Decades ago, investing in digital transformation became a term that mostly meant investing in the digitizing processes. Today, as companies need to leverage digital tools to be more competitive — not just more digital — it’s about integrating digital technology into all areas of a business, fundamentally changing how an organization operates and delivers value to its customers.
Gone are the network engineers, database administrators and desktop support engineers of even just five years ago. Today’s mature IT departments are filled with business systems analysts, data scientists and security analysts.
What are companies investing in?
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Hardware and services: 75% of all digital transformation spending |  |
Connectivity services: $147 billion |
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IT services: $152 billion |  |
Software: $288 billion |
Why Invest in Digital Transformation?
Although IT will play an important role in driving a digital transformation strategy, the work of implementing and adapting to the massive changes that go along with digital transformation falls to everyone. For this reason, investing in digital transformation is a people issue. Many leaders find themselves working in cross-functional teams more than ever. Digital transformation strategies often reshape work groups, job responsibilities and legacy business processes. When people fear their value and perhaps their jobs are at risk, IT leaders will feel the resistance.
Despite the pushback, these leaders know they must move forward — most notably because IT’s role has fundamentally shifted. CEOs increasingly want their CIOs to help generate revenue for the organization and acknowledge the strategic value of IT to their businesses beyond merely cutting costs.
Rather than focusing on cost savings, IT has become the primary driver of business innovation. Embracing this shift requires everyone in the company to rethink the role and impact of IT in their day-to-day experience. Mindsets need to shift from, running a bunch of pre-packaged solutions that we’ve bought to let’s build and develop new capabilities we’ve never had.
The main reason organizations finally make a change? Survival. Most businesses won’t go invest in digital transformation proactively, but rather reactively because they’re falling behind. Digital transformation demands a changing culture and challenges IT leaders to continually confront the status quo, experiment more and get comfortable with failure. This sometimes means killing off longstanding business processes for new ones still being figured out with the end goal to become more agile in responding to customers and competitors.
Playing the Digital Transformation Long Game
While all organizations are at different places in the digital transformation journey, speed has become a priority for all. CIOs face pressure to prove how their digital initiatives translate to increased agility, efficiency and ultimately success for the entire organization — all while they manage the daily rhythm of operational issues, service delivery and the unpredictable, like a cyberattack or information breach.
CIOs are responding to that pressure. Worldwide spending on the technologies and services that enable digital transformation of business practices, products, and organizations is forecasted to reach $1.97 trillion in 2022. 1
The commitment to funding digital transformation is expected to continue to drive spending well into the next decade. By 2020, 30% of G2000 companies are expected to have allocated capital budget equal to at least 10 percent of revenue to fuel their digital strategies. This shift toward capital funding is an important one as CIOs begin to realize digital transformation as an ongoing piece of their businesses, as part of an ongoing business strategy and as a long-term investment.
Final Thoughts
The investment in digital transformation is a massive undertaking, especially for larger, established companies. When done right, your business will be more aligned with customer demands and maintain agility in the fast-moving digital future. No business should be left behind because they can’t keep up with the pace of technology.
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