68% of Companies Use AI, but Frontier Firms Are Driving Real Enterprise Impact

Seven months ago, Microsoft introduced the concept of the Frontier Firm, arguing that AI would fundamentally reshape the enterprise. Its research predicted that within two to five years, most companies would be well on their way to becoming AI-native. Now, a new Microsoft-commissioned study by IDC offers an early look at that trajectory—and how closely reality is tracking with the company’s vision.

“AI has very rapidly moved from what we would say is this kind of innovation, experimental, trying to understand what’s happening to business reality. It’s the engine that is starting to drive how we live, how we work, [and] how we learn,” Alysa Taylor, Microsoft’s chief marketing officer for commercial cloud and AI, told The AI Economy in an interview. “We’re seeing all industries and functions transforming.”

Previously, she explained, most assessments of AI centered on productivity gains. Now, organizations are beginning to see—and measure—concrete business results, such as increased customer acquisition, revenue growth, and improved operational efficiency. Taylor said Frontier Firms are embedding AI into their business DNA, continuously looking for new ways to “unlock value, reshape business processes, and set the pace for what’s ahead.”

When Microsoft initially trumpeted Frontier Firms, it described these organizations as being “AI-first.” Jared Spataro, the company’s chief marketing officer for AI at Work, defined it further by saying these are companies that have decided that digital labor is as critical to the business model as human labor. They’ve opted to try to do everything with an AI-first approach.

With this new study comes an updated definition: “When we look at Frontier Firms and how they’re evolving, they are using AI to unlock new value, to reshape the business processes, and to really use AI at the strategic imperative level for the company,” Taylor declared. “It’s evolving AI from just a tool to being able to use AI to set the strategic direction and to deliver on customer value, operational efficiency, and innovation…Frontier is evolving because it’s more holistic than just using AI as a tool.”

New Findings on Frontier Firms

This benchmark report surveyed over 4,000 business leaders responsible for AI decisions. One key takeaway: While 68 percent of companies are now using AI, the true competitive edge lies in how they are applying the tools and applications.

“If you think about 68 percent of organizations using AI after two-and-a-half years, that is one of the fastest adopting technologies that we’ve seen in history,” Taylor remarked. “If you think about the internet, mobile, [and] the cloud—the period of time to the pervasiveness of it—that is a significant quantity of organizations that are using AI in their daily workflow. We continue to see this technology adopted at a rate that is outpacing previous technological shifts.”

She cited the healthcare industry as one sector that utilizes AI “very uniquely,” such as physicians using the technology to record their interactions with patients (with consent), analyze the discussions, and then automatically generate a clinical note that is integrated into the electronic medical record. “Those are things that we see where…physicians were bogged down,” Taylor claimed. “They were reaching critical levels of burnout from the administrative burden. AI is removing [it], allowing physicians to focus on what matters most, which [are] the patients.”

Retail is another example where AI is believed to have a transformative effect. Taylor brought up Ralph Lauren and its Ask Ralph agent that allows the retailer to engage with customers, providing styling advice, and giving access to inventory.

“You see so many examples of this by industry, by function, that it would be hard to say that AI is not having an impact on businesses in a meaningful way,” she asserted.

Here’s a by-the-numbers look at what else IDC found out about the future of AI-first organizations:

• Nearly 40 percent of organizations plan to boost AI spending by up to 19 percent over the next 24 months.
• Forty percent say they’re scaling AI across multiple business functions, including HR, finance, marketing, and supply chain. An equal percentage is currently shifting away from pre-built AI applications in favor of custom-built solutions—that’s expected to rise to 70 percent in the next 24 months.
• The average time to realize Return on Investment (ROI) for AI projects is 15 months.
• Most organizations are seeing real returns on their AI investments, with an average ROI of 2.8 times.
• Thirty-seven percent of respondents are currently using AI agents, with a quarter experimenting with them, and 24 percent stating that they plan to use them within the next two years.
• Organizations that utilize bots are seeing an average return of 2.3 times, with results typically realized within approximately 13 months.
• Three-quarters of those surveyed say transparency is “very or extremely” important.
• The percentage of Frontier Firms globally is low, with 22 percent worldwide falling into this category. The rest are “neutral” or deemed “laggards” at 39 percent apiece.
• In North America, nearly half of all companies are “neutral” (46 percent) while a little more than a third are Frontier Firms (31 percent).
• Latin America is made up of the most “laggards” with 53 percent, while Asia-Pacific has the lowest percentage of Frontier Firms (13 percent).

The IDC study starkly illustrates the emerging AI competitive divide across global industries. On one side are the Frontier Firms, which are most densely concentrated in financial services (31 percent) and telecommunications (27 percent). In contrast, the spaces where there are the greatest groupings of “neutral” organizations are in financial services (50 percent), telecommunications (38 percent), manufacturing (44 percent), retail and CPG (52 percent), energy and resources (45 percent), and education (51 percent). Healthcare (41 percent), media (48 percent), and automobile, transportation, and mobility (46 percent) have the highest amount of “laggards.”

