February 24, 2017 by Canadian Underwriter
Global organizations will spend US$1.2 trillion on digital transformation this year, with the fastest growth coming from insurance, banking, retail and healthcare providers, International Data Corporation (IDC) said on Thursday.
A new update to IDC’s Worldwide Digital Transformation Spending Guide forecasts worldwide spending on digital transformation (DX) technologies to be more than US$1.2 trillion in 2017, an increase of 17.8% over 2016. IDC said in a press release that it expects DX spending to maintain this pace, with a compound annual growth rate (CAGR) of 17.9% over the 2015-2020 forecast period and reaching US$2 trillion in 2020.
Eileen Smith, program director in IDC’s customer insights & analysis group, said that discrete and process manufacturers will contribute almost 30% of this spending, “while the fastest growth will come from retail, healthcare providers, insurance and banking. Changing competitive landscapes and consumerism are disrupting businesses and creating an imperative to invest in digital transformation, unleashing the power of information across the enterprise and thereby improving the customer experience, operational efficiencies and optimizing the workforce.”
According to IDC, the technology categories that will see the greatest amount of DX spending in 2017 are connectivity services, IT services and application development & deployment (AD&D).
Combined, these categories will account for nearly half of all DX spending this year, IDC reported. However, investments in these categories will vary considerably from industry to industry. The discrete and process manufacturing industries, for example, will invest roughly 20% of their DX budgets in AD&D and another 12-13% in IT services, while the transportation industry will devote nearly half of its spending to connectivity services.
The spending guide added that the fastest growing technology categories associated with digital transformation over the five-year forecast are cloud infrastructure (29.4% CAGR), business services (22.0% CAGR), and applications (21.8% CAGR). And, despite a CAGR that is slower than the overall market (17.3%), AD&D spending will grow fast enough to overtake IT services as the second largest DX technology category by 2020.
More than half of all DX investments in 2017 will go toward technologies that support “operating model innovations,” IDC reported. “These investments will focus on making business operations more responsive and effective by leveraging digitally-connected products/services, assets, people, and trading partners.” Investments in operating model DX technologies help businesses redefine how work gets done by integrating external market connections with internal digital processes and projects, IDC explained.
The second largest investment area will be technologies supporting omni-experience innovations that transform how customers, partners, employees and things communicate with each other and the products and services created to meet unique and individualized demand.
On a geographic basis, the release said, Asia/Pacific (excluding Japan) will see the largest investments in DX technologies in 2017, with 37% of the worldwide total. DX spending in this region will be led by the discrete and process manufacturing industries as well as professional services firms. The United States will be the second largest region with 30% of the worldwide total, led by professional services, discrete manufacturing and the transportation industries. Latin America and the Middle East and Africa will experience the fastest growth in DX spending with five-year CAGRs of 23.4% and 22.6%, respectively, the release pointed out.
IDC is a global provider of market intelligence, advisory services and events for the information technology, telecommunications and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional and local expertise on technology and industry opportunities and trends in over 110 countries. Founded in 1964, IDC is a wholly-owned subsidiary of IDG, the technology media, data, and marketing services company.