A recurring theme for investor strategy presentations in most industries is how enterprises are transforming themselves to deal with the disruptive effects of new technologies in the digitally connected world. To enable this, "digital transformation" has become a core imperative, as enterprises look to adapt business models, processes, platforms, and people. With digital at the heart of this transformation, it might seem that it should inherently drive technology investment, but given the reality of cost pressures in most sectors, how is digital transformation actually driving ICT spend, and what will be the enterprise vendor opportunities in 2019?
Ovum’s 2018/19 ICT Enterprise Insights study (launched this October) looked at this question. Based on primary interviews with senior ICT decision-makers at more than 6,600 enterprises across the world (covering more than 60 countries), it examined 2019 ICT budgets and investment priorities from both horizontal-technology and industry-specific perspectives.
At the top level, ICT budget growth does look strong for 2019, with close to three-quarters (73%) of enterprises planning to increase ICT spending over their 2018 spend. While this is not a dramatic shift in one sense (the figure was 59% for 2018), the proportion of institutions that are looking to significantly increase spend (over 6% budget growth) expanded notably from 12% in 2018 to 31% in 2019. Close to one-third of enterprises are therefore driving ICT spend growth well beyond average expected revenue growth.
At a regional level, the trend to higher ICT spend growth in 2019 is largely global, with the South and Central Asia region including India expecting particularly strong growth. Here the proportion of enterprises expecting significant spend growth shifted from 13% in 2018 to 53% for 2019, with the rest of Asia also growing strongly. Weaker growth is expected by enterprises in Eastern Europe and Africa, although the overall picture is still positive in these regions.
At an industry level, the financial services sector will be one of the strongest growth verticals, with close to 40% or more of corporate banks, financial markets institutions, and retail banks looking to significantly increase ICT spend. By contrast, government, K12 education, and transport and logistics will have weak growth compared to other industries.
However, for most enterprises, this growth is being heavily driven by digital transformation. The program found that creation of digital capability will be the top technology driver for all enterprises in 2019 and is the dominant driver for enterprises that are significantly increasing their ICT budgets. By contrast, enterprises that are not increasing ICT spend tend have security and privacy as the dominant ICT driver, with these requirements seen as essential but not a strategic imperative to drive spend investment.
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