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Digital Transformation Investment Drives Ongoing Growth

Many senior executives are resolute in their commitment to increasing business technology investments. The C-suite continues to support the strategic projects that CIOs and CTOs are championing within their organization. Cloud and edge computing are still gaining momentum.

Spending on the digital transformation (DX) of business practices, products, and organizations will continue at a solid pace despite the challenges presented by the COVID-19 pandemic, according to the latest worldwide market study by International Data Corporation (IDC).

Global spending on DX technologies and services is forecast to grow by 10.4 percent in 2020 to $1.3 trillion. While this is slower growth than the 17.9 percent in 2019, it remains one of the few bright spots in a year characterized by dramatic reductions in overall IT spending.

Digital Transformation Market Development

"COVID-19 has upended the global economy, with direct negative implications on the way businesses invest in IT," said Craig Simpson, senior research manager at IDC. "DX technology investment has not gone unscathed, but so far it has been affected to a lesser extent since many large-scale DX projects underway or planned are instrumental to broader strategic business initiatives."

A case in point: compared to IDC's pre-COVID-19 forecast, the five-year growth rate for DX spending has declined by less than two percentage points. However, the industries with the slowest year-over-year growth in DX spending are the ones experiencing the greatest impact from the economic downturn caused by the pandemic.

Personal and consumer services, which includes hotels, theme parks, casinos, and movie theaters, will only see an increase of 5.3 percent in its DX spending this year -- that's down from 18.4 percent growth in 2019.

Similarly, discrete manufacturing, the industry with the largest DX spending amount, will only grow 6.6 percent this year -- that's down from 14.5 percent growth in 2019.

In contrast, the industries expected to see the strongest growth in DX spending in 2020 are construction (16.3 percent) and healthcare (15.7 percent), both of which will see spending grow more slowly than last year.

According to the IDC assessment, COVID-19 has wiped off almost $500 billion of worldwide DX technology investment between 2020-2023 from their pre-COVID-19 forecast. Yet despite these losses, pockets of growth opportunities exist across most industries when diving deep into specific use cases that solve significant business challenges.

A few examples include RPA-based claims processing in insurance, digital visualization in education, omnichannel commerce platforms in telecommunications, and clinical trial operational excellence in process manufacturing.

The DX use cases – discretely funded efforts that support a particular program objective – that will receive the most spending this year include autonomic operations ($51 billion), robotics manufacturing ($47 billion), and root cause ($35 billion), all of which will be driven by the manufacturing sector.

Outlook for Digital Transformation Investment Growth

The DX use cases that will see the greatest year-over-year growth in spending are virtualized labs and digital visualization in the education sector, robotic process automation-based claims processing in insurance, and augmented design management in the professional services industry. Of the 278 DX use cases identified by IDC, only nine will see a decline in spending this year.

The United States will remain the largest geographic market for DX spending, delivering roughly one-third of the worldwide total in 2020. Western Europe will be the second-largest region for DX spending, following closely by China. These two regions will also deliver the strongest year-over-year growth in DX spending at 13.6 percent for China and 12.8 percent for Western Europe.

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