More than ever, CIOs are expected to work with other parts of their business to help create value through the use of digital technologies — but the business world is volatile, making long-term planning a challenge.
As part of the IDC FutureScape program, IDC Group VP Tony Olvet and research director Craig Powers offer 10 predictions for what will make a digital business strategy successful, and what challenges CIOs and other business leaders worldwide will face in 2023 and beyond.
Although they couch their predictions in business terms, they also apply to government, health care and other such endeavors, says Olvet. “We are inclusive here of commercial enterprise and public sector organizations.”
1. Spending on digital technology by organizations will grow at eight times the economy in 2023, establishing a foundation for operational excellence, competitive differentiation, and long-term growth
Although IDC expresses this prediction in terms of a multiplier, that’s perhaps the least reliable part of the forecast, and one over which IDC has little influence. IDC expects digital technology spending to grow at 16.9%, around eight times faster than current forecasts for growth in worldwide GDP in 2023. IDC doesn’t measure that, but forecasts from other sources come in at around 2%.
That figure for worldwide GDP is no certainty, though. “It might drop below that,” says Olvet. “It’s much lower than originally expected at the beginning of this year, and is definitely lower than last year.”
The core prediction here, he says, is that despite the economic challenges, “We’re seeing enterprises still pouring money into key technologies that are going to help them be operationally efficient, ready to come out of an economic slowdown in much better shape competitively to differentiate themselves.”
That spending should focus on cloud, advanced analytics, machine learning (ML) and other innovation accelerators, he says.
CIOs can’t be expected to solve problems by themselves, though. “CIOs will need the full support of the CEO and C-suite peers to ensure their digital business goals are achieved from those tech investments, especially during this period of volatility,” Olvet says.
At the same time, CIOs should also look for support from outside the enterprise. “Now’s the time to look closely at your tech suppliers to determine which of them can commit to supporting your digital goals and drive clear outcomes from IT investments,” he says.
Olvet also reminds CIOs that spending on cybersecurity should at least keep pace with, if not exceed, investment in digital initiatives as enterprises face more threats than ever.
Spending on recruitment and retention of skilled talent will be key to the success of digital initiatives, too.
2. By 2026, 40% of total revenue for G2000 organizations will be generated by digital products, services, and experiences
CEOs of the world’s largest companies tell IDC that they already make around 30% of their revenue from digital products, and they expect that proportion to grow in the years to come.
IDC identifies three dimensions along which enterprises can achieve this growth. First, they can exploit new channels: e-commerce, mobile apps, or the creation of new distribution paths such as enabling the circular economy. Second, they can adopt additional revenue models: pay-per-use, subscriptions, dynamic pricing, transaction fees, or payment for outcomes. And third, they can seek to monetize new digital assets: data, intellectual property, or virtual objects.
Developing such new revenue streams requires that CIOs keep pressing ahead with digital spending. “If you pause, you’re already behind,” he says.
Building new products may involve skills that CIOs don’t yet have on their roster. “You have to have the right mix of in-house and partners that can enable quicker development,” says Powers.
In addition, he says, there are five must-have requirements for enterprise technology architectures to speed up delivery of these digital products: micro services and APIs, integration capabilities, industrial data models, modularity, and cloud native capabilities.
3. The number of tech providers in the G500 will double by 2027, incorporating businesses that originated outside the tech industry
This is a consequence of the largest enterprises creating new business lines as they monetize their digital assets.
The sharing or sale of data will open up new revenue opportunities. “As agricultural data is shared more broadly between tech partners and farmers,” says Powers, “there are new revenue opportunities around carbon offsets and clean climate-friendly products.”
Another possibility that the petrochemical or metallurgical enterprises may be able to offer or profit from is carbon-capture-as-a-service, he says.
4. By 2024, 50% of G2000 CEOs will establish strategic personal relationships with their cloud providers to achieve quantifiable outcomes from digital business platform investments
When IDC asked CEOs who would be their most strategic technology partner in the future, over 30% pointed to their primary public cloud platform provider. “This is a shift from what we’ve seen in the past,” says Powers. “Five to 10 years ago, it would have been a consultant or on-premises ERP provider, so we’re seeing a changing of the guard.”
More digitally mature organizations are now building these relationships with cloud providers at the CEO level. It’s something suppliers have always wanted, and now CEOs want it too. “They want to be close to the outcomes of these big investments they’re making. They want to see the ROI from that,” he says.
And this interest will support CIOs, not sideline them: “CIOs can’t be on their own in driving digital technology; they need the support of a digital champion CEO,” says Powers.
5. Organizations with highly developed industry value chains on an ecosystem control plane will innovate 25% faster than other businesses by 2027
Providing visibility into social responsibility, joint ventures and resilience all along the value chain will be key.
6. By 2027, enterprises that collect, analyze, and contextualize customer data in a trustworthy way will successfully build creative business and pricing models that double customer lifetime value
Enterprises that are moving to a central customer data platform will have a head-start in measuring and managing customer lifetime value.
7. A quarter of organizations worldwide by 2024 will demonstrate responsible leadership through increasing their sustainability-related digital tech spend by more than 25% from 2022 levels
Software plays a key role in monitoring an enterprise’s sustainability — not just from an environmental point of view, but also a social one, such as ensuring employee health and wellbeing, IDC reported earlier this year.
8. With the majority of technology budgets residing in lines of business, by 2027, 30% of the expertise in the C-suite will shift from encouraging to scaling innovation, and operating digital businesses
A recent IDC survey of C-suite challenges found that organizational silos presented one of the biggest obstacles to scaling, says Olvet.
“The shift to the digital business era is also going to require a shift in expertise,” he says. “As a result, we’re going to see a shift in the people who are at the top of the organization.”
It’s also going to mean a shift in role for CIOs and their IT teams as they spend more time assessing new offerings to be used across the enterprise, and more time building and maintaining their status as a trusted advisor.
There’s a risk, as line of business leaders gain greater influence over technology, that enterprises see duplication and needless redundancy in IT spending.
To counter that, Olvet recommends that CIOs “be contagiously confident” in their team’s technology knowledge, bolstering their role as experts to be consulted, and to be “tenacious with talent,” making a persistent effort to find, support and retain staff with the necessary skills to scale technology across the enterprise.
9. By 2026, 80% of organizations will accurately quantify the value of their digital capabilities and assets (data, algorithms, and software code), and significantly improve their market valuation
Before organizations can quantify the value of their digital assets, they need to recognize they have value, and that it can be exploited or increased along the three dimensions explored in prediction 2.
10. By 2026, enterprises that did not effectively address the talent and digital skills gap in their organization will constrain revenue growth opportunities by 20% This will be one of the hardest challenges for CIOs to overcome in the next three or four years, and one they need to begin working on today.