Digital Transformation Report 2017

www.softserveinc.com survey report

survey report

What is digital
transformation?
The technology sector has been discussing digital transformation since the
1990s, with leading consultancies and major IT vendors highlighting their
digital transformation services and credentials in earnest from the turn of
the century onwards. However, like so many other technology trends, its
evolution has roots that stretch back over decades.

To help make sense of the current landscape, the SoftServe Digital

Transformation Report 2017 provides insights based on an examination of
the digital transformation strategies planned over the next 12 months by
a range of businesses and enterprise organizations. Most findings support
earlier research, while some statistics were surprising. Chief among them,
security concerns are stopping 55 percent of organizations from committing
to a digital transformation project.

The SoftServe Digital Transformation Report is based on a recent survey

completed by 300 respondents, made up of 100 UK and 200 US decision-
makers. One hundred and fifty participants represented companies with
1,000 to 3,000 employees, while the remaining participants represented
companies with more than 3,000 employees. Respondents were
broken down into six key industries: business and professional services;
manufacturing; financial services; retail; distribution and transport; and other
commercial sectors.

Conducted in November 2016, the research asked a cross-industry panel of

industry leaders about the risks, challenges, and opportunities surrounding
digital transformation for modern businesses.

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The Digital
Transformation Landscape
Build understanding to drive implementation
Awareness of digital transformation and the benefits that it
delivers are high across all verticals. However, the landscape
is fragmented in terms of who has ultimate responsibility for
digital transformation strategies and where the true value lies.
All this uncertainty could account for the relatively low levels
of complete adoption.
According to IDC, the percentage of enterprises creating advanced digital
transformation initiatives will more than double by 2020, from 22 percent
in 2015 to almost 50 percent by 20201 . While Gartner expects CIOs
are typically already spending 18 percent of their budget in support of
digitalization, that figure is set to increase to 28 percent by 20182.

Indeed, just one percent of organizations surveyed by SoftServe were

unable to provide any kind of definition when asked: “What does the term
‘digital transformation’ mean to you?”

On the surface then it looks like digital transformation is well underway

everywhere. When asked: “To what extent has a digital transformation
strategy been implemented in your business?” just two percent of
respondents said they did not have a strategy and had no future plans to
implement one.

A total of 27 percent of businesses claimed to have implanted a digital

transformation strategy across their entire organization. This figure seems
healthy at first glance. However, if we dig into the data, we find some big
differences in adoption level - particularly across different regions.

1. Predictions About The Future Of Digital Transformation; Forbes, Dec. 15, 2015.
2. Gartner Survey of More Than 2,500 CIOs Charts the Rise of the Digital Ecosystem; Gartner, Oct. 17, 2016

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In the US, the number of organizations that claim to

have adopted complete transformation stands at 33
percent. But in the UK that figure is just 10 percent.
The difference between the levels of adoption in the
US and UK likely speaks to regulatory and cultural
differences between the two counties.

Starting a business in the US comes with significantly

less red tape than in the UK. New businesses are
more likely to use disruptive technologies. They In the US, the number
are not burdened by legacy solutions or opinions. of organizations
In order to keep pace with start-ups, established that claim to have
businesses in the US are more likely to turn to adopted complete
transformative solutions.
transformation
Things are a little different in the UK. With fewer stands at 33 percent.
start-ups chipping away at the establishment, In the UK, that figure
businesses are less inclined to adopt transformative is just 10 percent.
technologies or practices.

When it comes to digital transformation,

competition drives innovation.

To what extent has a digital

transformation strategy been
25M 46 27 + 2
implemented in your organization?
25 % 27 %
We have one implemented across
our whole organization
We have one implemented
across parts of our organization
We do not have one, but we are
46 % planning to
We do not have one and have
no plans to implement one

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If we look across verticals, ‘retail, distribution and

transport’ leads the way in terms of complete
adoption with 38 percent of businesses in
this sector claiming to have adopted digital
transformation across the whole organization -
while just 18 percent of manufacturers claimed
complete adoption.

The reason manufacturers find themselves behind

the curve when it comes to adopting digital
transformation may come down to a lack of agility.

