BCG Report Enterprise-Class Quantum Computing to Produce Commercial Value by 2025

The milestone by which most observers measure progress in quantum computing is called "quantum dominance" - an indicator of when a quantum machine outperforms the most powerful classical computer in a practical and relevant task. It's a high standard, and one that can be interpreted.

However, it does not address the fundamental question posed by IT buyers: can quantum computing solve enterprise problems faster/more efficiently than the tools currently in use?

To measure the progress of quantum computers toward practicality, BCG has begun tracking the "evolution of enterprise-class quantum computing": this will measure the extent to which enterprises determine that quantum computers have sufficient advantages over existing tools that they are willing to use them to solve real business problems.

In May 2023, BCG released the latest report in this series.

Enterprise-class quantum computing is coming into the picture.

IBM improved machine learning for fraud detection, with a 5 percent reduction in false negatives compared to results from classical-only models; QC Ware and Goldman Sachs outperformed classical computers in Monte Carlo simulations, a technique widely used in options pricing and risk management; Credit Agricole partnered with Pasqal and Multiverse Computing Inc. to predict deteriorating credit scores with the same accuracy and recall as the bank's classical random forest model ......

This is a small step in a laboratory setting. But they clearly point to a real commercial use. Assuming that quantum computing hardware companies continue to deliver on their technology development roadmaps (which they have been doing for the past few years) and that software continues to make better use of the hardware, these milestones will show that enterprise-grade quantum computing can be commercially viable by 2025.

While the physics behind quantum computing is bafflingly complex, its potential commercial impact is clear. It all comes from a mathematical function with "quantum advantages" - a sparse matrix - that solves four types of computational problems that have baffled traditional machines.

This advance has led to more than 100 use cases across multiple industries and can create tremendous value. We (BCG) estimate that at maturity (expected around 2035), the technology could generate $450 billion to $850 billion in net revenue for end users through a combination of new revenue generation and cost savings.

This prospect has venture and corporate investors piling in. Venture capital investment has doubled in the last three years, reaching nearly $1.6 billion by 2022. Enterprise use case activity has tripled in the same period, with more than 100 companies active in 2022 in industries such as automotive, energy, healthcare and finance.

Not only is the number of user investments increasing, but the size and significance of the investments themselves are growing as well. According to Hyperion Research, the global quantum computing market totals approximately $614 million in 2022, and spending is expected to continue to grow at more than 25 percent per year, reaching approximately $1.2 billion in 2025. Half of the companies recently surveyed by BCG spend more than $1 million per year, and 70 percent of those companies have been investing for more than three years.

The $1 million mark is important because companies that spend more than that level are three times more likely to have CEO attention and sponsorship and twice as likely to have a strategy to protect their intellectual property (IP) and develop internal capabilities. They also spend twice as much on hardware.

Our (BCG) survey found that among those investing in quantum computing, buyer's remorse is limited: almost all users plan to maintain or increase spending over the next few years. Some aggressive early adopters (spending $5 million or more per year) are eager to double down and expand their competitive advantage: 80% of these companies plan to increase spending year over year.

Because of the combination of factors, quantum computing is likely to be a winner-take-all technology in most industries, with a disproportionate share of the value created (BCG estimates as much as 90%) going to early adopters. The key factors that companies trying to catch up will face are

- Limited computing resources and the time required to develop quantum computing use cases. Quantum computing solutions are tailor-made. Integration between quantum and classical resources is a particular challenge.

- Scarcity of algorithm development talent. Some vendors have been working with most of their highest-skilled developers for years with early adopters of financial, pharmaceutical, and industrial products.

- The difficulty of locking down intellectual property. Even companies with successful use cases will face the challenge of protecting the associated intellectual property.

Of all the possibilities, the cost of acquiring quantum computing talent and resources is now the cheapest (which is still not easy).

We are now nearing the end of the R&D phase, and the pricing power of suppliers is limited by the performance of the machines. Vendors need to work with and even train the company's end users, which makes the IP sharing provisions beneficial to the business. Once a breakthrough quantum advantage is reached, most likely by a single supplier, supply will be very limited and the successful supplier will have monopoly pricing power and control over top talent.

Those without existing partnerships will find it difficult, if not impossible, to gain access to the machines. By the time competition breaks through and supply stabilizes (and the law of three or four takes effect), it will be too late for many: those who have pre-established access will have developed a huge and largely unassailable intellectual property advantage.

How should companies start?

The first step is to assess the potential for quantum computing to create business value in their sector, how competitors are approaching the technology, and what it will take to build a capability. Some sectors are already well down this path.

Financial institutions have identified more than a dozen use cases using quantum computing's facilities for optimization, machine learning, pricing and simulation. More than 12 institutions are active in the ecosystem, experimenting in areas such as portfolio selection, allocation and optimization, and derivatives pricing. Meanwhile, eight of the top ten biopharmaceutical companies are piloting quantum computing and five have partnered with quantum vendors.

Building a capability is a three-stage journey that

- Identifying the right use cases

- Selecting the right vendors and partners

- Developing a management system to incubate the technology

It is important to clarify the use cases and their value to the company at the outset, as well as clarify the challenges in managing expectations. Most companies establish a team visible to senior management with a recognized leader; they seek to invest in ecosystem partnerships and ventures that target high-potential use cases.

Near-term adoption requires seamless integration of technology with existing workflows. Companies should seek to cultivate relationships and trust early on to become the vendor and partner of choice.

Given supply constraints, the biggest challenge is likely to be talent. Companies need a comprehensive talent strategy that includes recruiting or developing leaders with quantum awareness, operators with quantum knowledge, and executives with quantum expertise. Building internal talent takes time, so it is best to start as soon as possible.

Reference link:

https://www.bcg.com/publications/2023/enterprise-grade-quantum-computing-almost-ready