One of the buzzwords of the century has been digital transformation. Some have wanted this to just be a short phase. “Let’s let digital transformation have its 15 minutes of fame, then we can move on and forget about it. We’ll buy a couple of tools, hire some IT people and focus on the next initiative.” If it was that easy, the term digital transformation wouldn’t have been trending across all industries for the last twenty or thirty years. Digital transformation is, in fact, not quick or easy but rather long and arduous.
If there was any ray of somewhat positive light during the COVID-19 pandemic, it’s the test that it brought on each organization’s digital transformation journey. Stakeholders and executives can tick all the boxes they want on their digital transformation initiative checklist. Still, if they aren’t practicing the actual changes, they can find themselves following behind their peers and competitors. This became more obvious in the past year amidst the backdrop of the pandemic.
So, where are we now? As you know, digital transformation isn’t limited to a single continent or industry. In the same vein, the pandemic did not adhere to any borders or markets. It affected everyone and everything, with no regard to nationality, employment, or where you are in your digital transformation journey. In the rest of this post, we will discuss the effects of the COVID-19 pandemic on different industries' digital transformation journeys.
So what is this digital transformation thing? If you aren’t familiar by now, this section is for you.
Digital transformation is the integration of digital tools and practices into all areas of a business, regardless of their industry. It helps fundamentally change how organizations deliver value to their customers. This is the operational and functional side of digital transformation that we are all most familiar with.
The second part of digital transformation is much more difficult and abstract. It is within the organization’s culture. From enterpriseproject.com, “Digital transformation requires an organization's culture to continuously challenge the status quo, experiment, and get comfortable with failure.” Within this cultural change, most organizations start seeing the results of their hard work in their digital transformation initiative.
COVID multiplied this result, no matter where you were on your digital transformation journey. If an organization was lagging behind and failing to match its digital transformation goals, the pandemic hit them hard, and the possibilities of continuing business remotely may have seemed dire. If an organization was well along in its digital transformation journey, it might have seen business continue as usual or as close to usual as possible.
Most of the research referenced in this post comes from an IDG survey conducted with over 2000 IT leaders located in 14 countries across five industries. The survey was meant to provide IT leaders with a means to compare where their team stands vs. other similar organizations. The survey was 20 questions long and completed in October or November of 2020. The leaders surveyed had to have at least some portion of their IT environment in the public cloud. They also had to work in organizations of over 500 people involved in one of the following industries: financial services, healthcare, manufacturing, telecom/media, and retail/consumer goods. The countries surveyed and their regions were: North America (USA, Canada), Latin America (Brazil, Mexico), EMEA (France, Germany, UK), and JAPAC (Australia, China, India, Indonesia, Japan, Singapore, South Korea).
Now that we have some background let’s look at how IT initiatives fared during the 2020 COVID-19 pandemic.
Remote work amidst the pandemic
For introverts, remote work is the dream. You can stay at home away from people all day and get your work done on your own time. Even for extroverts, remote work can be great as you can choose who you want to work around or communicate at any given moment. We often think of the end-user costs or benefits for remote work, but what about the teams that enable us to work remotely? Your internal IT teams are integral to this.
Depending on where your organization is in its digital transformation journey, the IT team could have helped ease the burden of working remotely. According to the survey, 59% of organizations started or accelerated their remote work initiatives during the pandemic. We could conclude that the pandemic forced their hand in this initiative, making them embrace remote work potentially before they were ready.
We can consider this the “low-hanging fruit” of the digital transformation initiatives in 2020. Obviously, companies needed people to work remotely since it was unsafe for them to work together. Across all industries surveyed, enabling remote work was the top initiative started or accelerated due to COVID. In addition to this, only 3% of all surveyed organizations delayed or canceled their initiative to improve remote working conditions.
Move to the multi-cloud/hybrid-cloud
The second top initiative of IT leaders is moving at least some operations to the cloud. No matter where you are in your digital transformation journey, 80% of organizations surveyed had migrated at least one application to the cloud. The pandemic also caused 35% of firms to accelerate or start their move to the cloud. This could have been as simple as starting to use Google Docs or as complicated as migrating an entire workflow and workspace to Google. It’s not surprising, then, to see that only 11% canceled or delayed their move to the cloud. As more and more employees work remotely, they rely on cloud services to keep them going.
The approach to cloud-based technology will vary from industry to industry. Historically, the reliance on a single cloud provider has been risky. Organizations don’t want to “put all their eggs in one basket” because if something bad happens, like an outage, all their services could be affected. Recently, the multi-cloud or hybrid-cloud strategy has been shown to mitigate this risk. With the continuous development of cross-cloud integrations, organizations no longer need to worry about having all their tools on one platform to ensure ease of use. Apps and adapters are used to transfer information from system to system, allowing your organization to use the best capabilities from each cloud vendor.