Companies operating in the manufacturing sector

are heavily siloed and have relatively high capital
and operating expenses compared with businesses
working across retail, distribution, and transport.
Manufacturing is, therefore, a lot less agile than
more software-centric verticals such as financial
services or IT - which stand at 25 and 30 percent
respectively. Rather than transform, manufacturing
is more likely to offshore work to regions that enjoy
lower overheads.

The business and professional services vertical

reports that 22 percent of organizations have
adopted digital transformation across the board.
This vertical is reliant in human capital. With
incremental improvements in artificial intelligence
we can expect to see this sector increasingly turning
to digital solutions.

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Piecemeal adoption
The headline figures relating to complete adoption
tell only half the story. The fact that nearly 50
percent of respondents have implemented
transformation across parts of their business shines
a light on the piecemeal approach that many are
taking.

It has parallels with the “bring your own device” The fact that
trend that shaped the enterprise mobility space nearly 50 percent
in the years that followed the advent of the
of respondents
smartphone. Individuals or smaller business units
are more agile than entire organizations, it makes
have implemented
sense then that parts of the business will start to transformation across
adopt disruptive technologies before the business parts of their business
at large. shines a light on the
piecemeal approach
As individuals or smaller parts of the business enjoy
the benefits delivered by digital transformation, we
that many are taking.
can expect to see it being more widely adopted. In
this way, we’ll see transformation happening from
the bottom up (or from the inside out) rather than
the more traditional command and control method.
But this approach runs the risk of becoming
chaotic or haphazard. Ultimately, someone in
the organization needs to take responsibility. So
who will businesses turn to in order to make that
transition a success?

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Call in the experts

Most businesses, it seems, are very inward looking when it comes to digital
transformation.

When asked: “When planning a digital transformation strategy in your

organization, which resources do you/would you turn to for guidance and
advice?” 76 percent of respondents stated that they would seek advice
from experts within their business.

When planning a digital transformation strategy in your organization,

which resources do you/would you turn to for guidance and advice?

28+28201365M
5% Internal IT expertise
6%
28.2 % Internal IT and management expertise
13 %
Internal management expertise

Industry analysts

19.9 % 27.9 % Vendors

Media articles

In some ways, this makes perfect sense. These are the professionals
who know the business best, are familiar with the IT eco-system, the
operational requirements and limitations of the business, and the people
who rely on the systems.

And serving the people should not be overlooked as a consideration

when it comes to digital transformation. You can probably count on the
fingers of one hand the number of times a transformative IT infrastructure
project has been implemented where the employees have welcomed the

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disruption and changes it brings. There is an almost

inherent inertia among human beings when it
comes to change.

This touches on why so few businesses are adopting

complete digital transformation. The people who are
arguably in the best position to drive transformation
are not necessarily the people who ultimately benefit.
IT doesn’t just need to keep the ship afloat; it also
needs to keep it moving forward at full steam. More
often than not, that results in businesses taking the
approach that if things are not broken, they do not Just six percent of
need to be fixed. This is especially true at times of respondents felt that
economic hardship. Even now, the global economy
vendors would be the
is only just showing signs of recovery and IT budgets
are set to stay flat in 20173 . best people to speak
with for guidance or
Solutions, not products advice about digital
transformation.
Just six percent of respondents felt that vendors
would be the best people to speak with for guidance
or advice about digital transformation. This doesn’t
mean that people don’t trust vendors; rather, it
means they trust their internal experts more. That
said, consumer trust in brands is at an all-time low4.
The fact that respondents trust vendors over the
media speaks volumes.

Internal stakeholders, while trusted, will however

need to turn to someone for advice. Those third
parties are much more likely to be organizations that
are not selling products in the space. Industry analysts
and consultants that can help develop a solutions
framework are well-placed to fill the knowledge void
that internal stakeholders might have.

