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Worldwide Spending on Digital Transformation Will Surpass $1 Trillion in 2018

June 13, 2018 By admin Leave a Comment

Worldwide spending on the technologies and services that enable the digital transformation (DX) of business practices, products, and organizations is forecast to be more than $1.1 trillion in 2018, an increase of 16.8% over the $958 billion spent in 2017. DX spending will be led by the discrete and process manufacturing industries, which will not only spend the most on DX solutions but also set the agenda for many DX priorities, programs, and use cases. In the newly expanded Worldwide Semiannual Digital Transformation Spending Guide, International Data Corporation (IDC) examines current and future spending levels for more than 130 DX use cases across 19 industries in eight geographic regions. The results provide new insights into where DX funding is being spent as well as what DX priorities are being pursued.

Discrete manufacturing and process manufacturing are expected to spend more than $333 billion combined on DX solutions in 2018. This represents nearly 30% of all DX spending worldwide this year. From a technology perspective, the largest categories of spending will be applications, connectivity services, and IT services as manufacturers build out their digital platforms to compete in the digital economy. The main objective and top spending priority of DX in both industries is smart manufacturing, which includes programs that focus on material optimization, smart asset management, and autonomic operations. IDC expects the two industries to invest more than $115 billion in smart manufacturing initiatives this year. Both industries will also invest heavily in innovation acceleration ($33 billion) and digital supply chain optimization ($28 billion).

Driven in part by investments from the manufacturing industries, smart manufacturing ($161 billion) and digital supply chain optimization ($101 billion) are the DX strategic priorities that will see the most spending in 2018. Other strategic priorities that will receive significant funding this year include digital grid, omni-experience engagement, omnichannel commerce, and innovation acceleration. The strategic priorities that are forecast to see the fastest spending growth over the 2016-2021 forecast period are omni-experience engagement (38.1% compound annual growth rate (CAGR)), financial and clinical risk management (31.8% CAGR), and smart construction (25.4% CAGR).

“Some of the strategic priority areas with lower levels of spending this year include building cognitive capabilities, data-driven services and benefits, operationalizing data and information, and digital trust and stewardship,” said Research Manager Craig Simpson, of IDC’s Customer Insights & Analysis Group. “This suggests that many organizations are still in the early stages of their DX journey, internally focused on improving existing processes and efficiency. As they move into the later stages of development, we expect to see these priorities, and spending, shift toward the use of digital information to further improve operations and to create new products and services.”

To achieve its DX strategic priorities, every business will develop programs that represent a long-term plan of action toward these goals. The DX programs that will receive the most funding in 2018 are digital supply chain and logistics automation ($93 billion) and smart asset management ($91 billion), followed by predictive grid and manufacturing operations (each more than $40 billion). The programs that IDC expects will see the most spending growth over the five-year forecast are construction operations (38.4% CAGR), connected automated vehicles (37.6% CAGR), and clinical outcomes management (30.7% CAGR).

Each strategic priority includes a number of programs which are then comprised of use cases. These use cases are discretely funded efforts that support a program objective, and the overall strategic goals of an organization.. Use cases can be thought of as specific projects that employ line-of-business and IT resources, including hardware, software, and IT services. The use cases that will receive the most funding this year include freight management ($56 billion), robotic manufacturing ($43 billion), asset instrumentation ($43 billion), and autonomic operations ($35 billion). The use cases that will see the fastest spending growth over the forecast period include robotic construction (38.4% CAGR), autonomous vehicles – mining (37.6% CAGR), and robotic process automation-based claims processing (35.5% CAGR) within the insurance industry.

“While the influence of the manufacturing industries is apparent in the program and use case spending, it’s clear that other industries, such as retail and construction, will also be spending aggressively to meet their own DX objectives,” said Eileen Smith, program director, Customer Insights & Analysis. “In the construction industry, DX spending is expected to grow at a compound annual rate of 31.4% while retail, the third largest industry overall, is forecast to grow its DX spending at a faster pace (20.2% CAGR) than overall DX spending (18.1% CAGR).”

The Worldwide Semiannual Digital Transformation Spending Guide quantifies enterprise spending for 139 DX use cases and twelve technology categories across 19 industries and eight geographies. The guide provides spending data for 27 DX strategic priorities and 51 programs as well as technology spending by delivery type (cloud, non-cloud, and other). Unlike any other research in the industry, the DX Spending Guide was designed to help business and IT decision makers to better understand the scope and direction of investments in digital transformation over the next five years.

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