming number of corporate leaders treat AI as a plug-and-play solution for lowering overheard without understanding the how of it all, a kind of magical thinking entirely divorced from practical reality.

[struggle4progress]

1. One of them's born every minute

[DBoon]

2. I was going to post "suckers"

There is no one more gullible than a corporate CEO

[Jerry2144]

7. The word I call CEOs rhymes with suckers

Same word I use for the oligarchs trying to destroy the US and other democracies

[Coventina]

8. Suckers and losers?

No, they are the suckers, and we, the losers, will bail them out as usual.

[FHRRK1]

10. See my post below

In my experience the CEOs were clueless, but were led down the path by CIO/CTO along with a partner at one of the big consulting firms.

Had the unfortunate task of putting together a ROI on a 50 million pure flush of funds on a software buy/implementation. Put a deck with narrative and charts together for CIO that basically showed it was a waste of money and at best he was looking at a few decades ROI. Basically like paying 150k for a Cybertruck and expecting it to last for 30 years. He pushed back a bit at my numbers, finally told him, you could have spent 5 to 10 million on modifications to existing software and achieved the same result. And with that you wouldn’t have the 8 million per year in SAP software support. We can go back and forth and find 10k potential savings but it ain’t going to change the facts.

[lonely bird]

11. Consulting firms...

Parasites.

[erronis]

16. Don't forget the bribes that were paid by the hardware and software vendors.

[eppur_se_muova]

3. Wait, you mean the salesmen proved to be an unreliable source of information ??

That's the most unheard-of thing I ever heard of !

[sheshe2]

4. sorry all I can do is...

[FHRRK1]

5. Long standing practice in IT and Software

Ellison and Oracle were masters at fucking over customers. Broadcom/AVGO same model in ICs and then software. Get your foot in the door, get them pregnant and then bend them over. Short sell on original deal, then come back in a year and sell what should have been apart of original deal.

Workday is the anti Oracle software company and has lost about 50 percent of stock value in last 18 months, the Woke/DEI honest company gets penalized.

Funny thing, to a person at every customer/company, the IT exec making the call to go with the sleaze bag organizations, was a loud mouthed Republican.

[erronis]

17. No love for IBM? I do agree that Ellison took (takes) sleaze to the highest level.

[FHRRK1]

33. Had very little interaction with IBM

Sun and HP hardware, Oracle, SAP, Workday, salesforce, Peoplesoft in software.

Can imagine any company that had a practice within a large consulting firm may go down the sleaze path.

But damn, the shit I saw Oracle pull was legalized fraud.

Had a company that spent 1 million on Oracle licenses at list price based on promises of millions in business. A year later the company asked me to review the contract. Black and white, you paid list price. Standard discount was 60 percent plus! No mention of any of the promises in the contract. Best part was Oracle fired the Rep and Regional Mgr who made the promises and slashed pricing. So the company could either pay 220k for required maintenance fees, buy the software they actually needed for 240k and then drop to 50k fees for future years, or just walk. In this case Oracle was not needed to run the business so they just walked and ate a 1 million dollar loss.

[erronis]

35. You bring up another horrible point about these companies. Stiffing the sales people that land the contracts.

Oracle was (is?) famous for weasling out of paying high yielding sales reps. Every penny that wasn't going into Leisure Suit Larry's pockets was to be stolen from the reps.

I have a friend who had the same happen to her with IBM in major accounts in NYC.

[SamuelTheThird]

6. 6- 11 trillion dollars

That's the estimate for the amount to be spent on AI infrastructurre through 2030 by the major firms

They won't make that back in revenue., not by a long shot

Economic implosion.

[OGBuzz]

13. And taxpayers will end up bailing them out once again.

[FakeNoose]

9. Now they have to hire back all the workers who were previously fired

... if they haven't moved out of the country already. These companies that jumped on the AI bandwagon will mostly lose their shirts. We'll care when the banks start closing their doors like it's 2008.

[Aristus]

12. You don't get to be a corporate executive by rationally thinking through the problem.

People with that skill set don’t waste it on corporate bullshit.

