Nothing catalyzes change like a pandemic does. 2020 is the year that businesses will depend heavily on digital transformation (DX) for survival and much-needed growth.
According to an article published in Forbes, “Traditional supply chains and manufacturing ecosystems are failing and we need to shift to a more adaptable, agile solution that is fully digitally enabled. The virus, like any crisis, has merely underlined both that need and the urgency. As a result, it will likely serve to accelerate that change. This needs to result in real plans of action, rather than debate.”
The International Data Corporation (IDC) unveiled its IDC FutureScape forecast in October. On this report, it projected that by 2023, “digital transformation spending will grow to more than 50% of all ICT investment from 36% today”. With COVID-19, businesses cannot wait that long to adopt DX strategies.
During a four-day IDC digital conference for China’s ICT market in April, corporate organizations identified new opportunities in markets disrupted by the pandemic. These would drive business growth in China and worldwide by leveraging technology and accelerating businesses’ digital transformations.
“In this era of multiplied innovation, technology is increasingly intertwined with everyday life as innovation keeps advancing and disrupting the existing norms and unlocking new possibilities,” IDC China Managing Director Kitty Fok said. Moreover, IDC predicts that by 2024, 51% of the worldwide IT budget and 70% of that in China will be spent on digital innovation/transformation.
By late May, IDC updated its Worldwide Digital Transformation Spending Guide. It outlined that expenditure on DX for business practices, products, and organizations “will continue at a solid pace despite challenges presented by the COVID-19 pandemic.”
The new projection is that global spending on DX technologies and services would grow by 10.4% this year to $1.3 trillion. “While this is notably slower than the 17.9% growth in 2019, it remains one of the few bright spots in a year characterized by dramatic reductions in overall technology spending”.
IDC’s Customer Insights and Analysis Group Senior Research Manager Craig Simpson said “COVID-19 has upended the global economy, with direct negative implications on the way businesses invest in IT”. He added that “DX technology investment has not gone unscathed, but so far it has been affected to a lesser extent”. This is because “many large-scale DX projects underway or planned are instrumental to broader strategic business initiatives”. Simpson shared that compared to IDC’s pre-COVID-19 forecast, the five-year growth rate for DX spending has declined. However, it only dipped by less than two percentage points.
According to the IDC guide, the industries that will see the slowest year-over-year growth in DX spending are as follows:
The industries expected to see the strongest growth in DX spending in 2020 are construction (16.3%) and healthcare (15.7%). Both of them will see spending grow more slowly than last year.
“COVID-19 has wiped off almost $500 billion of worldwide DX technology investment between 2020-2023 from our pre-COVID-19 forecast”. This was the statement of IDC’s Program Vice President Customer Insights and Analysis Group, Eileen Smith.
The areas where the most DX spending will go, according to IDC, include the following:
Interestingly, these all belong in the manufacturing sector.
The DX use cases that will see the greatest year-over-year growth in spending are the following:
Of the 278 DX use cases identified in the DX Spending Guide, only nine will see a decline in spending this year.