Enterprises will spend $1.18T on digital transformation efforts this year: report

digital enterprise
A report by IDCs predicts that enterprise spending on digital transformations will total $6 trillion over the next four years. (World Economic Forum)

A recent International Data Corporation (IDC) report says enterprises are ramping up their digital transformation projects to the tune of $1.18 trillion in 2019, an increase in spending of 18% over 2018.

IDC forecasts that investments in worldwide digital transformation technologies will total more than $6 trillion over the next four years, which is music to the ears of the service providers that are helping organizations with their transformation journeys.

On the technology front, IDC's report says hardware and services investments would account for more than 75% of all digital transformation spending this year. Services spending will be led by IT services ($154 billion) and connectivity services ($102 billion.)

Hardware spending will be spread across several categories, including enterprise hardware, personal devices, and infrastructure-as-a-service (IaaS) infrastructure, while transformation-related software spending will total $253 billion.

The fastest growing technology categories will be IaaS with a compound annual growth rate (CAGR) of nearly 40%, application development and deployment software (26.7% CAGR), and business services (26.5% CAGR.)

"Digital transformation is quickly becoming the largest driver of new technology investments and projects among businesses," said Craig Simpson, research manager with IDC's Customer Insights & Analysis group, in a prepared statement. "It is already clear from our research that the businesses which have invested heavily in DX over the last two to three years are already reaping the rewards in terms of faster revenue growth and stronger net profits compared to businesses lagging in DX initiatives and investments."

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While there are obvious benefits to making the move to a digital world, a large number of the organizations lack the in-house know-how, which is where service providers come in. One of the obstacles to enterprises digital transformations is cutting the cord to the legacy platforms and infrastructures, according to Masergy CEO James Parker, in an interview with FierceTelecom earlier this year.

"You can go into companies and they'll still have a plethora of managed processes," Parker said. "Of the processes they have, many are not documented or well enough understood that they could go through a digital process. When you really start to unpick all of the elements that you have to work through to get an enterprise through a digital change or transformation, it is a very rich and broad set of activities."

Digital transformations are worth the effort on several levels, according to according to Niels Helkov, head of digital solutions for Orange Business Services in the Americas. In an increasingly competitive landscape, digital transformations can enable better customer experiences, which is a key factor for the multi-national companies that Orange Business Services serves.

"Customer experience is a growing part of their digital transformation as the world digitizes," said Helkov, in a previous interview with FierceTelecom. "The way they are going to differentiate themselves, even more so now, is through customer experience. As part of that, they are seeking to build coherent, consistent, global customer experience platforms across their operations worldwide."

IDC's report said that the United States and China will be the two largest geographic markets for digital transformation spending by accounting for more than half the worldwide total in 2019.

In the U.S., the leading industries will be discrete manufacturing ($63 billion), professional services ($37 billion) and transportation ($34 billion) with transformation spending focused on IT services, applications, and enterprise hardware.

In China, the industries spending the most on digital transformation efforts will be discrete manufacturing ($55 billion), process manufacturing ($31 billion), and state/local government ($21 billion). Connectivity services and enterprise hardware will be the largest technology categories in China.