Kyndryl: 62% of AI Projects Remain Stuck in Pilot Phase

Enterprises are reporting measurable returns from AI investments whilst confronting persistent barriers to scaling beyond experimental deployments, according to Kyndryl’s second annual Readiness Report. 

The company’s survey of 3,700 senior leaders across 21 countries reveals 54% of organisations now see positive ROI from AI investments, up 12% from 2024, yet 62% remain unable to advance projects beyond the pilot stage.

Martin Schroeter, Chairman and CEO of Kyndryl, says: “A readiness gap exists as enterprises grapple with the promise of transformative value from AI. While 90% of organisations think they have the tools and processes to scale innovation, more than half are stalled by their tech stack and less than a third say their employees are truly ready for AI. Closing that gap is the challenge and opportunity ahead.”

The research combines survey data with insights from Kyndryl Bridge, the company’s digital business platform, to examine how organisations are navigating AI adoption alongside infrastructure modernisation and workforce transformation.

AI spending rises 33% as cybersecurity becomes primary use case

Business leaders report their companies increased AI spending by 33% on average since last year, with 68% investing in at least one form of AI. The pressure to demonstrate value has intensified, with three in five leaders reporting they feel increased pressure this year to deliver ROI from AI compared to 2024.

Cybersecurity emerges as the primary use case for AI implementation across surveyed organisations. This focus reflects enterprises prioritising risk management as they expand AI deployments across their operations.

The gap between confidence and capability remains significant. Whilst 90% of leaders say their tools and processes enable them to test and scale new ideas rapidly, more than half identify their technology stack as an obstacle to innovation. This pattern echoes findings from Kyndryl's 2024 report, where 90% of business leaders considered their IT infrastructure best-in-class, yet only 39% believed it was prepared for future disruption.

Workforce readiness lags behind AI transformation timelines at surveyed enterprises

The survey reveals a disconnect between AI transformation expectations and workforce preparedness. 87% of leaders believe AI will transform jobs at their organisations within 12 months, yet only 29% consider their workforce ready to use the technology effectively. Organisations report employees are not using AI frequently at present, and few possess the technical skills required.

The skills challenge compounds with cultural obstacles. Nearly half of CEOs report their organisation stifles innovation (48%) and makes decisions too slowly (45%). These factors create barriers to moving AI initiatives from pilot programmes to production deployments.

The report identifies a subset of organisations termed “Pacesetters” who demonstrate distinct approaches to AI readiness. These organisations prioritise culture development, training programmes, and leadership coordination alongside technology investments. Compared to organisations lagging in these areas, Pacesetters are 32% less likely to cite their tech stack as a barrier and 20% less likely to have experienced a cyber-related outage in the past year.

Infrastructure challenges persist as AI demands increase on cloud environments

Organisations are re-examining their infrastructure strategies as AI workloads place new demands on existing systems. The report reveals 70% of CEOs describe their current cloud setup as resulting from “accident rather than design”.

Three in four leaders express concern about geopolitical risks associated with storing and managing data in global cloud environments. In response, 65% have modified their cloud strategies through data repatriation investments, vendor reassessment, and movement towards private cloud models. These adjustments reflect organisations balancing AI deployment needs with regulatory compliance and data sovereignty requirements.

The infrastructure challenge extends beyond cloud architecture. More than half of organisations report their technology stack holds back innovation, creating obstacles to scaling AI projects that show positive results in pilot phases. Pacesetters demonstrate 30 percentage points greater likelihood of reporting their cloud infrastructure can adapt to new regulations compared to lagging organisations.

AI pilot programmes face scaling obstacles despite positive early returns

The survey shows organisations caught between encouraging pilot results and difficulties in production deployment. Whilst 54% report positive returns on AI investments, the 62% figure for projects remaining in pilot phase indicates a scaling challenge across industries and geographies.

This pattern occurs as AI spending increases substantially. The 33% average increase in AI spending since 2024 reflects enterprises committing resources to AI initiatives whilst struggling to move beyond experimental deployments. The 68% figure for organisations investing in at least one form of AI demonstrates widespread adoption at some level, yet the pilot phase stagnation suggests systematic barriers to full implementation.