Innovation Trends

Worldwide Spending on Digital Transformation Soars in 2018

IT and business leaders are doing more than just talking about digital transformation. Many are making huge investments in related technologies this year, according to a new report from International Data Corp. (IDC).

The research firm predicts that worldwide spending on the technologies and services that enable the digital transformation of business practices, products and organizations will total more than $1.1 trillion in 2018, an increase of 17% over the $958 billion spent in 2017. The report analyzes current and future spending levels for more than 130 transformation use cases across 19 industries in eight geographic regions.

Digital transformation involves revamping business strategies, models, operations and processes. Increasingly, this is being done by adopting digital technologies such as cloud services, mobile devices and apps, big data/analytics, artificial intelligence, social media, enterprise applications, the Internet of Things (IoT) and other digital tools.

Among the key goals of transformation are to increase agility, efficiency and scalability — all of which can make companies much more competitive. By moving toward more digital operations, companies can more easily interact with their supply chain partners that are undergoing similar shifts.

Of the various industries IDC examined, discrete and process manufacturing lead the way in digital transformation spending. Companies in these sectors are forecasted to spend $333 billion combined on related products and services in 2018, accounting for nearly 30% of all digital transformation spending worldwide this year. These businesses will also set the agenda for many transformation priorities, programs and use cases, the firm says.

In terms of specific types of technology solutions, the biggest categories of spending will be applications, connectivity services and IT services. It’s somewhat surprising that among the strategic priority areas with lower levels of spending this year are building cognitive capabilities, data-driven services and benefits, operationalizing data and digital trust and stewardship.

These are all areas that have garnered lots of attention among IT leaders, who are looking to leverage the latest data management and predictive analytics tools to help their organizations gain a competitive edge. IDC says the findings suggest that many organizations are still in the early stages of their digital transformation journey.

As they move into more mature stages of development, IDC expects to see these priorities and spending, shift toward the use of digital information to further improve operations and to create new products and services.

To achieve its digital transformation strategic priorities, every organization will develop programs that represent a long-term plan of action toward these goals, the report says. The transformation programs that will receive the most funding in 2018 are digital supply chain and logistics automation ($93 billion) and smart asset management ($91 billion), followed by predictive grid and manufacturing operations (each more than $40 billion).

Each strategic priority includes a number of programs that are comprised of use cases, IDC says, and these are discretely funded efforts that support a program objective and the overall strategic goals of an organization. Use cases can be thought of as specific projects that use line-of-business and IT resources, including hardware, software and IT services.

The use cases that will receive the most funding this year include freight management, robotic manufacturing, asset instrumentation and autonomic operations.

Other recent research indicates that digital transformation is a top priority for organizations. Gartner Inc.’s 2018 CIO Agenda Industry Insights report released earlier this year shows that all industries in the study rank digital business as one of their top 10 business objectives.

The Gartner report is based on survey of 3,160 CIOs from 98 countries and 15 main industries. In 11 of the 15 industries participating, CIOs ranked digital business/digital transformation among the top three business priorities for 2018.