3. IT Budgets Expected to Remain Flat in 2017: CEB Survey; The Wall Street Journal, Oct. 26, 2016
4. Lies And The Declining Trust In Brands; Brand Strategy Insider, Jan. 4, 2016

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Calling the shots

Digital transformation is a C-suite issue with almost
half of all respondents choosing either the CEO
or CIO as the person with ultimate responsibility.
And when we factor in other C-level executives,
the figure rises to 80 percent. So while IT budgets Nearly one fifth
are not set to rise in the immediate future, we of respondents
can at least be sure that the people who hold reported that their
the purse strings will be looking closely at digital organization has
transformation initiatives when they consider how a dedicated digital
those budgets will be allocated. transformation team.

Looking outside the C-suite, nearly one fifth of

respondents reported that their organization has
a dedicated digital transformation team. It is a
reassuringly high percentage and chances are good
that the digital transformation team reports into
either the CIO or CEO.

25+2420187312M
Who within your organization has
responsibility for driving digital
7.3 % transformation?
25.2 %
18.5 % CIO CFO

CEO CMO

A dedicated digital *Other

19.9 % 23.8 % transformation team
CTO I don’t know

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Where is the value?

Given the scope of digital transformation, it should come as no surprise
that respondents believe that it will deliver value to a wide range of
business areas, with almost equal weighting given to customer experience,
mobile technologies, digital asset management, and Cloud computing.
Digging into the data, retail showed a marked desire for customer
experience, but that is to be expected.

There will always be certain areas that benefit more than others from the
digital transformation. But the fact that it promises to add value across
the board suggests that businesses should concentrate on delivering
wholesale adoption.

Where do you see digital transformation providing value to your organization?

14+13119643M
Customer experience/engagement

6.5 % 13.7 % Mobile technologies

Digital Asset Management
9.4 % 13.5 % Cloud computing services
Data mining/analytics E-Commerce
10.6 % 13 % Product Information Internet
Management of Things
Devops Robotics
10.6 % 12.8 %
Wearables

Security challenges
Digital transformation promises to deliver greater levels of connectivity
and more data than ever before, and businesses will also come to rely
absolutely on that connectivity and data. So, it is with good reason that
organizations cite security as the number one challenge. In fact, security

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concerns are stopping 55 percent of organizations

from committing to a digital transformation project.

Security will always be a key consideration with any

new IT initiatives, in fact it should be “baked in.” Security and
If there is any doubt about a company’s existing budgetary constraints
security strategy, then they should address that are the two
now. The fact that digital transformation is not
main challenges
always being carried out as part of an overall
strategy is a worry for the security conscious. Of organizations must
course security, like everything else, is linked to address to take
budgetary considerations. advantage of digital
trends.
So it is little wonder that budget is also viewed as a
major challenge that businesses need to address.
Unfortunately, as noted, IT budgets are not on the
rise. Perhaps then, rather than positioning digital
transformation as an IT challenge, it should be
considered a business objective, with budget set
aside accordingly.

What challenges are impeding your organization from taking

advantage of digital trends?
There are no challenges 4

Lack of strong business case 11

Not a collaborative culture 11

Organizational inflexibility 22

Lack of willingness to take risks 22

Competing interests 26

Lack of required skills 27

Lack of a strategy across the organization 31

Budget constraints 50

Security concerns 55

% of respondents 0% 10 % 20 % 30 % 40 % 50 % 60 %

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Conclusion
The findings of the SoftServe Digital Transformation Report demonstrate
that while awareness of the need for, and an appreciation about the
advantages of, transformative technologies are high, levels of total
adoption are relatively low.

The key to driving greater levels of implementation lies in transforming

awareness into understanding. Once businesses understand how to
deliver transformative technologies, they will move forward quickly.

How SoftServe can help

Most organizations know they need to bring digital transformation
strategies on board, but many struggle to envision a path forward.
SoftServe helps modern enterprises adopt the disruptive technologies that
drive digital transformation with custom technology solutions.

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About SoftServe

With over 20 years of experience in digital software development and

consulting, SoftServe is a global leader in solving complex business
problems, creating industry disrupting technology and accelerating growth
and innovation while optimizing operational efficiency. From leading ISV
to Fortune 1000 digital enterprises, SoftServe has transformed the way
thousands of clients do business with the most innovative technologies
and processes in Big Data, Internet of Things (IoT), DevOps, digital
commerce, security, and experience design.

Visit www.softserveinc.com to learn more.

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