AI Is More Expensive Than You Think

Artificial intelligence and machine learning have been all the rage for the past decade, but in the last year or two, the hype around AI has grown to unimaginable levels.

While artificial intelligence is capable of performing a wide variety of tasks, like recognizing and tracking objects in photos and videos, generating human-like text, extracting information and extrapolating from large amounts of data, and much more, it’s not the magic pill for every ailment. AI systems, while being widespread, may still not be the perfect fit for solving a given problem.

One of the main reasons behind companies rejecting AI is cost. Artificial systems may seem omnipresent, thus inducing the feeling of them being easy and affordable to create, but this is far from the truth.

Even the most simple AI-powered app of the system requires a significant time and money investment, and it’s not always obvious just how much of a commitment artificial systems really are.

In this article, I aim to help businesses assess the cost of AI development more accurately as well as evaluate whether AI is truly going to save money in the long run.

The Cost Of AI Development

One of the main misconceptions about AI is that due to its popularity, it’s affordable and easily attainable. Artificial intelligence software, despite being widely used in many business operations, is complex to develop and takes a lot of time and, consequently, money.

It’s crucial to calculate as precisely as possible the cost of AI development beforehand to avoid wasting time looking for an AI development team and disappointment when the total project cost doesn’t fit your budget.

Calculating the development project is not the main step in the process of assessing the cost of AI development. In my opinion, calculating how much money it takes to complete a task you’re looking to automate now, using manual labor, is far more important.

On the surface, it may seem like automating a certain task is the most sensible approach, when in reality, implementing an AI system to replace human labor is more often than not too expensive and not as effective compared to human labor.

Calculate The Current Cost

Before looking for AI developers, you must understand your business processes and have a clear look at how much it costs to complete a task you are looking to automate with AI.

For example, a complex AI surveillance system that counts how many clients visit a store in a day may seem like a good idea on the surface: the counting process is automatic, and AI can not only count the people in the store but also track their purchases or general behavior. Falling for the AI hype, a business owner may consider getting such a system developed to get insights into their business operations.

However, the cost of developing a real-time video processing AI for object detection is likely to be far more expensive, especially if your business is on a smaller side, than hiring an additional employee who will complete the same tasks for much less money.

On the other hand, certain tasks may require a lot more human labor. For example, a company working with a lot of paperwork may find itself with 50+ employees sorting through hundreds of paper documents daily, looking for relevant information, and punching it into the systems manually.

The cost of labor for over 50 employees, in the long run, is considerably more than the cost of developing an AI-powered OCR system for automatic document processing. Even with the upfront cost of system development, the AI solution remains the more sensible option for the business money-wise.

This step may seem obvious, but many business owners seem to skip it entirely, falling for the AI hype. AI remains a complex technology that is rather expensive to develop and requires lots of data, lots of testing, and lots of time. While AI is superior to humans in completing certain tasks and may seem like the ideal choice for a certain business scenario, it may not make sense economically even in the long run.

Calculating the cost of labor a certain task requires is the first step in developing any AI project for a business.

Estimate Project Scope

Some AI systems are smaller and less complex than others, and understanding where your project lies on this spectrum is the best way to get a precise project cost estimation. Here are a few questions to ask yourself to understand the size of the project at hand:

Define The Project Goal

Define a precise goal of the AI system, whether it’s looking for a specific piece of information within a document, detecting forest fires, or facial recognition for an onboarding process. It’s better to define the goal as precisely as possible, e.g. “an AI for detecting if a document has been signed and by who” instead of “an AI for processing documents automatically”.

Define The AI Type

Object recognition and classification, OCR, natural language processing, data analysis are all different in what type of AI models are used and how complex they are. Defining what type of an AI model your project requires will help with estimating the total project complexity and, therefore, its cost.

Assess The Dataset

A dataset is the cornerstone of any AI project. A dataset is used for training and testing machine learning models, and is often one of the most time-consuming and challenging parts of a project.

Datasets are not small collections of images: to get accurate results, you need to include hundreds, better thousands of images, videos, audio recordings, scanned documents, etc. Estimate if you already have a dataset, for example, an archive of scanned paper documents or videos from surveillance cameras, and if not, estimate the time it would take to gather the needed data.

Calculate Project Cost

A precise cost calculation of any AI project can only be done by a professional AI development company that will assess your project and your business needs, test and choose ML models to get the best accuracy and provide you with a breakdown of different development stages.

There are certain guidelines when it comes to AI project costs. Here’s how much time a project requires depending on its complexity:

• A tiny AI project with very limited functionality and a predictive AI, e.g. a model that identifies patterns in past events and makes predictions about future events, takes at least 100 hours to develop,
• A small AI project, including object recognition and classification, starts at 2000 to 2500 hours,
• Larger AI projects can easily span across multiple years.

The hourly rate of any project is the main metric when it comes to calculating how much money the project will require. By multiplying this number by the amount of hours a project takes, you can get an assessment of the project cost.

The rate of AI developers varies greatly based on the region, the developer’s qualification and their experience. Make sure to research the rates of AI projects in your area (or in the area where you are planning to outsource the development) to get a more accurate cost assessment for your project.

For the sake of example, I will calculate the approximate AI project cost based on an average AI developer rate. According to Salary.com, the average hourly rate of an AI developer is around $50.

Let’s look at the hours I’ve listed earlier for different AI projects. For example, a very small AI project with a simple pattern detection and event prediction model takes at least 100 hours. Multiplying this number by the average developer’s rate, we get $5000 — the approximate cost of this type of project.

Performing this very simple calculation with the rest of the hourly estimates I’ve listed earlier results in the following numbers:

• A very small AI project with a simple pattern detection and event prediction model

  costs at least $5000,

• A small AI project with an object detection model starts at $100.000,

• A large AI project with multiple starts at $200.000.

There are rough estimates, but they can be a start at assessing the cost of your AI project. Keep in mind that the hourly rate of AI developers depends in the region and county and can vary, significantly affecting the total cost of development. Additional costs, like the hourly rate of a project manager, servers, etc. also add up to the total project cost.

Assess Additional Costs

While additional costs are not the main chunk of the total investment, they are important to keep in mind when assessing whether an AI system is worth it for your business.

A lot of custom software runs in-cloud, meaning you need to pay a monthly or yearly fee for renting servers. These costs are usually small enough to not have a large impact on the overall cost of development, but AI systems are different in this regard. AI systems require servers with powerful GPUs to run efficiently, and those tend to be more expensive, thus increasing the cost of monthly system upkeep.

If you’re looking to develop a complex AI system or an AI system that will be used by dozens of employees, you need to account for tech support to guide users through the system and fix any bugs or malfunctions a system may experience.

Another important cost to consider is the cost of additional development. During the system operation you may develop a need for additional functionality. For example, you may need to start processing new document types, or detect more objects on a video. These additions can be costly, so you need to keep them in mind when calculating the total project budget.

The Cost Of AI vs Human Labor

After you roughly estimate the cost of the AI system in question, compare it to the money you now spend on completing the same task. You may be surprised, but more often than not the price of human labor is much cheaper than the price of a custom-made AI system.

Even with all the hype around AI, it’s important to keep your head cool and hype-free when looking into having an AI developed. Tempting as it is, implementing AI is not always a sensible idea due to economics.