New research from International Data Corporation (IDC) entitled EMEA Digital Transformation Market Forecast, 2024–2028, based on the Worldwide Digital Transformation Spending Guide published in October 2024, shows that the Europe, Middle East, and Africa (EMEA) digital transformation (DX) spending is projected to reach $1 201-billion by 2028, registering a compound annual growth rate (CAGR) of 15,8% over the 2024-2028 forecast period.
The digital spending market is highly influenced by the strong growth of artificial intelligent (AI) investments, which are sustaining the double-digit growth rate. This is also evident from survey data indicating that 99% of EMEA CEOs are prioritising generative AI (GenAI) initiatives.
“AI will reshape digital business models and redefine digital assets, supporting organizations’ efforts to become AI-fueled businesses by 2027. The future of DX is set to accelerate, creating immersive new experiences and transforming operational models. As of this forecast round, EMEA digital transformation spending is poised to exceed $1 200-billion by 2028,” says Erica Spinoni, senior research analyst at IDC EMEA Digital Business and AI Transformation Strategies Research.
Digital transformation investments underpin investments in disparate technologies, from robots to connectivity to cloud. The analysis of the underlying technologies allows them to be categorised into three growth groups: steadily growing technologies like personal devices and connectivity services; technologies growing at the same rate as DX, including IoT and IT services; and technologies outpacing DX growth, led by GenAI, cloud computing, and emerging technologies like AR and VR. These insights provide a clear view of the dynamics and strategic priorities driving organizations’ transformation into digital business.
“Digitally transforming the business and operating models requires organizations to invest in multiple technologies and use cases to address critical business priorities. Today, GenAI has emerged as the primary driver of digital investments, surpassing even cloud, with a CAGR that is four times that of the overall digital market,” says Giulia Carosella, senior research manager at IDC EMEA Digital Business and AI Transformation Strategies Research.
Organisations are taking a different approach and will prioritise different use cases based on the industry of adherence, reflecting specific priorities, investment criteria, and needs.
- Financial Services: The industry with the highest CAGR over the forecast period, keeping the digital investment momentum with a focus on cybersecurity and customer experience, especially now with the AI pivot.
- Distribution and Services: Despite the harsh impact of current geopolitical tensions on the supply chain, retailers are maintaining strong DX investments, primarily focusing on digital platforms and multiple customer-centric AI use cases.
- Infrastructure: Already characterised by a high level of digital maturity, digital investment in infrastructure will keep its momentum to further boost its competitive position in the AI/tech space. AI will play a pivotal role in further building intelligence into the infrastructure network.
- Manufacturing and Resources: Organisations in this industry are accustomed to massive technology deployments, reshaping processes and ways of working. Today, AI and GenAI investments are expected to further boost employee productivity, creating growth opportunities.
- Public Sector: There is a dual approach to digital investment in this industry. While budget constraints are imposing investment prioritisation and budget allocation, the usage of modern and emerging technologies is expanding.
“Digital transformation is the way to expand in industries where substantial investments are proceeding. It is also a way to more efficiently reduce costs and optimise processes. These benefits will help drive DX growth in the double digits over the forecast period,” says Angela Vacca, senior research manager at IDC Data and Analytics.
“Digital transformation is more about new products and new revenue streams than it was a few years ago,” says Neli Vacheva, research manager at IDC Data and Analytics. “However, the wave of innovation in the wake of AI will give rise to new optimization projects and levels of efficiency in areas that have already digitally transformed.”
Several factors influence organisations’ ability to invest in digital transformation. On the growth and driving side, EMEA organisations are propelled by the strategic imperative of AI, which presents a critical opportunity to lead the charge and capitalize on first-mover advantages. New regulations and increasing cyberattacks necessitate a robust security and trust posture, which is equally paramount for ensuring investment.
Conversely, potential projects are being carefully scrutinized due to high costs and the uncertainty of returns.
“AI and GenAI are not just technological advancements; they are strategic imperatives for EMEA organisations. However, geopolitical tensions and macroeconomic uncertainties are pushing organizations to scrutinize their IT budgets. Additionally, the lack of digital skills and organisational silos are significant barriers that need to be addressed to fully realize the potential of digital transformation,” says Spinoni.