Of course, with great capability comes great responsibility. That’s the phrase, right? Managing multiple cloud tools is the difficult part. IDC predicts that by 2023 more than 70% of companies will use multi-cloud management platform capabilities. Finding the right balance between capabilities and ease of management in the multi-cloud approach will be vital.
Data analysis and intelligence
Another massive aspect of the acceleration of digital transformation during the pandemic was the investment in data analytics capabilities. Organizations that put a high value on data analytics in their digital transformation journeys felt instant relief when the pandemic hit. They were able to adjust their strategies quickly in response to the change in demand. Thirty-two percent of firms accelerated or introduced the use of data analytics to their businesses during the pandemic, while only 14% reduced or canceled this initiative. Big data analysis was a must-have or major consideration for 77% of businesses surveyed when looking for a cloud provider.
So what can we do with data analysis, and why is it important in digital transformation? Data is critical to inform decision-making. Many organizations can gather the data, but they lack the insights to know what to do. A good data analytics tool will help you get to the heart of your customers' wants and provide actions based on the insights. It will also speed up product development and offer you new revenue streams by bringing data applications to market.
Before the pandemic, IT leaders identified data analytics as the primary driver for IT investment in the year ahead. The pandemic obviously changed this a bit, so the need for analytics is still there. If the data is ready and available, then why can’t humans just dig in and analyze? More and more AI and machine learning are playing their role. The more digital forward organizations are accelerating ahead of their peers with the adoption of AI, machine learning, and the internet of things (IoT). Forty-four percent of digital-forward companies use these technologies, while only 24% of digital conservative companies are doing so.
Note: Digital-forward organizations are those that are implementing or have implemented digital transformation strategies with digitally-conservative organizations that have not yet implemented those strategies.
Security enhancements and risk mitigation
When organizations started moving to the cloud ten to twenty years ago, one of the first major concerns was security. In the IDG survey, 84% of respondents said that the cloud was as secure or more secure than their on-premise solution. While that’s not 100%, it still shows a significant shift in the thought process behind security enhancements and risk mitigation.
The pandemic threw us a nice curveball for security. Seventy-three percent of IT leaders said that the pandemic would shape their security strategy for the next five years. At the beginning of the pandemic, 61% said they felt increased security risk because of work from home initiatives. Employees working more from different locations on different networks posed a threat to the stable environments IT administrators had come to know.
One of the top barriers to innovation in organizations is security. Therefore IT leaders need to continue to balance between providing secure services and inhibiting business operations. Cloud providers such as Google Workplace can help with this. Google’s team uses a “zero trust” access approach called BeyondCorp, which allows their employees to work across any network and device without using a client-side VPN. Security similar to this is built into all their products and constantly updated to thwart even the most sophisticated threats.
Barriers to significant digital transformation
Different companies across different industries and locations are at different stages in their digital transformation journey. The commonality in all of this is that they all struggle with the same barriers to moving forward in their innovation. Let’s now talk about a few of the most popular barriers, according to the IT leaders surveyed.
The most glaring barrier to innovation is the insufficient IT and developer skillsets. This barrier persists across all industries as the number one barrier to innovation. It also ranks as the top barrier in JAPAC and EMEA regions. This means that these regions see a shortage of people to fill the right roles for innovation in all sectors.
In NORTHAM and LATAM regions, the top barrier to innovation is security risks and concerns. Refer to our last section for more details about security in cloud technologies.
Some of the other barriers to entry mentioned are internal processes and governance structure, legacy systems and technologies, and the inability to show ROI.
Continue on your digital transformation journey
Overall the pandemic has had significant adverse effects on organization’s IT initiatives. These initiatives were meant to enable digital transformation across the organization, but in fact, the impediment of these initiatives has slowed things for almost everyone.
The organizations that are digital-forward in implementing their digital transformation have continued business as (mostly) usual. They prepared for this without knowing the pandemic was coming. They had at least one of their services through the cloud already and were a significant way through their digital transformation. Having the tools and teams in place already helps them adapt to the new working conditions. While they still have some barriers to innovation and inevitably struggled with other aspects of remote work, overall, they stood strong through the pandemic and didn’t need to hastily put together contingency plans.
The organizations that are digitally conservative struggled more during the pandemic. They fell behind because they didn’t have a plan for adapting to remote working conditions and weren’t ready to confront the potential security risks. These organizations might not have regularly had video conference meetings nor conferred normally over a chat tool. All of their communication before the pandemic might have happened face to face.
The good news for all teams is that tools like Google Workspace are available and almost instantly effective upon purchase. While the configuration and setup can take some time, the out-of-the-box turnkey solutions still provide significant value.
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