Israeli companies increasingly recognize AI technology as vital to their future business success, yet many still struggle to translate that vision into reality. That is the key finding of a new survey conducted by Microsoft Israel and KPMG. Three out of four organizations see AI as a crucial competitive edge, but only one in four is actually using it at scale.
Conducted as part of the Microsoft AI Tour in Israel, the survey examined 40 major organizations across sectors including healthcare, finance, retail, industry, and technology. The findings show that AI has quickly shifted from a futuristic concept to a core strategic tool for driving efficiency, enhancing productivity, and improving customer experience. However, they also highlight the persistent challenges that hinder broader AI adoption across the business landscape.
What is holding back implementation?
The survey targeted senior C-level executives, such as CIOs, CTOs, and Heads of Digital Transformation and Innovation, and explored current usage levels, implementation trends, and key barriers to AI integration across organizations.
The survey demonstrates the key challenges hindering organizations from realizing AI's potential. Leading the list are two key issues: High deployment costs (50%), and a lack of executive-level understanding of AI technologies (50%).
Furthermore, 25% of respondents pointed to the shortage of skilled professionals and concerns around cybersecurity as major deterrents. Despite these hurdles, 75% of respondents plan to expand their use of AI in the coming years, with a focus on embedding it into core business operations.
When asked about the primary use cases for AI, the top responses were data analysis and software development (75% each). Customer service, marketing and advertising, and cybersecurity followed closely (50% each). Conversely, areas such as project management, finance, and legal applications remain underutilized, with only 25% of organizations reporting AI applications in those domains.
"A gap between vision and reality"
"The data exposes the wide gap between aspiration and execution in the Israeli AI landscape," said Adi Crystal, VP of Microsoft Israel's Enterprise Commercial Division. "Microsoft Israel does recognize that organizations that are actively engaging with AI innovation are already realizing tangible business gains."
"This is a rare window of opportunity for leadership teams aiming to accelerate growth," Crystal added. "AI is no longer about 'if,' but about 'when' and 'how fast.' Responsible and strategic integration of these technologies is now a necessity."
"AI is no longer a futuristic concept; it is the force reshaping tomorrow's business landscape," said Ido Ron, Partner and Head of AI at KPMG Israel. "Our journey with organizations across the business spectrum - from designing enterprise AI strategies to launching category-defining products - highlights enormous untapped potential."
"Each organization has different goals: Some seek commercial differentiation, others aim to transform operational efficiency, achieve leverage by driving productivity, or deliver next-generation customer experiences and a sustainable competitive edge," Ron continued. "Organizations that embrace AI not as a technological add-on but as a strategic engine of innovation, efficiency, and data-driven decision-making, while accepting the risk of failure - will lead the new economy."
