Kathy Gibson is at IDC Directions 2020 in Sandton – Attaining the future enterprise is the key outcome of all digital transformation exercises – and it’s up to the IT organisation to make sure it happens.
Indeed, organisations are going to spend $5,2-trillion in digital transformation over the next three years, and it will account for more than half of all IT spend, according to IDC.
South Africa’s GDP growth may be faltering, and every region of the world has seen a slowdown over the last year or two, but in Africa the GDP is looking up slightly for 2020.
Jyoti Lalchandani, group vice-president and MD: META at IDC, concedes that no-one knows what will happen in the continent except that volatility will continue.
“It’s no surprise that 2020 is going to be a challenging year, and no-one can predict how it will pan out.”
The themes dominating the META region over the last 12 months include policy uncertainty, weak global demand, limited access to capital, elections in several countries, volatile oil and commodity prices, weaker consumer sentiment, unemployment/lack of skills, and currency fluctuation.
Positive moves include the public sector leading transformation efforts and diversification, increasing urbanisation, mega events and national programmes, a thriving startup ecosystems, a large youth consumer base, and technology starting to drive innovation and transformation.
Overall ICT spend in 2019 was down 3,1% in the META region, Lalchandani points out. A modest recovery in 2020, of about 2,3%, will bring it to about $212-billion.
2020 is still lower than the last five years, he points, and this is pointing to more selective investments in ICT.
Two-thirds of ICT spend is derived from teleocmmunicaiton, and there has been a decline in voice spending over the last year. At the same time there is growth in data services, particularly fixed mobile
The overall IT market contracted about 3% in 2019, with just 1,3% growth expected in 2020.
A significant portion of the decline in 2019 was driven by a contraction in devices spend, Lalchandani points out.
South Africa is the largest IT market in the META region, and a growth of 2,2% is expected in 2020.
The top four markets – South Africa, Saudi Arabia, UAE and Turkey – represent more than half of the total maarket and, as such, what happens here affects the whole region.
Device sales declined significantly in 2019, and will growth only slowly in 2020, still reflecting negative growth.
Infrastructure should move from 0,8% to 2,7% growth, IT service should grow from 3,2% to 6,3% growth, and software will recover from 1,5% growth to 6%.
Overall, we will see more operational rationalisation, which is driving the modest growth expected in the IT space.
The investments will instead be made in digital transformation, Lalchandani says.
Innovation accelerator spend is set to double between 2019 and 2023. These are cognitive systems, robotics, 3D printing, next-generation security, Internet of Things, and AR/VR. These investments are expected to grow by 19,1%.
Spend on the third platform pillars – cloud, mobile, big data/analytics and social business, with grow by 4,2%.
We are in the second chapter of the third platform, Lalchandani says. “We are now seeing all the innovation accelerators leveraged to transform businesses.”
As we move forward, we will see the focus shift form the core to the edge – by 2023 we will see almost 40% of cloud deployments will include edge computing.
There will also be more investment in applications, with almost 500-million new logical applkcations created – almost the same a the installed base of applications released over the last 40 years.
“The CIO will become an orchestrator, bring these all together,” Lalchandani says.
Line of business managers will also be more important, becoming important stakeholders in positioned innovation accelerators and digital transformation.
“We are seeing digital transformation projects driving a lot of the net new spending in ICT,” he says.
Almost every part of the organisation is being touched by digital transformation, with the following areas being impacted: customer experience; marketing; finance; operations; quality; strategy; production, sales, R&D and HR.
The benefits of digital transformation are seen as productivity improvement, customer efficiency, process time, customer acquisition, revenue from existing products, organisational agility, production, operation time, customer retention and revenue from new products.
Successful digital transformation programmes tend to be run by organisations that are digitally determined, with a focused strategy.
A DX projects team is the driver for 39% of successful transformations; 23% have a digital transformation office; and 7% are run by a DX business unit.
However, about 25% of digital transformation is more ad hoc in nature, Lalchandani says, and this often results in islands of innovation, or silos.
In fact, new challenges that are being highlighted in digital transformation include tactical roadmaps (51%), islands of innovation (48%), organisational silos (40%) and outdated KPIs (36%)
When it comes to paying for digital transformation, the savings that companies get from opex rationalisation has allowed for investment in 53% of companies; internal IT rationalisation is funding 27% of projects, and 34% of investment is coming from incremental digital transformation funding over and above regular budgets.
Millennials and Generation Z are driving much of the need for digital transformation, In South Africa, these groups represent about 79% of the population.
These consumers want to be always connected, they would rather access services than possess them, and expect one brand to deliver one experience, Lalchandani says.
This is driving an explosion of consumer digital transformation, new business models and technology transformation.
The industries that are being disrupted the most are finance, government, communications and manufacturing.
Others that are changing quickly include transportation, healthcare, utilities, retail and wholesale, professional and personal services.