IT Spending

Digital Transformation Investment Fast Approaching Majority of Total Technology Investment

Read the IDC blog

An increasing number of businesses are spending the lion’s share of their IT budgets on digital transformation (DX) technologies. But many businesses are not — and the high speed at which DX is reshaping industries is leaving some vendors and end users behind. As the DX wave continues to gain velocity, the question must be asked: Can these businesses catch up?

IDC’s most recent Worldwide Digital Transformation Spending Guide forecasts that by 2022, DX technology investment will make up almost half of all worldwide technology spending. DX technology spending is growing almost 12 times faster than all other IT technology investments combined. IDC’s upcoming Worldwide Digital Economy Impact Guide, which quantifies the net economic impact of new digital products and services in industries globally, is expected to confirm that business DX initiatives provide a substantial multiplier effect.

IDC research shows that manufacturers, retailers, and banks have benefited from their substantial investments in DX projects over the last four years. The research shows that digitally-oriented businesses are recording revenue and gross profit growth — while non-digitally-oriented businesses are seeing their revenues and profits decline.

The initial base DX technologies revolved around what IDC refers to as 3rd Platform Pillar technologies: cloud, big data analytics, mobility, and social. Investments in these areas ballooned in recent years as organizations established foundations to enable them to reap the benefits from the explosion of data collected from a myriad of devices, sensors, equipment and customer and consumer data. The Internet of Things (IoT) will continue to be a key enabler of DX strategic initiatives, not only by collecting and routing data to processing hubs for various solutions and system consumption, but also by building the intelligent edge, driving a new wave of digital intelligence for DX.

The second wave of DX investment is being driven by what IDC calls Innovation Accelerator technologies: IoT, artificial intelligence systems, augmented/virtual reality, robotics, and 3D printing. Until recently, use of these technologies has been generally confined to DX initiatives launched by larger businesses that have the resources to experiment and create custom solutions. However, Innovation Accelerators are now the fastest-growing segment among DX technologies. Mainstream adoption is being made possible by vendors that have stepped up to support a host of DX business use cases. As businesses continue to plow more capital into strategic DX initiatives driven by 3rd Platform and Innovation Accelerator technologies, the digital economy will expand even more rapidly, driven by the creation and deployment of new products and services in virtually all industries.

To answer the question posed at the beginning: Can businesses left behind catch up? Not really — or at a minimum, they have an Everest to climb. The digital multiplier effect is proving extremely formidable. Many established companies have had to declare bankruptcy in the past year because they have failed to keep up with the changing environment. More digitally distraught casualties are inevitable in the next 3–4 years.

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