Proof of Validation

Why release new Frontier Firm research so soon after the Work Trend Index—and why outsource it to an independent firm? According to Taylor, the goal was to establish a clear benchmark: to understand the early signals of the AI shift, identify emerging trends, and track how quickly things are evolving. Bringing in a third-party research group, she shares, gives Microsoft external validation that its expectations for the market are aligned with what’s actually happening.

These findings land amid a wave of other research—some of it conflicting—about how enterprises are actually using it. One of the most debated studies comes out of MIT, and it has forced software vendors to rethink their messaging to their customers. The report claimed an astonishing 95 percent of generative AI pilots at enterprise firms are failing. Another study from Cisco reveals that 13 percent of organizations are prepared to operationalize AI.

When asked how business leaders can reconcile MIT’s study versus IDC’s and Microsoft’s, Taylor suggested that the former doesn’t capture the full picture of AI’s impact.

Five Identifiers of a Frontier Firm

Microsoft and IDC recognized five lessons that organizations can learn from this research to become a Frontier Firm:

• Expand AI’s impact across every business function: Frontier Firms are using the technology across an average of seven business functions, such as customer service, marketing, IT, product development, and cybersecurity. Microsoft’s research reveals that Frontier Firms receive better results at a rate four times greater than slow adopters when it comes to brand differentiation, cost efficiency, top-line growth, and customer experience.
• Use AI for industry-specific applications: It’s understandable to start using AI to address personal productivity gains, but Frontier Firms are utilizing the technology for more strategic, industry-specific use cases. The data highlights that 67 percent are monetizing such instances to boost revenue.
• Custom AI solutions lead to competitive advantage: Buying off-the-shelf software isn’t enough for Frontier Firms. Microsoft’s study reveals that 58 percent of these AI-first organizations are using customized solutions, which enable businesses to embed proprietary knowledge, tone, and compliance into every conversation, while also fine-tuning the AI using in-house data and expertise. This amount is expected to skyrocket to 77 percent within the next 24 months.
• AI agents, AI agents, AI agents: IDC estimates that the number of companies using autonomous bots will triple. This harkens back to Microsoft’s vision of a hybrid workforce, comprising both humans and AI agents.
• Companies are investing more in AI financially: Nearly 71 percent of survey respondents indicated they plan to increase their AI budgets, with money coming not only from IT departments, but also from other parts of the business. This recognition acknowledges that AI is no longer confined to being solely an IT issue or the responsibility of the Chief Digital or Technology Officer.

Taylor shared that the questions Microsoft and IDC hoped to answer with this study included how AI was impacting the business function of an organization and how it could be measured if it extended beyond the IT department. Additionally, how does the technology impact the workflows of a business and its individual business functions? Lastly, has AI become a strategic imperative for the organization? Are these programs shifting from pilot to actual business value?

The data gleaned from the survey helped inform the development of the five identifiers mentioned above.

Now that this information is public, what should business leaders do with it? Taylor advised selecting a business or process where there is a clear business imperative and then modeling how AI can be used to automate it. Using her marketing team at Microsoft as an example, she would select any “cumbersome, burdensome workflows” for disruption. Because her company seeks to make AI accessible to everyone, she empowers those closest to the business problem to experiment and find ways to utilize AI to improve the process.

“It is the combination of putting the tools in the hands of those closest to the business, and letting them use AI to be able to experiment and learn, and then also, what are the top-line strategic initiatives that you want to use AI to solve?” Taylor explained. “When I see a Frontier Firm evolving, they’re doing both. They’re both looking at the top-line strategic imperatives and empowering those within the business functions to experiment, learn, and really reshape business processes.”

Teasing a Preview of Ignite

This new Frontier Firm research arrives just days before Microsoft’s annual Ignite conference, the company’s marquee event for IT professionals, developers, and business leaders. While Taylor didn’t offer details on what will be announced, she teased the focus: helping organizations create and manage AI-driven “agentic experiences” at scale.

“That is becoming very critical at the IT level,” she declared. “If you’re empowering users to build these agentic experiences, you also have to allow organizations and IT to be able to see and observe, and understand the impact—and then secure, manage, and govern those experiences.”

Regardless, the lesson here is that after seven months, what we understand Frontier Firms to be has evolved. No longer are these organizations simply enthusiastic about using AI or deploying AI agents in the workplace. They are embedding AI into the core of the business, refining processes, unlocking new value, and using insights to guide strategic decisions.

“AI has moved from sort of this tool to actually being a strategic imperative for organizations,” Taylor concludes. “And it’s moving from pilot or experimental to actually mainstream, and it’s changing how we live, work, learn, and how businesses operate—and that’s pervasive across all industries and all functions.”

Featured Image: An infographic detailing the results of a Microsoft-commissioned IDC study on how Frontier Firms are using AI. Credit: Microsoft