Global digital transformation spending set to reach $3.9tn by 2027, says IDC

Discrete manufacturing and professional services set to lead on adoption

Global spending on digital transformation (DX) is anticipated to surge, reaching an impressive $3.9tn by 2027, according to IDC.

This growth trajectory is underpinned by a five-year compound annual growth rate (CAGR) of 16.1 per cent.

The worldwide enthusiasm for digital transformation is evident in the geographical allocation of digital transformation spending.

While the US is poised to command a significant 35.8 per cent share of global digital transformation spending in 2023, the Asia/Pacific region (including Japan and China) closely follows with a robust 33.5 per cent share.

In parallel, the EMEA region is set to contribute 26.8 per cent of DX spending worldwide this year.

Angela Vacca, senior research manager for data and analytics in Europe, commented: "In Europe, digital transformation spending is growing at a fast pace, and we estimate a CAGR of 16 per cent across the 2023-2027 timeline.

"In this context, investment opportunities will vary depending on countries, industries, and use cases. The fastest growing geography will be the Nordics, where financial services and telecom/media companies will be the most dynamic, growing their DX spend by more than 20 per cent across the forecast period.

"In France, the fastest growing use case will be machine learning-driven predictive analytics in the healthcare provider industry, which will grow by 32 per cent over the period to 2027. This shows that the European market is dynamic and diverse and that opportunities need to be pinpointed."

"Digital transformation has taken centre stage across enterprises in the Asia/Pacific region as the focus continues to rapidly shift from traditional business models, commented Mario Allen Clement, associate research manager for the Asia/Pacific IT spending team.

"Customer experience, innovation, and efficiency are leading to business models that are boosting both productivity and profitability for businesses.

"With a young and growing population that is more tech-savvy than older generations, rapid infrastructure developments towards urbanization are driving the demand for digital offerings both in products and services.

"Integration of multiple third platform technologies such as cloud computing and artificial intelligence coupled with a need to cater to real-time customer experience will continue to push investments further across industries with specific use cases as priorities in the Asia/Pacific market."

Use cases split between innovation and back-office support

In the realm of digital transformation use cases, two major areas emerge as the focal points of global spending: ‘innovate, scale, and operate,' encompassing large-scale operations such as supply chain management, engineering, design, research, operations, and manufacturing, and ‘back-office support and infrastructure,' which comprises accounting, finance, human resources, legal, security, risk, and enterprise IT.

Together, these two categories are projected to account for over 35 per cent of all digital transformation spending in 2023.

Additionally, customer experience is a pivotal use case, covering customer-related functions and associated technologies supported by digital transformation.

This includes customer services, marketing, and sales. A closely linked use case is ‘360 degree customer and client management,' which enhances customer engagement and experience throughout the customer journey.

Together, these two use cases are set to represent over 10 per cent of all digital transformation spending in 2023.

Noteworthy is the remarkable growth exhibited by select digital transformation use cases identified by IDC.

These include ‘mining operations assistance,' ‘robotic process automation-based claims Processing,' and ‘digital twins,' boasting five-year CAGRs of 32.6 per cent, 30.6 per cent, and 28.5 per cent, respectively.

When it comes to industries, discrete manufacturing takes the lead in digital transformation spending, constituting around 18 per cent of global investments.

Key use cases in this domain encompass robotic manufacturing, autonomic operations, inventory intelligence, and smart warehousing.

Other prominent industries with significant DX investments include professional services, where the emphasis lies on operational efficiency use cases, and process manufacturing.

The securities and investment services industry is poised to witness the most rapid growth in DX spending, boasting a five-year CAGR of 21.1 per cent, followed closely by banking and insurance, with CAGRs of 20 per cent and 19.2 per cent, respectively.