Is the hype surrounding digital transformation fading? You’re not alone if you’re starting to feel that way. The term has been used ad nauseam over the years, becoming a bit of a tired cliché. Some would even argue that it’s come to mean so many different things that it’s become meaningless. Clint Boulton, Senior Writer, CIO acknowledges this sentiment, noting this is due to some vendors misusing or overusing the term when marketing tech solutions designed to satisfy every IT leader’s requirements. As a result, many CIOs have grown weary at the very mention of digital transformation.
So, is it time to declare digital transformation dead? The experts at IDC say absolutely not. In fact, the dollars and resources behind digital transformation are increasing at an unprecedented rate. We just need to be mindful of the context we use the term in.
Our team recently attended Directions 2019 where IDC analysts shared insights on the future of digital business and scaling a technology revolution. Below are our main takeaways from this year’s conference.
Defining Digital Transformation
Digital transformation marks a radical rethinking of how an organization uses technology, people and processes to change business performance, writes George Westerman, Principal Research Scientist with the MIT Sloan Initiative on the Digital Economy. And while technology is certainly the catalyst behind a digital transformation, the overall philosophy must permeate throughout the culture of an organization in order to be successful.
It’s also critical to recognize that digital transformation is a journey as opposed to a quick ‘one-sized fits all’ solution. The businesses that are embracing this ideology are already beginning to transform customer experiences and generate new revenue as a result. Those that aren’t will suffer the consequences and find themselves on the wrong end of a digital divide that is quickly forming.
Digital Transformation Spending & Efforts on the Rise
According to IDC, spending on digital transformation technologies is expected to nearly double over the next five years, reaching $1.97 trillion by 2022. And by 2020, at least 55% of organizations will be “digitally determined” – with an integrated digital strategy, single roadmap, and cohesive enterprise-wide technology architecture. Frank Gens, Senior Vice President & Chief Analyst, IDC, noted organizations are in a “race to reinvent” to be ready for the onrushing digitized economy.
We are currently in the era of ‘Multiplied Innovation,’ driven by key technologies such as AI, IoT, blockchain and natural interfaces. Innovation is indeed accelerating as organizations take new risks and microservices go mainstream. In fact, from 2018 to 2023 – with cloud-native tools/platforms, agile methods, code reuse and an increase in developers – 500 million new apps will be created, equal to the number built over the past 40 years.
Slow Motion AI Explosion
At this time, AI platform players are only beginning to come to the forefront. Big names like AWS, Google, Microsoft and Alibaba will lead the charge, with countless additional players finding important roles in the oncoming expansion of AI. Worldwide spending on AI systems will grow to nearly $35.8 billion this year, and more than double to $79.2 billion in 2022 according to IDC. Organizations are harnessing AI systems to improve employee productivity, consistency in interactions and decision-making, process automation, and uncover new insights.
In the immediate future, AI spending will be led by the retail industry where companies will invest $5.9 billion this year on solutions such as automated customer service agents and product recommendations. This will be followed by the banking industry investing $5.6 billion in AI-enabled solutions including automated threat intelligence & prevention systems and fraud analysis & investigation systems.
Taking It to the Edge
As more businesses embrace a digital-first approach, edge computing is becoming the ultimate multiplier for innovation. In its simplest form, edge computing is a way to streamline the flow of traffic from IoT devices and provide real-time local data analysis. This results in benefits such as low latency, local resiliency and data sovereignty – all of which allows for an improved customer experience. Let’s take a look at a quick example shared by Richard Villars, Research Vice President, Datacenter & Cloud, IDC.
Carnival Cruise Line carries millions of passengers each year, but the company quickly realized that issues with WiFi and connectivity were hurting their customer experience. To help combat this problem, Carnival implemented a high-speed Wi-Fi infrastructure on their ships, allowing guests to connect to the internet and popular apps like Netflix, YouTube, Twitch, etc. Taking this a step further, Carnival then created a seagoing CDN HUB. The easy-to-use app lets guests board the ship with ease, order food/drinks to their exact location, view schedules of onboard events, message with family and friends, and much more.
Through edge computing technologies, Carnival can control the data in motion and ensure privacy throughout the process. Meanwhile, the transactions are seamless for passengers using the app, resulting in an optimal customer experience.
Put simply, digital transformation is not dead – it’s actually thriving. The term has certainly been misused and that’s where the discussion becomes convoluted. Too many people want to apply “digital transformation” to every business technology initiative and that simply isn’t accurate.
Digital transformation starts with digital products and services, but really comes down to the people, technologies and processes that create, enable, manage, and deliver them. This philosophy is very much alive in today’s business culture and will only increase in importance going forward. It’s accurate that the term has been used far too loosely, but the true meaning of digital transformation embodies the future of business.