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What is digital transformation? 

Digital transformation is one of the most commonly over-used phrases in the IT industry, with definitions varying depending on who you ask. What everyone can agree on is that beneath the hype, the fluff, and the confusion, digital transformation drives fundamental changes in business culture.

In practice, digital transformation is the use of digital technologies to make a process more efficient or effective. The idea is to use technology to transform a service into something significantly better, not just replicate an existing service in digital form.

By: Ian Wagner

Worldwide spending on digital transformation technologies -- hardware, software and services -- hit $1.3tn in 2017, according to the tech research company IDC.  This represented a 16.8% increase over the $1.1tn spent the year prior.  IDC expects spending to almost double between now and 2021, when the total amount spent on digitalization globally will surpass $2.1tn.

In a survey of 460 execs by IT analyst Gartner, 62% said they had a management initiative or transformation program underway to make their business more digital. Just over half (54%) said their digital business objective is transformational, while 46% said the objective of their initiative is optimization.

The majority of the money spent in 2018 is going towards technologies that support new or expanded operating models as organizations seek to make their operations more effective and responsive.  This is particularly true within information services, where organizations are working to obtain and leverage data in order to secure a competitive advantage via better decisions, optimized operations, and new products and services.  Organizations are also eager to upgrade technology that facilitates “omni-channel-experience” innovations that can transform how companies communicate with customers.

According to a recent survey conducted by Grant Thornton, more than two-thirds (69%) of CFOs and senior financial executives are planning to increase their investment in technologies that speed business change, and four in 10 said they plan an increase of more than 10% in the next 12 months. Just under half said their companies' digital transformation investments are meant to help them overtake their competition through differentiation.

Spending on digital transformation hit 1.3tn in 2017...and is expected to almost double between now and 2021.

Ian Wagner is a Director in the Los Angeles office of Livingstone, with a focus on business services and media & technology. Prior to joining Livingstone, he was a Director in the corporate development and strategy group at ReachLocal and served as Vice President in the business and technology services group at UBS.  He began his career with Houlihan Lokey in 2004. 

Who is transforming what 

Executives are clearly buying into digital transformation - 46% think half of their revenue will be influenced by digital by 2020, according to analyst Forrester. The World Economic Forum suggests the value of digital transformation for both society and industry could reach $100 trillion by 2025.

The industries investing the most in digital transformation in 2018 are discrete manufacturing ($214bn), professional services ($133bn), process manufacturing ($132bn), and transportation ($127bn). However, industries that can anticipate the fastest digital transformation spending growth over the next five-year forecast are construction, retail and healthcare providers. The reality is investments in new technology applications will be important to all industries.

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© Copyright 2018

Ian Wagner

Director | Los Angeles

Specialties:  M&A Sectors: Business Services, Media & Technology

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