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Cost Savings Drive IT Services Modernization

February 4, 2019

A vast majority of businesses will increase their investments in digital technology over the coming year, and many expect IT modernization to fuel future transformation efforts that lead to cost savings and greater profitability. These are some of the findings from a new global survey conducted by The Economist Intelligence Unit (EIU) and commissioned by DXC Technology.

The study, “2019: The Year of Digital Decisions,” explores how companies define digital transformation and the resulting business outcomes. Significantly, the report reveals that more than eight in ten survey respondents (83 percent) expect their organizations to increase their digital investments in 2019. And more than 40 percent of respondents predict that their organizations will increase their investments by 11 percent or more.

Currently, approximately half of companies surveyed have digitally enabled just three key organizational functions, according to the research. When asked to cite the top barriers to transformation, more than one-third (35 percent) of respondents flagged “cost or lack of funding,” second only to security concerns (40 percent).

However, most companies surveyed (76 percent) expect the cost savings from IT services modernization to help fund their digital strategy. Within the next three years, companies intend to greatly ramp up their efforts, and more than half of respondents (58 percent) expect every business unit to be digitally enabled in the next three years.

“Companies overwhelmingly recognize that digital innovation is now a requirement for them to compete and succeed,” said Dan Hushon, senior vice president and chief technology officer, DXC Technology. “The survey findings point to perhaps the most rapid, dramatic and sophisticated effort at reinvention that major businesses have attempted in many decades, and those surveyed are committed to investing to make digital happen.”

Survey respondents also linked digital transformation to profits. More than two-thirds (68 percent) say the annual profitability of their organizations has increased over the past three years thanks to their organizations’ digital strategy, and 74 percent say they expect it to rise over the next three years.

“We strongly believe that we can make the customer experience easier and simpler while leading to better outcomes through digital technology, and that will continue to drive our market share,” said survey report interviewee Neesha Hathi, executive vice president and chief digital officer at Charles Schwab. “Digital transformation also helps us scale our services while driving down costs for our clients.”

Digital decision drivers

The report reveals what companies aim to achieve by digitally remaking themselves, as well as the challenges they must overcome and the cultural changes they need to make.

Other key findings include:

Digital and business strategy formulation are completely or almost completely aligned at 72 percent of companies.
Three-fourths (75 percent) of respondents say digital transformation will lead to greater agility, and 76 percent report that modern digital IT infrastructures better position their companies to produce value for their stakeholders.
Approximately one-third (33 percent) of respondents say the lack of a tech-savvy workforce is a barrier to transformation.

Nearly three-fourths (72 percent) of companies agree that a change in culture is necessary to digitally transform any organization. That figure is even higher for companies in developing regions and those that have implemented digital strategies only in the past two years.

“Our research indicates that digital strategy will continue to be a major area of investment – amounting to a dramatic effort at corporate reinvention. But getting it right will be a continuing challenge,” said Gilda Stahl, managing editor, thought leadership, at The Economist Intelligence Unit. “Defining your digital strategy clearly, ensuring digital literacy in every relevant role and recruiting digital-savvy employees are all essential to guaranteeing that digital investment yields positive business outcomes.”

Key regional and industry trends

Companies that are further advanced – for example, those headquartered in North America and Europe and those in the financial services and manufacturing industries – tend to place greater emphasis on cross-functional collaboration, possibly because this helps them to optimize the digital investments they’ve already made.

Financial services companies are more likely to stress AI/machine learning and blockchain while, for manufacturing companies, cloud computing and IoT are especially important.

Social media is a somewhat higher priority for retailers than for other industries, given the importance to them of developing digital channels for sales and marketing. These tools play a growing role at marketing and communications firms as well.

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