Forrester predicts “frumpy but functional AI” era as 95% of projects fail

Forrester Research, a market research firm, predicts that 2026 will mark the beginning of “the age of frumpy but functional AI,” signaling a shift from AI hype to practical implementation. The firm expects businesses to focus more on governance and measured adoption rather than rushing to deploy new AI tools, as companies realize many AI initiatives fail to deliver expected returns on investment.

The big picture: AI is transitioning from a revolutionary technology grabbing headlines to a mundane but essential part of business operations, similar to how the iPhone evolved from groundbreaking innovation to everyday necessity.

Key spending trends: Forrester forecasts significant changes in how businesses approach AI investments throughout 2026.

• One-quarter of businesses will delay their AI spending as they discover the technology often doesn’t deliver hoped-for returns on investment.
• A recent MIT study found that 95% of enterprise AI applications have failed to deliver tangible returns.
• “The disconnect between the inflated promises of AI vendors and the value created for enterprises will force a market correction,” Forrester writes.

Governance takes center stage: Companies are shifting their focus from aggressive AI adoption to responsible management of existing tools.

• Sixty percent of Fortune 500 businesses will appoint a head of AI governance next year, following companies like Sony and Bank of America.
• Forrester calls governance “the frumpiest word in the lexicon of business,” yet it’s becoming a growing priority for business leaders.
• Thirty percent of large businesses will require workers to complete training programs for internal AI tools.

Workforce implications: The AI market correction is reshaping hiring patterns and job roles across data-focused positions.

• Plans to hire new data engineers, scientists, and analysts are slowing as AI agents automate many aspects of these roles.
• This shift is “giving rise to a new world of agentic data and analytics,” according to Forrester.
• Vendor fragmentation is leading more businesses to build “agentlakes”—networks of integrated and interoperable AI agents—rather than relying heavily on third-party service providers.

In plain English: Agentlakes are essentially collections of AI tools that work together seamlessly within a company, rather than businesses depending on multiple separate AI services from different outside vendors.

Why this matters: The predicted market correction represents a natural maturation process where AI moves from speculative investment to proven business value, potentially weeding out unsustainable AI startups while strengthening companies with practical applications.