Current State of Digital Transformation

Thanks, in large part, to COVID-19, digital transformation has finally become an urgent priority for all businesses – regardless of size, sector, or strategic goals.

But the game has changed. Digital transformation is now embedded in the business strategy. Data strategies have matured. And, successful companies have upped the “transformation ante,” making it harder to compete in the digital landscape.

In this article, we’ll focus on the trends and technologies shaping digital transformation in 2022 – and beyond. We’ll discuss long-time trends (and how they’re evolving), disruptions on the horizon, and what it takes to achieve DX success according to today’s standards.

Overview: Where Digital Transformation Stands Today

In 2022, you’ll find no shortage of people who say “digital transformation is dead.”

Arguably, there’s some level of buzzword fatigue at play. For example, this Next Web piece rails against the term “digital transformation,” but talks about “reimagining industries” to create a competitive advantage.

Or – maybe some critics misunderstand the meaning of DX – interpreting “transformation” as a passing trend, rather than an ongoing cycle of improvements and upgrades.

No longer a buzzword, digital transformation isn’t just here to stay – it’s become a means of survival.

A recent IBM report found that 60% of companies accelerated DX investments due to the coronavirus pandemic and 55% permanently updated their strategies to more aggressively pursue transformation initiatives that support long-term flexibility and agility.

According to BCG, the top 35% of leading companies are at a serious advantage. Analysts say we’re in the midst of a major “digital retooling,” and companies with a strong digital foundation are investing in transformation and innovation at scale.

What’s more, those investments span all core business processes – sales, service, marketing, IT, the C-suite, and so on. Savvy business leaders understand that you won’t get far focusing on one business unit or process at a time. Instead, transformations need to happen on a holistic level.

At the same time, the gulf between digital leaders and laggards is getting wider. According to Accenture, tech leaders have moved further ahead of the pack and are now growing, on average, 5x faster than their laggard counterparts.

During the pandemic, leaders scaled up investments in AI, cloud, and automation, allowing them to adapt to new conditions and reallocate IT budgets toward innovation and growth. The laggards, on the other hand, were investing in initial cloud migrations. Or, they were scrambling to support remote work. It’s easy to see how these digital disparities led to this massive divide – the problem is, the laggards will have a harder time catching up.

It’s also important to understand the shift in mindset that’s happening right now – the general sense of pessimism that’s currently sweeping the globe.

There’s this sort of reluctance to pursue digital transformation – due to costs or a perceived lack of internal talent. In one 2021 report, nearly 75% of CEOs said that they believe their company needs to be a “digitally transformed organization.” Yet only 17% said they felt their talent was actually prepared to achieve critical transformation goals.

It’s also worth noting that some organizations aren’t sure if now is a good time to invest in transformation initiatives. There’s too much uncertainty in the air – the post-COVID recovery, inflation, the war in Ukraine, ongoing supply chain issues, the list goes on.

Accenture’s 2022 Fjord Trends report says we’ve reached the end of “abundance thinking.” Between supply chain problems, labor shortages, climate change, and even austerity laws, the firm advises orgs to start designing business models with scarcity in mind.

It’s not as bleak as it sounds. It’s more about being more intentional about, say, the materials you use and where they come from. Or, making sure that you don’t waste resources on developing a new product until there’s enough data to prove there’s a legitimate need.

M&A Activity Continues to Heat Up

So, one of the ways companies are coping with the pressures of digital transformation is by acquiring companies that already have the specialized technologies they need.

Essentially, companies with enough resources can bypass the time, expense, and effort it takes to develop innovative solutions – and as a result, start offering new products and services to their customers ASAP.

Splunk predicts an explosion in M&A activity through 2022 and beyond (something of a post-COVID “bonanza”). Analysts emphasize that the COVID “downturn” was unique, in that, unlike most economic recessions, there wasn’t a dip in the stock market. But –

The idea is, companies that were able to invest in acquisitions during the pandemic downturn are emerging in the recovery stronger and more agile than ever. Expect to see a lot more consolidation – though, keep in mind, private valuations are currently very high.

Ultimately, the fact that the pandemic created this opportunity for larger, better-funded organizations to access innovative solutions – and expand at the same time – makes it harder for small companies and digital laggards to catch up to DX leaders. And long term, that could widen the gap between them.

Cloud Strategies Are Evolving

Cloud isn’t exactly new at this point. Sure, many orgs are still working on migration post-COVID – but in those cases, it’s a matter of playing catch-up, not embracing the next big thing.

What has changed, however, is that cloud computing is evolving, and by extension, that means cloud strategies are changing, too.

Forrester predicts enterprises will move away from hyperscalers (AWS, Google) in favor of smaller, industry-specific cloud service providers (CSPs) that address specific competitive challenges.

A November 2021 piece from TechRepublic points out how changing regulations and new geopolitical frictions are forcing strategies to evolve, as are antitrust reforms Industry-specific clouds, more automation in data centers, and increased container adoption. In other words, cloud strategies are becoming increasingly complex.

On the one hand, AI and robotic process automation (RPA) are enabling organizations to create more efficient and secure cloud environments. But – on the other, companies are increasingly expected to meet data privacy and regulatory requirements across multiple countries.

It’s worth noting that businesses are looking beyond the cloud, too.

Splunk is currently betting on edge computing – calling it the next “multi-cloud.” Technically, it’s already here – we’re just not quite at the point where industrial use cases have hit the mainstream.

Researchers predict big buzz throughout 2022, but anticipate edge will live up to the hype.
As it stands, cloud providers are investing in edge architecture, and soon, we’ll see companies embracing it as a natural extension of their digital environment.

Finally, current market forces are shaping major changes in the edge, IoT, and networking.
Forrester analysts predict edge and IoT will drive new solutions aimed at lowering emissions and driving greater energy efficiency and improve resource management. They also expect chip shortage to fuel IoT growth and that satellite internet will not only bridge the digital divide but emerge as a challenger for 5G.

Building a Better Version of Hybrid Work for the Future

COVID taught us that working from home (or collaborating with distributed teams) doesn’t mean we’re stuck with the norms, processes, and tech that defined the pre-COVID era. According to a CIO article, it’s not just about technology. Enabling hybrid/remote work requires companies to redefine internal culture, business processes, even HR policies.

There’s currently a big push to make remote and hybrid work better. We’ve seen this with Microsoft, which has invested heavily in several solutions that make it easier to work with colleagues and customers remotely.

This shift is evident if you look at recent improvements to the Teams integration, as well as recently-released collaboration features and tighter integration across MS apps and ISV solutions.

Final Thoughts

Digital transformation is a reality of doing business in the digital age and those who dismiss it as a passing trend will get left behind.

Today’s companies need to redefine existing assets, strategies, and mindsets to enable resilience, agility, and long-term growth. It requires a lot of upfront work (not to mention talent and financial resources) – but that initial investment can set you up for a more sustainable approach to DX.

Instead of approaching transformation as a once-in-a-decade sprint, once the foundation’s in place, you can shift to an agile DX strategy – an ongoing cycle of making incremental improvements.

Velosio’s Microsoft experts can help you navigate the challenges of digital transformation right now – whether you’re a leader looking to take on the next big challenge or you’ve got some catching up to do.

Ready to get started on your Digital Transformation? Read more about the process here.