​Enterprises “flip the switch” as digital transformation takes it toll

“In the next two years, two-thirds of Global 2000 CEOs will put digital transformation at the centre of their growth and profitability strategies.”

In 2007, IDC identified the 3rd Platform - built on the technology pillars of mobile computing, cloud services, big data and analytics, and social networking - as the foundation for the IT industry's future innovation and growth.

Since then, the rapid adoption of 3rd Platform technologies has moved into the “Innovation Stage” - an explosion of innovation and transformation on top of the 3rd Platform's foundation.

Consequently, IDC predicts that this phase will accelerate over the next three to five years as enterprises commit to digital transformation (DX) on a massive scale, leading to the emergence of the "DX economy."

“The disruptive impact of digital transformation is about to be felt in every industry as enterprises 'flip the switch' and massively scale up their DX initiatives to secure a leadership role in the DX economy,” says Frank Gens, Senior Vice President and Chief Analyst, IDC.

“In the next two years, two-thirds of Global 2000 CEOs will put DX at the centre of their growth and profitability strategies.

“By the end of this decade, IDC predicts that the percentage of enterprises with advanced DX strategies and implementations will more than double.”

In outlining its forecasts for 2016 and beyond, IDC predicts that the scale-up of digital business strategies will drive more than half of enterprise IT spending within the next 24 months, rising to 60 percent by 2020.

Mastery of 3rd Platform technologies will be table stakes for successfully executing DX business initiatives and "Cloud First" will become the new mantra for enterprise IT.

Virtually none of the other 3rd Platform technologies or major DX initiatives is possible in scaled-up implementations without the Cloud as the foundation.

By 2020, IDC predicts that enterprise spending on cloud services, the hardware and software to support cloud services, and the services for implementing and managing cloud services will exceed $500 billion, more than three times what it is today.

The DX economy - operating at scale - will be driven primarily by code.

Enterprises' ability to grow and compete will increasingly depend on their digital "innovation capacity": the size and talent of their software development teams.

In this regard, every company will increasingly be a software company. By 2018, IDC predicts that enterprises pursuing DX initiatives will more than double the size of their developer resources, focusing those developers almost entirely on DX initiatives.


Data will be equally important to the DX economy - without large volumes of quality data "fuelling" innovation, the process will stall.

IDC believes that success in the DX economy will depend on the ability to build robust "data pipelines" that flow both in and out of the enterprise.

By 2018, IDC predicts that the flow of external data into organisations with advanced DX strategies will increase by as much as a factor of five while high-end DX performers will increase their "data out" by 500-fold or more.

Internet of Things

The Internet of Things (IoT) will be one of the most fertile areas for DX.

By 2018, IDC predicts the number devices on the IoT will more than double to 22 billion and drive the development of 200,000 new apps and solutions that take advantage of them.

These devices and solutions have the potential to redefine competitive advantage in virtually every industry - IDC predicts the most active IoT development will cluster around the manufacturing, transportation, retail, and healthcare industries.

“Cognitive systems are already providing critical assistance to organisations dealing with the tsunami of data,” Gens adds.

“Spending on cognitive software platforms is forecast surpass $1 billion this year and will scale up dramatically over the next three years.”

As a result, IDC predicts that more 50 percent of developer teams - up from less than 1 percent today - will embed cognitive services into their apps by 2018 to leverage their data pipelines and to improve customer personalisation.

In the expanding DX economy, Gens believes that industry cloud platform and community participation will become increasingly vital to scale up digital supply chains and digital distribution channels by as much as 100- to 1000-fold.

By 2018, IDC predicts that more than 50 percent of large enterprises - and more than 80 percent of enterprises with advanced DX strategies - will create and/or partner with industry cloud platforms to scale up their digital supply and distribution networks.


IDC predicts that as the number of industry clouds will reach 500 or more by 2018, up from today's 100-plus.

As the DX economy compresses pricing in many sectors, IDC predicts that 60 percent of B2B and 80 percent of B2C enterprises will overhaul their "digital front doors" - and the customer engagement systems behind them - to support 1,000 to 10,000 times more customers and customer touchpoints than they do today.

At the same time, they will have to deliver dramatically more personalised customer service.

As such, IDC predicts that Customer/Intimacy and Scale will be the biggest, most complex enterprise-wide DX initiative that organisations will have to face, requiring a fundamental cultural and operational transformation.

Finally, the DX economy will take its toll on the IT industry itself.

By 2020, IDC predicts that nearly a third of today's IT suppliers will be acquired, merged, downsized, or significantly repositioned.

In this environment, enterprises will have to constantly monitor and assess the solutions offered by their suppliers and partners and be prepared to realign these relationships as needed.

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