[Dr. T]

14. There was a chief executive at GE years ago named Jack Welch.

To this day, I believe that he would have a three-martini lunch then spew some ill-conceived business plan on the golf course. The yes men within earshot took it as a decree then implemented the plan.

[slightlv]

15. As a former IT worker,

I find this hilarious, from an "any worker, especially IT worker" could have... and probably tried to... tell them more than once!" point of view. But what do we know? We're only the workers!!!! /sarcasm

[Skittles]

23. I worked decades in mainframe

its demise was predicted the entire time!

[3_Limes]

25. Still being predicted. Even while mainframes continue to process

The bulk of the world's transaction workload. Because the alternative solutions collapse under the volume. And they so it with no AI in sight.

Just sayin.

[the nelm]

31. Same here. Back in my day they would make their sales pitch and get a contract, usually with upper managers...

who were not that well versed in the technology. At which point it would be up my other co-workers and I to make it work. Sometimes it would, sometimes not. As I recall my organization ended up eating it more than once.

[paulrevere2018]

18. The big AI players have figured out that its usage not effiency

That will drive their profits. Right now a lot of the pricing is based on metering usage. Tokens. The models are different but one I worked with is that every X number of queries that involved an AI access cost Y tokens. Applications were built and users trained without taking this into consideration. So a poorly designed chatbot may make hundreds of queries to answer a simple request. Multiple that across hundreds of bots handling thousands of incoming chats, no wonder CEOs were blindsided.

[NoMoreRepugs]

19. Smartest guys in the room on their way to creating yet another gargantuan crisis.

[IronLionZion]

20. Send ICE to detain those execs for stealing our jobs

deport the execs who kill jobs by replacing American workers with AI

[OC375]

21. Gen-X will be charging 2x our salaries when we come back as independent consultants.

Those of us who don't change industries entirely or just drop off the official employment map.

Talk about brain drain!

[TygrBright]

22. Reminds me of the early days at AOL, paying per minute and getting huge bills... LOL... n/t

[in2herbs]

24. This is the exact reason voters shouldn't put business people in govt positions --- because business people

don't know how to run a govt.

[RockRaven]

26. These shit-for-brains are the same execs who insist their pay/compensation is merit based.

[yellow dahlia]

27. Thanks for all the knowledgeable comments.

The collateral repercussions are depressing.

[WhiteTara]

34. I agree!

[NBachers]

28. Keep the workers. Fire the executives. Ditch the AI.

[ChicagoTeamster]

29. But they're okay with their bills from Amazon AWS and Microsoft Azure?

[erronis]

36. With AWS or Azure you should know what you're paying for - measurable usage of resources

such as CPU, memory, bandwidth, storage.

With the tokenized billing it is black magic. You have to take the smoke-and-mirrors that Altman and others are spewing as being a meaningful and reproducible item.

[Karasu]

30. Almost like corporate executives are--in fact--overly simplistic morons, and don't deserve the worship they've grown

accustomed to in a (hyper)capitalist society.

[HeartachesNhangovers]

32. Not so fast. This article is very incomplete.

There have been many stories recently about shocking AI usage fees after the AI providers recently started charging by actual usage rather than just a monthly license with unlimited use. That's all true, but the real problem is that companies upgraded to the most-capable AI models available whether they needed them or not, since the monthly license costs weren't very high. AI providers were surely keeping monthly license costs artificially low to grab market share and to hook employers on AI.

Employees were using these high-end models (capable, for example, of solving math problems that have stumped humans for decades) for even the most mundane tasks like sorting through their emails to make to-do lists. However, there are entry-level AI models or even free models that can do most of the work that employees had been mis-using high-end models for. The problem was compounded because some employers were requiring employees to use AI models for as many tasks as possible, with no consideration of the type of model being used.

I think that low-cost AI models will continue to replace human labor for many tasks (administration, most programming, etc, etc), and that use of the most expensive, cutting-edge models will be restricted to the few employees that actually need them. Many companies will probably find that they don't actually have any use for the most expensive AI models.

But if AI providers think that companies are going to continue to pay for unrestricted employee use of high-end AI models, they're wrong. Why would they throw money away like that? AI is in a bubble and this is the start of the AI consolidation.