More and more business leaders are coming to realization that investments in digital transformation is one for the long-term. Source:

More and more business leaders are coming to realization that investments in digital transformation is one for the long-term. Source:

Here’s how much digital transformation will cost businesses

THERE is no doubt that digital transformation is a major priority for businesses not only in Asia but all around the globe.

As more and more business leader are coming to realize that investments in the transformation journey are geared for the long-term, the number of companies allocating capital towards that goal is also on the rise.

So much so that worldwide spending on technologies and services that facilitate the transformation of business practices, products, and organizations is expected to reach US$1.97 trillion.

In its updated Worldwide Semiannual Digital Transformation Spending Guide, IDC expects steady spending expansion throughout the 2017-2022 period, while achieving a compound annual growth rate of 16.7 percent.

By 2020, IDC predicts that 30 percent of G2000 companies will have allocated capital expenditure of equalling to at least 10 percent to boost their digital journey according to IDC Research Director for Worldwide Digital Transformation Strategies, Shawn Fitzgerald.

“This shift toward capital funding is an important one as business executives come to recognize digital transformation as a long-term investment. This commitment to funding digital transformation will continue to drive spending well into the next decade.”

In 2019 alone, US$1.25 trillion will be spent worldwide on tech with U.S. and China being responsible for more than half of it.

Four main industries will lead the way.

Discrete manufacturing is poised to spend US$220 billion and while process manufacturing will be spending US$135 billion. Transportation and the retail business will spend US$116 billion and US$98 billion respectively, according to IDC.

The main focus of transformation for the manufacturing industry will be the adoption of smart manufacturing and digital innovation. The transportation sector will focus its capital on digital supply chain optimization.

Meanwhile, the retail industry is expected to fork out for innovation in omnichannel commerce, e-commerce, and next-generation payment system among other things.

The IDC is also foreseeing that a lot of spending flowing towards use cases — discretely funded efforts that support a program objective.

Robotic manufacturing, smart energy infrastructure, and automation solutions are among these use cases.

Over 75 percent of digital transformation spending in 2019 is also likely to be on hardware and digital services with IT and connectivity services being the priority.

Across industries, digital transformation spending will revolve around use cases that are discretely funded.

These use cases include robotic manufacturing, automation, and intelligent infrastructure for energy.

Hardware and services will represent more than 75 percent of digital transformation spending in 2019 with IT and connectivity services leading the way.

While the investments and the buzz around digital transformations are on the uptrend, the true success of a company’s digital journey can only be gauged by the net gain.

In Asia, where the process of implementing a digital strategy has not exactly been smooth due to various reasons, it is important that the investment is focused on adding value to the current business model.