Gen AI spending in ER&D to hit $4 mn from $2.6 mn per project at scale

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Enterprise adoption of Generative AI (Gen AI) in engineering research and development (ER&D) is gathering pace, with average project investments expected to rise at the pilot stage to $4 million from $2.6 million in full-scale production, according to a new study.

The ISG-NASSCOM thought leadership paper, launched at the Nasscom Design & Engineering Summit 2025, highlights that just over 10 percent of enterprise applications are currently Gen AI-enabled, a share projected to reach 25 percent by the end of 2025. IT budget allocation for Gen AI is also set to increase from 4 percent in 2024 to more than 6 percent in 2025.

Spending is split across applications and SaaS (36 percent), personnel (25 percent), infrastructure (21 percent), and managed services (18 percent). The report highlights that companies are balancing off-the-shelf solutions with custom builds, frequently turning to service providers and global capability centres (GCCs) in India to fill talent and capability gaps.

Efficiency remains the dominant driver of Gen AI initiatives, with organisations reporting more than 50 percent of their expected return on investment already realised. Use cases range from automated code generation and predictive defect detection to simulation-driven product innovation across sectors such as automotive, semiconductors, industrials, telecom, and healthcare.

The study concludes that India is uniquely positioned to lead this shift, backed by a deep engineering talent pool, diverse datasets, and policy initiatives like the National AI Mission and National Semiconductor Mission.