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Digital Transformation Spending Reaches $1.8 Trillion

Ongoing investment in business technology will remain on track, despite concerns about the global economic outlook which continues to evolve in 2022. Enterprise CIOs and CTOs are focused on operational profitability and digital business growth goals that are enabled by strategic IT initiatives.

Global spending on the Digital Transformation (DX) of business practices, products, and organizations is forecast to reach $1.8 trillion in 2022 — that’s an increase of 17.6 percent over 2021, according to the latest market study by International Data Corporation (IDC).

Many anticipated DX investments will sustain this pace of growth throughout the 2021–2025 forecast period, with a five-year compound annual growth rate (CAGR) of 16.6 percent.

Digital Transformation Global Market Development

“IDC expects to see aggressive DX technology investment growth in 2022 following a minor slowdown during the pandemic period,” said Craig Simpson, senior research manager at IDC. “As organizations accelerate their pursuit of a digital-first strategy, they are channeling these investments into both internal operations and external direct engagement.”

The investments in internal operations are largely focused on improving efficiency and resilience, while customer experience transformation has become a DX priority for many companies.

The DX priorities that will see the largest investment in 2022 include Back Office Support and Infrastructure, Smart Manufacturing, and Digital Supply Chain Optimization. Together, these three investment areas will represent more than $620 billion in DX spending this year.

Other operational priorities that will see significant investments in 2022 include Connected Assets, Facility Management, and Operationalizing Data and Information. Customer experience investments, such as Omni-Experience Engagement, and Omni-Channel Commerce, will account for more than $300 billion in DX spending in 2022.

The DX strategic priorities that will experience the fastest spending growth over the five-year forecast include narrowly focused priorities like Frictionless Insurance (27.4 percent CAGR) and Legal (27 percent CAGR) as well as operational priorities such as Enterprise and Resource Management (26 percent CAGR).

From an industry perspective, the discrete and process manufacturing industries will account for nearly 30 percent of worldwide DX spending this year, followed by the professional services and retail industries.

The utilities and banking industries will also see DX spending of more than $100 million this year. Meanwhile, the financial services sector will deliver the fastest DX spending growth over the 2021–2025 forecast period, with the securities and investment services, insurance, and banking industries all forecast to have five-year CAGRs of 19 percent or more.

The United States will be the largest geographic market for DX spending in 2022, accounting for nearly 35 percent of the worldwide total. Western Europe will be the second-largest region for DX spending, followed closely by China.

China will also deliver the strongest growth in DX spending with a five-year CAGR of 18.5 percent. Latin America will be the region with the second-fastest growth with a CAGR of 18.2 percent.

Digital transformation spending in EMEA will be nearly $469 billion in 2022 — that’s an increase of 16.7 percent over 2021 and underlining the strong importance of DX projects across industries in Europe.

The highest growth will be in the finance and manufacturing industries where Big Data and Artificial Intelligence (AI) related use cases will dominate across financial institutions, and the Internet of Things (IoT) and robotics-related use cases will be growing very dynamically among manufacturing companies.

In Central and Eastern Europe, the ongoing Russia-Ukraine war will delay investments for the current year, which will impact many business sectors — in particular, the resource industry.

Outlook for Digital Transformation Applications Growth

Supply chain disruptions will also impact some manufacturing and distribution segments while disruption of networking and IT supply chains will contribute to the postponement of some DX projects in the telecom industry.

That said, many enterprise digital transformation projects are still spread across internal employee experience, and external customer experience, driven by strategic IT investment objectives. Both areas of focus require the modernization of legacy business applications and associated IT infrastructure.

I anticipate that new IT projects may require a compelling business case, as the global economy continues to evolve in the coming weeks and months during the remainder of this year. CIOs and CTOs will seek the guidance of their trusted advisors, particularly for the assessment and prioritization of complex technology decisions.

Originally published at https://blog.geoactivegroup.com on June 6, 2022.

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