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IDC: Digital transformation spending will take up 50% of IT budgets by 2023

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It’s a staggering number, but as organizations look to build off existing strategies, direct digital transformation investment spending will approach $7.4 trillion between 2020 and 2023, reports IDC, resulting in organizations becoming digital-at-scale future enterprises.

In unveiling their FutureScape: Worldwide Digital Transformation 2020 Predictions report, IDC highlights the critical business drivers that are helping to accelerate DX initiatives and investments — in the face of business challenges, the speed of scaling, and rising customer expectations.

The 2020 report marks the fourth installation of IDC’s digital transformation predictions.

According to IDC analyst Shawn Fitzgerald, investment in direct digital transformation “is growing at a compound annual growth rate (CAGR) of 17.5% from 2020 to 2023, and is expected to approach $7.1 trillion as companies build on existing strategies and investments, becoming digital-at-scale future enterprises.”

The report adds that digital transformation spending will grow to more than 50 percent of all ICT investment, from 36 percent today. The largest growth will be seen in the areas of data intelligence and analytics.

Fitzgerald, along with fellow IDC analyst Bob Parker, detailed the ten industry predictions that will, over the next one to five years, impact DX efforts of CIOs and IT professionals:

Prediction 1 – Future of Culture: By 2024, leaders in 50 percent of G2000 organizations will have mastered “future of culture” traits such as empathy, empowerment, innovation, and customer-and data-centricity to achieve leadership at scale.

Prediction 2 – Digital Co-Innovation: By 2022, empathy among brands and for customers will drive ecosystem collaboration and co-innovation among partners and competitors that will drive 20 percent collective growth in customer lifetime value.

Prediction 3 – AI at Scale: By 2024, with proactive, hyperspeed operational changes and market reactions, artificial intelligence (AI)-powered enterprises will respond to customers, competitors, regulators, and partners 50 percent faster than their peers.

Prediction 4 – Digital Offerings: By 2023, 50 percent of organizations will neglect investing in market-driven operations and will lose market share to existing competitors that made the investments, as well as to new digital market entries.

Prediction 5 – Digitally Enhanced Workers: By 2021, new future of work (FoW) practices will expand the functionality and effectiveness of the digital workforce by 35 percent, fueling an acceleration of productivity and innovation at practicing organizations.

Prediction 6 – Digital Investments: By 2023, DX spending will grow to over 50 percent of all ICT investment from 36 percent today, with the largest growth in data intelligence and analytics as companies create information-based competitive advantages.

Prediction 7 – Ecosystem Force Multipliers: By 2025, 80 percent of digital leaders will devise and differentiate end-customer value measures from their platform ecosystem participation, including an estimate of the ecosystem multiplier effects.

Prediction 8 Digital KPIs Mature: By 2020, 60 percent of companies will have aligned digital KPIs to direct business value measures of revenue and profitability, eliminating today’s measurement crisis where DX KPIs are not directly aligned.

Prediction 9Platforms Modernize: Driven both by escalating cyberthreats and needed new functionality, 65 percent of organizations will aggressively modernize legacy systems with extensive new technology platform investments through 2023.

Prediction 10 – Invest for Insight: By 2023, enterprises seeking to monetize benefits of new intelligence technologies will invest over $265 billion worldwide, making DX business decision analytics and AI a nexus for digital innovation.

DX Journal Staff
Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Sustainable datacenter region coming to Sweden in 2021, accelerating the country’s digital transformation

Microsoft is investing in Sweden thanks to the Scandinavian country’s strong commitment to sustainability and innovation.

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In May of last year, Microsoft announced plans to develop new data centers in Sweden. The goal? Making them “among the most sustainably designed and operated in the world.”

The company is now making good on their pledge with a press release from November 24, confirming they’ll launch a “world-class, sustainable datacenter region in Sweden in 2021 with presence in Gävle Sandviken and Staffanstorp.”

Investment details

The news comes on the heels of Microsoft’s announcement of a significant digital transformation investment in Greece, involving the construction of new datacenters. This also includes a plan to skill approximately 100,000 people in Greece in digital technologies by 2025.

“Building on Microsoft’s 35-year history in Sweden and strong partnerships across the energy, manufacturing and retail sectors, we are looking forward to delivering the Microsoft Cloud from this new datacenter region in 2021,” said Jean-Philippe Courtois, Executive VP and President of Microsoft Global Sales, Marketing and Operations.

“We believe that digital transformation should always be both inclusive and sustainable.”

Elaborating further, Hélène Barnekow — General Manager of Microsoft Sweden — explained that Sweden is an ideal environment for such an investment because of its renowned leadership in sustainability, innovation, and gender equality:

“It is one of the places in the world where IT and tech have the greatest potential to create new opportunities for the individual, the organization and society, she said.

“In this time of change, we invest in the digital infrastructure and our Swedish ecosystem to accelerate digital transformation that will empower public and private companies to innovate, providing a strong digital foundation for the country’s future growth,”

As a result of these datacenters, Microsoft explains, Swedish businesses can “empower employees, engage customers, transform products and optimize operations — all through connected experiences and supported by advanced data privacy and security.”

