Dive Brief:
- Digital transformation (DX) spending is expected to reach about $1.18 trillion in2019, an increase by almost 18% compared to 2018, according to a new forecast from the International Data Corporation (IDC).
- Manufacturing is expected to lead the way within this spending category with discrete and process manufacturing expected to invest $221.6 billion and $124.5 billion in 2019, respectively.
- "It is already clear from our research that the businesses which have invested heavily in DX over the last 2-3 years are already reaping the rewards in terms of faster revenue growth and stronger net profits compared to businesses lagging in DX initiatives and investments," Craig Simpson, a research manager with IDC's Customer Insights and Analysis group, said in a statement.
Dive Insight:
After manufacturing, retail and transportation are the sectors expected to invest the most in digital transformation.
"Each of these industries will be pursuing a different mix of strategic priorities, from omni-channel commerce for the retail industry to digital supply chain optimization in the transportation industry and facility management – transforming workspace in professional services," IDC said in a press release.
IDC sees this funding going specifically toward robotic manufacturing, freight management and autonomic operations, the latter of which relies on self-managed computing systems.
One of the drivers of this transformation in retail is the movement into omnichannel strategies by retailers of all sizes. This had led to the adoption of technologies like augmented reality (AR) to allow consumers to see what they're buying in context, even if shopping on a smartphone, and predictive analytics to try and optimize inventory levels.
While some of the tech, like AR, is relatively new, the trend toward more tech is not. It's something eBay CEO Devin Wenig spoke to McKinsey about five years ago.
"It’s easier said than done, but you’re starting now, in the industry, to see really good examples of businesses that are using data to their advantage," Wenig said.
McKinsey noted in 2015 that manufacturing generates more data than other sectors, but most of this information never gets used.
"We believe that companies that can close this gap by tapping the data they generate (and what’s publicly available) will uncover valuable insights to drive profits and growth," McKinsey wrote at the time.
IDC's latest report indicates some of the companies that may have been hesitant to invest in an unproven technology are beginning to see how others have benefited. And this isn't expected to slow down. IDC expects DX investment to total $6 trillion over the next four years.
"Digital transformation is quickly becoming the largest driver of new technology investments and projects among businesses," Simpson said.
