Digital Transformation: Roots and Perspectives

Digital transformation is a trend that is occurring across more and more companies worldwide. Although every company follows its own particular form of digital transformation, there is an overarching definition that can clarify what it is.

Digital transformation is the integration of digital technology in business processes. It includes automating processes and data migration to the cloud with technological devices, communication, and collaboration tools.

The transformation is required for a company of any size — from small ones to enterprises. Digital transformation helps business owners change their business operating process and the value they deliver to their customers. Digital transformation may require cultural changes and internal restructuring. As it is a complicated process, businesses should be prepared for failure.

Reasons for Implementing Digital Transformation

Reasons vary as a company’s size, its industry, and internal processes differ greatly.

According to Statista, in 2020, customer demand was the leading factor that pushed companies to turn to digitalization. Competition is the second most frequently cited factor. As every business cares about money, improved earnings were in third place. The fourth, less expected reason, is market disruption. The percentage of businesses that transformed their process due to new entrants is not much lower than the number that cited market disruption. The demand of the board of directors was reported to be the least important factor, but this affected business transformation too.

However, we should remember another facet of digital transformation — it’s a survival issue. 68% of respondents said that the COVID-19 pandemic sped up digital transformation processes in their organizations significantly. 29% said that COVID-19 was somewhat a reason for the transformation.

The pandemic effect is not surprising. Business owners had to make working processes remote. It became possible only through the use of digital tools.

Increased Spending

Statista data pointed out that companies had to lower their costs to increase spending on digital and technology initiatives in 2020. Although the COVID-19 pandemic forced companies to dismiss workers (43% of respondents said the overall numbers of full-time equivalent employees declined), 44% of businesses increased the number of full-time equivalent employees in tech roles.

Statista predicts that IT spending worldwide will reach around $4.2 trillion in 2021, pointing to a 9.5% rise in growth compared to 2020. Growth in 2020 was limited due to the economic impact of the global pandemic.

The digital transformation led to an increase in direct spending along with spending on information security. Hacking attacks and cyberthreats are problems for businesses of any size. Spending on information security products and services is expected to reach almost 175 billion by 2024.

Will the Digitalization Trend Slow Down?

Businesses spend a fortune on digitalization. In 2018 already, the spending on digital transformation reached $1 trillion. Two years later, it reached $1.78 trillion.

Although we could expect the trend to slow down, Statista estimations testify to the opposite. In 2022, spending could surge to $1.78 trillion. In 2023, the $2 trillion threshold will be broken — spending is estimated to reach $2.3 trillion. Only in 2024 will the trend slow down — spending of $2.39 trillion is expected.

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