Enterprises ready to flip the switch on digital transformation

Digital transformation is impacting everything.  Get ready for the emergence of an economy driven by a technological revolution in which enterprises must adapt to unrelenting change in order to survive.

Back in 2007, IDC identified what it called the “third platform”. This was built on the technology pillars of mobile computing, cloud services, big data, analytics and social networking. The subsequent rapid proliferation of these technologies has triggered an explosion of innovation and transformation. IDC expects this will accelerate across the next three to five years as enterprises commit to digital transformation (DX) on a huge scale, creating an economy it calls the ‘DX economy’.

"The disruptive impact of digital transformation is about to be felt in every industry as enterprises 'flip the switch' and massively scale up their DX initiatives to secure a leadership role in the DX economy," explained Frank Gens, Senior Vice President and Chief Analyst at IDC.

This is a nexus point for change. IDC thinks that within the next two years, two-thirds of Global 2000 CEOs will put DX at the centre of their growth and profitability strategies. By the end of the current decade the percentage of enterprises with advanced DX strategies and implementations will more than double, the analyst’s claim. This focus on digital business strategies will drive over half of enterprise IT spending within the next 24 months, and this phenomenal spend will climb to 60% by 2020.

It’s all in the cloud
The big questions for enterprises today are not “should” we migrate to the cloud, but “when?”, because the cloud is central to digital transformation and pivotal to the DX economy.

Take the example of General Electric (GE): The company is going through an aggressive digital transformation that will see it move 70 percent of its IT into the cloud within five years in its bid to transform itself into the best “digital industrial” company.

Increasing convergence means it will become practically impossible to develop implementations of mobile computing, big data, analytics and social networking implementations without cloud at the core. By 2020, IDC predicts enterprise spending on cloud services, hardware, software and cloud service deployment and management costs will exceed $500 billion – that’s triple what we spend today. IDC believes ‘Cloud First’ will become the new mantra for enterprise IT in the DX era.

By 2018, IDC predicts over 50 percent of large enterprises – and more than 80% of enterprises with advanced DX strategies – will create and/or partner with industry cloud platforms to scale up their digital supply and distribution networks. IDC forecasts 500 or more such “industry clouds” will exist by 2018, up from just over 100 today.

Software talent will drive the DX economy

The analysts anticipate the DX economy will drive tremendous growth within development teams as organizations engaged in digital transformation seek out developers to help write the code. The corollary here is that enterprises will find their ability to grow and remain competitive will depend on the size and talent of their software teams.

This also means every company will increasingly become a software company. By 2018, IDC forecasts enterprises chasing DX initiatives will more than double the size of their developer resources, focusing those developers almost entirely on those initiatives.

The value of data in the DX economy

Data will become an increasingly valuable asset. Without large volumes of quality data to sustain innovation, the whole process will come to a standstill. IDC believes the success of the DX economy rests on building solid “data pipelines” to enable information to flow in and out of the enterprise. 

What really matters is what is done with this high quality big data. This is where algorithms become so important. These include things like Amazon’s recommendation algorithm or Netflix’s dynamic algorithm that keeps people watching movies. In just five years, Gartner estimates 1 million new devices will arrive online every hour, creating billions of new relationships, driven not just by data, but by algorithms.  “Data is inherently dumb. It doesn’t actually do anything unless you know how to use it; how to act with it,” explained Peter Sondergaard, senior vice president at Gartner and global head of Research at this year’s Gartner Symposium. “Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are the core of new customer interactions.”

The notion of applying intelligence across the new enterprise IT will connect the consumer to the company like never before, with algorithms enabling new business opportunity. “Products and services will be defined by the sophistication of their algorithms and services,” said Sondergaard. “Organizations will be valued not just on their big data, but the algorithms that turn that data into actions, and ultimately impact customers.”

Those who transform will prosper
The DX economy will radically change the way enterprises think, connect, interact and work.  To stay at the top of the leader board enterprises will need to build a cocktail of digital expertise and the ability to truly embrace innovation.

Adapting to the DX economy will demand enterprises upgrade their infrastructure to deliver what they need for future business development. Take a look at how Orange Business is helping other firms meet the challenges of digital transformation.

Jan Howells

Jan has been writing about technology for over 22 years for magazines and web sites, including ComputerActive, IQ magazine and Signum. She has been a business correspondent on ComputerWorld in Sydney and covered the channel for Ziff-Davis in New York.