NetSuite: Why A/NZ businesses need to respond faster to digitalisation…

A worrying 26 per cent of Australian executives believe their industry is rapidly changing, representing a significant increase from 13 per cent in 2010.

Despite this, executives across both Australia and New Zealand are more complacent about the need to adapt their organisation than in other countries, with only 13 per cent believing change needs to happen much faster than in the past, compared with 22 per cent globally.

According to recent Frost and Sullivan findings, commissioned by NetSuite, the biggest trends driving industry change are digitalisation, new disruptive competitors, servitisation and new business models.

Australian organisations in particular are responding by adopting cloud computing for its greater adaptability to rapid industry transformation – 63 per cent of Software-as-a-Service (SaaS) users indicated that Cloud has helped them react more effectively and 72 per cent have gained competitive advantage.

"The pace of transformation in most, if not all, industry sectors in Australia is very high and appears to be accelerating," says Mark Dougan, managing director of Australia and New Zealand, Frost & Sullivan.

"The introduction of new business models as a result of the digital revolution has helped accelerate Cloud adoption.

“Coupled with shifting economic conditions, accelerated time to value and the need to innovate rapidly, businesses simply need to be more efficient and adapt at a much faster rate than ever before."

Digitalisation – the leading factor driving industry transformation

According to the study, digitalisation – the use of digital channels to do business, sell to customers, or transact with suppliers - was identified as the top trend driving change across the region, particularly in the media, entertainment and retail sectors.

Despite being the leading driver, only 30 per cent of organisations on average allow customers to transact with them online.

This does differ greatly by sector, however, with ICT (52 per cent), manufacturing (48 per cent) and retail (38 per cent) leading online use, but adoption lags in many sectors, particularly financial services (20 per cent).

Many organisations identify that one of their biggest threats is the entry of new, disruptive competitors with new business models, which are forcing change in the way that businesses interact with customers.

This includes the emergence of competitors using low-cost models, for example, or those using online only distribution channels.

However, only 22 per cent of ANZ businesses say that they are likely to change their distribution model in the next five years, by far the lowest of all countries surveyed.

While much less developed Down Under than elsewhere, servitisation is another significant driver of change worth noting.

As a result many businesses are developing the capabilities they need to provide services and solutions that supplement their traditional product offerings. Across A/NZ, less than 30 percent of manufacturers, for example, are servitised, compared to almost 60 per cent in the U.S. and 50 per cent in Singapore.

Need for greater adaptability driving cloud adoption

Frost and Sullivan believes that cloud computing is both a contributor to industry transformation, as well as a necessary response for organisations to survive.

The study revealed that the main reasons for adopting SaaS are evolving over time, with cost savings and ease of upgrading becoming less important than they were four years ago.

Greater adaptability to industry change is now a main driver of SaaS adoption Down Under, according to 34 percent of surveyed organisations, which is a significant increase from 10 percent in 2010.

According to the study, 63 per cent of SaaS users indicated that it has helped them respond more effectively to changing market conditions and 72 per cent say that it has given them a source of competitive advantage.

As well as lower costs, the main benefits achieved have been improved speed to market with new products or services (20 per cent) and the ability to enter new global markets (20 per cent).

"Given industries are changing so quickly in such an unpredictable way, companies need to have the ability to adapt extremely quickly to launch new products and services, come up with new revenue or business models and access new geographical markets," Dougan adds.

"That adaptability is being enabled by cloud computing – it has become a necessary response to the rapid pace of transformation."

The study indicated that the highest adopters of SaaS are the Australian financial services, ICT and government sectors, with mining, healthcare and construction being the lowest.

Forty percent of organisations overall are using SaaS for at least one of their main business applications, with CRM being the most widely accessed (50 per cent), followed by e-commerce (48 percent) and finance and accounting (47 per cent).

"The reality of fast-changing market conditions is that businesses need to stay ahead to generate future revenue and remain relevant," adds Mark Troselj, managing director of APAC and Japan, NetSuite.

"We have seen the biggest shift in Cloud computing in Australia over the last two years, as businesses of all sizes have moved beyond initial adoption to using cloud solutions to drive real business transformation.

“Cloud provides greater flexibility, speed and agility for businesses to move quickly with the market as it changes, enabling them to easily achieve their broader growth strategies.

“This certainly can't be achieved with heavily customised and costly on-premise ERP solutions."