The NPV for AI

Artificial Intelligence is all around. Every domain has its influence and every individual and organization is looking to join the bandwagon. It is a buzz, and no one wants to miss the train. The success of any technology is gauged by the interest it generates among the users and the benefits it brings to the organizations in monetary terms. AI is no different as every enterprise is looking to adopt it because of the potential to bring down umpteen man hours that are being invested across different tasks. That is a measurable success criterion to see the impact of AI, but long term the NPV (Net Present Value) will play a pivotal role in determining how AI shapes up with its new offerings and scaling to more and more enterprises.

NPV is the today’s value of expected cash flows vs the value of invested cash. For example, if you invested $1000 today and its value a year later will be $1070 with a 7% interest rate owing inflation or capital cost, the NPV will be 0. NPVs are important to measure the success of an initiative and the longevity of any service or product. Every product or software will go through a cycle of having net sales coupled with the different cost factors which influence the development and sale of the product and service. AI is no different in this sense as it goes through a cycle of heavy development in any enterprise which would consume the following on the cost front.