Digital transformation spending to exceed $3 trillion by 2026

Companies and organisations are expected to invest a total of $3.4 trillion to fund their digital transformation strategies by 2026, according to a report released this week by market research company International Data Corporation (IDC).

The company explained that progressive, enterprising organisations have been moving ahead with their digital transformation planning in order to generate both value and revenue through the creation of new digital products, services, as well as experiences.

Moreover, the Covid-19 pandemic inadvertently highlighted that such investments not only diversify revenue sources but can also help to safeguard organisations from external shocks and market-wide disruptions, particularly in the case of previously unforeseen hindrances.

IDC’s forecast of global spending on digital transformation plans reflects a five-year compound annual growth rate (CAGR) of 16.3 per cent.

“Despite strong headwinds from global supply chain constraints, soaring inflation, political uncertainty, and an impending recession, investment in digital transformation is expected to remain robust,” senior research manager with IDC’s Data & Analytics Group Craig Simpson said.

“The benefits of investing in DX technology, including automation, strong intelligence, operational transparency, and direct support around customer experience, all support targeted areas of business focus to weather the current environment of uncertainty and to make the most of any opportunities in the recovery,” Simpson added.

The specific use case for digital transformation that is expected to absorb the lion’s share of the spending involves innovation, scaling-up and operations, which, according to IDC, covers a wide scope of actions.

These include large-scale operations, which encompasses making, building and designing activities, as well as core business functions, such as supply chain management, engineering, design, research, and manufacturing plant floor operations.

“Innovate, Scale, and Operate will account for more than 20 per cent of all digital transformation investments throughout the forecast,” IDC said.

“The next largest use cases are Back-Office Support and Infrastructure at more than 15 per cent of all DX spending and Customer Experience at more than 8 per cent,” the company added.

Furthermore, the company noted that the fastest growing among the more than 300 digital transformation use cases that it has identified in its research include Digital Twins and Robotic Process Automation-Based Claims Processing with five-year CAGRs of 35.2 per cent and 31 per cent respectively.

In addition, the report revealed that 30 per cent of global digital transformation spending throughout the aforementioned period will come from the Discrete and Process Manufacturing industries, where Robotic Manufacturing, Autonomic Operations, and Self-Healing Assets and Augmented Maintenance are among the leading use cases.

Moreover, the next largest industries for digital transformation spending are Professional Services and Retail where Back-Office Support and Infrastructure is the leading use case.

“Amidst the pandemic and recovery, organisations have accelerated their digital engagements, products, and services, which have been predominantly improved by deploying digital technology faster,” associate research manager for the Asia-Pacific IT Spending Team Mario Allen Clement explained.

“More and more businesses have started to go digital as a source of resiliency and innovation, which is shown across the region as new offerings and solutions are widely available,” he added, before concluding by saying that “customer experience, engagements, and personalised customer journey will be the highlight of pushing a stable growth in digital transformation”.