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Friday, March 27, 2020

COVID-19: Digital Transformation Creates Opportunity

How do business leaders react when there's a sudden disruption in the Global Networked Economy? While some leaders see only challenges, the bold and the brave envision an opportunity for the development of solutions that result in unique competitive advantages.

The outbreak of the COVID-19 epidemic has showcased the value of IT and Digital Transformation, and savvy leaders of forward-looking organizations will now accelerate the transition, according to the findings in two recent surveys of senior executives in China.

The first IDC survey canvassed the opinions of 32 CxOs in 10 industries and covered three qualitative aspects: the impact of the COVID-19 epidemic on corporate business; the value of IT and digital transformation in the fight against the outbreak; and new digital transformation measures after the epidemic.

The second, quantitative survey polled 121 CxOs of industry users, comprising 19 questions such as judgment on epidemic development and its impact on the economy, businesses and ICT spending, and new initiatives for the digital transformation of enterprises after the epidemic.

Mr. Wu Lianfeng, VP and chief analyst at IDC China, said "digital transformation has become a core strategy for enterprises. It is not something which can be done overnight but will rather take at least 10 years to complete. Realizing large-scale accelerated innovation has become the core of digital transformation today."

Judgment on Development of the Epidemic Situation

As for the development of the COVID-19 epidemic, survey respondents were generally cautiously optimistic about the development of the epidemic, but industrial users were more optimistic than ICT vendors as 70 percent of the respondents believe that the epidemic would last for 3 to 6 months.

Impact of the Epidemic on Corporate Business

The top 3 negative impacts of the COVID-19 epidemic on enterprises are:
  • Inability to visit customers.
  • Significant decline in sales performance.
  • Inability to resume production.
The top 3 positive impacts on enterprises are:
  • Improved corporate ability of long-distance collaborative work.
  • Wide recognition of the value of digital transformation and information technology among all employees.
  • Gaining ability of online marketing and business development.

As for their 2020 corporate business growth plans, 52 percent of respondents are maintaining their original plans unchanged, while 14 percent downgraded their original plans by 5-10 percent.

As for the epidemic, 65 percent of industrial users have formulated plans for working from home, while 20 percent are planning to implement telecommuting.

The three major challenges of working at home are: companies have not formed a culture of long-distance collaborative work; there are concerns about the sharp decline in work efficiency; and lack of similar experiences to draw upon as reference.

Impact of the Epidemic on ICT Spending

As for the impact of the COVID-19 epidemic on ICT spending, 45 percent of the surveyed industrial users said that their spending would be delayed in the first quarter of 2020 and their annual spending is also expected to be reduced.

However, there was still 26 percent of industrial users believing that their annual ICT spending would be not unaffected much, while 21.5 percent said that their spending would increase by up to 10 percent. Overall, ICT vendors were more pessimistic than industrial users.

Among the negatively impacted ICT fields, hardware will be hit harder than software, while traditional technology will be more affected by new technology. Product-wise, front-end devices will be more impacted than back-end infrastructure products.

Among the positively impacted ICT segments, enterprise collaboration platforms will benefit most from the epidemic, with 76 percent of the surveyed industrial users choosing to adopt such platforms, followed by cloud computing, robotics, artificial intelligence (AI), big data and 5G.

New Measures for Digital Transformation of Enterprises

To cope with the challenges of the COVID-19 epidemic and the macroeconomy, industrial users will focus their digital transformation on the following Top 5 fields in 2020:
  • Creating new telecommuting and enterprise collaboration systems.
  • Exploring new business models and business growth points.
  • Building up competitive digital cultures and organizations.
  • Reducing costs by improving operational efficiency.
  • Exploring industrial application scenarios of 5G and IoT.

IT and Digital Transformation Show Growing Value

According to the IDC assessment, the outbreak of the COVID-19 epidemic fully showcases the value of IT systems. Collaborative office, online marketing, video conferencing, customer management, remote support and service and other systems have played a tremendous role in coping with the challenges posed by the epidemic.

Enterprises leading in digital transformation are significantly less vulnerable to the epidemic, while enterprises leading in work resource transformation have a better ability of long-distance coordination and higher overall work efficiency.

The outbreak has boosted enterprises’ sense of response to force majeure, which will accelerate their all-round digital transformation.

Non-contact connected businesses and services will rise faster, with deepening integration of online and offline services. Cloud + AI + 5G or IoT will be the catalyst for this trend.

"The COVID-19 epidemic has fully showcased the value of IT and digital transformation. CxOs should take full advantage of this opportunity to turn crisis into a business opportunity, accelerate the implementation of new digital transformation strategies, support enterprises to look for points of business breakthroughs and innovation and achieve healthy and sustainable corporate development," concluded Mr. Lianfeng.