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Digital Transformation Investment at $3.4 Trillion

Business technology leadership matters. Across the globe, more leaders have been pursuing bold Digital Transformation (DX) initiatives with the goal of creating new sources of business value through digital products, services, and experiences.

As an additional benefit, the COVID-19 pandemic revealed that digital transformation efforts improve an organization's resilience against global market disruptions.

Global DX investment is forecast to reach $3.4 trillion in 2026 with a five-year compound annual growth rate (CAGR) of 16.3 percent, according to the latest worldwide market study by International Data Corporation (IDC).

Digital Transformation Market Development

"Despite strong headwinds from global supply chain constraints, soaring inflation, political uncertainty, and an impending recession, investment in digital transformation is expected to remain robust," said Craig Simpson, senior research manager at IDC.

The benefits of investing in DX technology -- including automation, analytics intelligence, operational transparency, and direct support around customer or employee experience -- all support targeted areas of business growth in an uncertain global economy.

The DX use case that will see the largest investments over the forecast period is Innovate, Scale, and Operate, a broad area covering large-scale operations, including making, building, and designing activities.

Core business functions that make up this area include supply chain management, engineering, design and research, operations, and manufacturing plant floor operations. Innovate, Scale, and Operate will account for more than 20 percent of all DX investments throughout the forecast.

According to the IDC assessment, the next largest use cases are Back-Office Support and Infrastructure at more than 15 percent of all DX spending and Customer Experience at more than 8 percent.

The fastest growing among the more than 300 DX use cases identified by IDC include Digital Twins and Robotic Process Automation-Based Claims Processing with five-year CAGRs of 35.2 percent and 31 percent respectively.

Nearly 30 percent of worldwide DX spending throughout the forecast period will come from the Discrete and Process Manufacturing industries, where Robotic Manufacturing, Autonomic Operations, and Self-Healing Assets and Augmented Maintenance are among the leading use cases.

The next largest industries for DX spending are Professional Services and Retail where Back-Office Support and Infrastructure is the leading DX use case.

The Securities and Investment Services industry will experience the fastest growth in DX spending with a five-year CAGR of 20.6 percent, followed closely by Banking and Healthcare Providers with CAGRs of 19.4 percent and 19.3 percent respectively.

Outlook for Digital Transformation Regional Growth

The United States will be the largest geographic market for DX spending throughout the forecast, accounting for nearly 35 percent of the worldwide total and surpassing the $1 trillion mark in 2025. 

Western Europe will be the second largest region with nearly a quarter of all DX spending. China will see the strongest growth in DX spending with a five-year CAGR of 18.6 percent, followed closely by Latin America with a CAGR of 18.2 percent.

The Asia-Pacific region is expected to grow in double digits across the forecast period where use cases from the Internet of Things (IoT) and Robotics have a high potential within the Manufacturing sector.

That said, I believe the shift to hybrid work and flexible working models will help to advance stable growth in digital transformation investments in the coming years of this amazing decade of transition.

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