According to Silicon Republic, Kyndryl’s new Readiness Report surveyed 3,700 senior leaders across 21 countries and found AI spending is up 33% from last year, with 61% of business leaders feeling more pressure to prove ROI. While 54% report positive returns so far, a staggering 62% admit their AI projects haven’t advanced beyond the pilot stage due to infrastructure complexity and regulatory concerns. The report also reveals that 75% of organizations are increasingly concerned about geopolitical risks in cloud environments, yet only 37% feel prepared for cyberthreats after 82% experienced cybersecurity outages in the past year. Meanwhile, 25% of mission-critical infrastructure is at end-of-service, creating what Kyndryl’s Gavin Goveia calls a “tipping point” for businesses trying to modernize while dealing with these compounding pressures.
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The Pilot Problem
Here’s the thing that really stands out: companies are spending more on AI than ever, but most can’t get past the starting line. We’re talking about a 33% spending increase, yet nearly two-thirds of projects are stuck in pilot purgatory. That’s a massive disconnect between investment and implementation.
Goveia hits the nail on the head when he says the initial on-ramp to AI is getting smoother, but scaling from proof-of-concept to real products is where everything falls apart. Basically, it’s easy to build a fancy demo that impresses the board, but turning that into something that actually runs your business? That’s where the real work begins. And with 57% of leaders saying tech innovation gets delayed by “foundational issues” in their tech stack, it’s clear the problem runs deeper than just AI strategy.
Infrastructure Debt Meets AI Hype
This is where things get really interesting. While everyone’s chasing the next AI breakthrough, a quarter of mission-critical networks, storage, and servers are at end-of-service. Think about that for a second – companies are trying to build cutting-edge AI capabilities on infrastructure that’s essentially falling apart.
And it’s not just old hardware holding them back. The geopolitical landscape is adding another layer of complexity. Eight in ten respondents said data sovereignty regulations, supply chain disruptions, and international instability are becoming more important in their tech decisions. Yet the least concerned groups? US and Chinese companies. Makes you wonder if they’re underestimating the risks or just better positioned to handle them.
The Pacesetter Advantage
Kyndryl’s research divides companies into Pacesetters, Followers, and Laggards, and the gaps are telling. Pacesetters are 35 points more likely to have IT infrastructure ready for future disruption and 30 points more likely to have cloud infrastructure that provides flexibility. But here’s what really matters: they’re also 30 points more likely to have CTOs/CIOs who actually understand the business strategy.
That last point is crucial. It’s not about having the shiniest AI tools – it’s about having leadership that can connect technology investments to business outcomes. The smaller gaps in areas like employee AI usage suggest that once you get the fundamentals right, the advanced capabilities follow naturally.
The Tipping Point Is Now
With 87% of respondents expecting AI to completely transform roles and responsibilities this year, we’re at a genuine inflection point. Companies that can navigate the scaling challenges, infrastructure complexity, and geopolitical pressures will pull ahead dramatically. Those that can’t? They’ll be stuck in pilot purgatory while their competitors build real competitive advantages.
The next 12 months will separate the AI winners from the AI pretenders. And given how many companies are struggling with basic infrastructure while trying to implement advanced AI, I suspect we’re about to see some very different outcomes emerge. The question isn’t whether AI will transform business – it’s which companies will actually be ready for that transformation.
