Fix your data foundation, not your AI

Australian businesses are increasing their AI budgets despite previous overspending, driven by the misconception that high AI usage equates to productivity gains, a phenomenon known as "tokenmaxxing." Research by Elastic highlights that many companies are not effectively measuring AI's return on investment, with only a small percentage tracking revenue or cost savings. The main issue lies in the data foundation, as poor data quality forces AI models to consume more resources, leading to higher costs without corresponding benefits. Additionally, AI adoption is outpacing governance, with insufficient monitoring and risk management practices in place. Companies are funding AI expansion by reallocating budgets from areas like IT infrastructure and operations, but caution is advised against diverting funds from cybersecurity. The workforce impact of AI is nuanced, as automation of routine tasks allows employees to focus on strategic initiatives, and many businesses are creating new AI-focused roles. To ensure sustainable AI investment, businesses must prioritize building strong data foundations and support the human element alongside technological advancement.

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