Microsoft will also invest in skills development, providing digital skills training for up to 150,000 Swedes. 

DX Journal Staff
Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Investing in digital resiliency

A new index from IDC shows growth in cloud, collaboration, and security investment.

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Is your business digitally resilient? 

IDC’s new Digital Resiliency Investment Index is a look at the progress of organizations in their investment towards digital resilience. This is especially important now with this year’s digital transformation acceleration.

Results from the initial index show an overall steady increase in investment toward resiliency. 

Organizations have placed priority in cloud, collaborative, and digital transformation projects. Thanks to the pandemic-related shift to work-from-home and the aforementioned increase in cloud adoption, significant investments have been made in security.

According to IDC prediction, investment toward digital resiliency will increase in 2021, in tandem with economic recovery.

In terms of geography, digital resiliency investment had the fastest growth in the Asia/Pacific region. While US investment increased in October, Europe’s had a slight decline in the same period — as the continent was experiencing a significant surge in COVID cases and restrictions. 

Background

Two factors make up the index:

  • Digital Core Investments, described by IDC as “spending on the core components of digital resiliency: cloud, security, collaborative support for remote workers, and digital transformation projects.”
  • Digital Innovation Investments, which are “measured using a monthly survey of enterprises on their current and anticipated IT investment focus, including how much new or reallocated spending is targeted at digital resiliency and business acceleration versus crisis response measures.”  

“Digital resiliency refers to an organization’s ability to rapidly adapt to business disruptions by leveraging digital capabilities to not only restore business operations, but also capitalize on the changed conditions,” explains Stephen Minton, VP in IDC’s Customer Insights & Analysis group. 

Organizational success in the midst of a global pandemic has largely hinged on the ability to react quickly to change, he says. The difference between rapid adaptation and simply responding to disruption? A plan.

“Investments in digital capabilities not only enable an organization to adapt to the current crisis but also to capitalize on the changed conditions.”

Looking ahead

“The next several months may put increased pressure on some organizations to respond to second waves of COVID infections and economic lockdowns, which will be reflected in our monthly surveys throughout the winter,” adds Minton. 

“What we have learned already this year is that the organizations which were among the early adopters of cloud, digital, and collaborative technologies were best-positioned for a crisis no one could have predicted.”

DX Journal Staff
Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Digital transformation for economic recovery

“With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future,” explain two World Bank economists.

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Digital transformation is having a moment. 

Over and over, widespread reports and surveys show that — in the wake of the COVID-19 pandemic — DX efforts have accelerated. “Business-savvy CIOs who deploy highly adaptive strategies and technology to rapidly respond to the impact on their firm’s operations and customers will lead from the front,” explains Forrester’s recent Predictions 2021 report.

Can the momentum keep going? How can DX be leveraged so everyone can be better off, post-COVID? 

As two World Bank economists argue in Harvard Business Review, “technological advancements were already changing the world over the past two decades,” and that in the midst of threats from automation and offshoring, it’s important to realize that tech can act as a job creator for economic recovery. 

According to Federica Saliola (Lead Economist in the Jobs Group of the World Bank and co-Director of the World Development Report 2019) Asif Islam (Senior Economist for the Middle East and North Africa Region of the World Bank Group), “to reshape technology as a job creator, it’s important to understand what, exactly, the current wave of technology is changing, and how policymakers and businesses can adapt to it.”

Where we were

The economists laid out three foundational truths about the pre-COVID state of technology:

  1. It has always been a disruptor. Tech has been “challenging the traditional boundaries of firms, changing global value chains and the geography of jobs.”
  2. As tech evolved, there have been massive changes in what skills are needed by a successful workforce. “The premium for skills that cannot be replaced by robots has been increasing,” they explain. What are these in-demand skills? Critical thinking and socio-behavioral skills, for starters, as well as adaptable skills. This leads to point three.
  3. Thanks to tech, the very nature of work has been changing over the last few years. The standard of permanent and full-time work has given way to a gig economy.

What’s next?

Simply put, “it is likely that the pandemic will reinforce these pre-existing trends and increase the urgency of corresponding policy responses,” explain Saliola and Islam.

Digital-first companies are thriving, the gig economy certainly isn’t going anywhere, and “firms may also have more incentive to invest in automation and reshore production to shield against value chain disruption.”

The aforementioned barrage of surveys and reports showing the acceleration of DX efforts reported on the mostly-successful shift to work-from-home. Saliola and Islam reference World Bank and World Economic Forum reports that show (unsurprisingly) positions and organizations that have put WFH measures in place are more prevalent in wealthier countries and regions, and that women and young people are more likely to hold positions where WFH isn’t feasible. 

Ultimately, Saliola and Islam explain, organizations and governments have to turn to policy to ensure that digital transformation can lead to a more successful economic recovery.

What does this look like? Reskilling and upskilling on the part of businesses, and “incentives and regulations to infrastructure projects and taxation” for governments. 

It’s similar to the approach of the recent OECD report showing that DX is critical for recovery in Latin America and the Caribbean — but on a global scale. 

“Technology can be a boon to society if businesses and governments prepare and adapt,” they write. “With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future.”

DX Journal Staff
Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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