Study finds ‘digital business’ is still just a dream for many

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For all the talk about digital transformation, it appears there’s little actual transforming going on.

A new survey of 1,000 companies by The Enterprise Strategy Group Inc., and underwritten by Dell EMC, finds that only about 5 percent of organizations have fully embraced all the elements of information technology transformation that are needed to become a digital business. These include integrating IT and business strategy, investing in more agile and flexible infrastructure, and using IT as a source of new business opportunity.

About 12 percent of companies have barely started the transformation process, or show no interest in it. The remaining 83 percent are split evenly between those that are making progress but have invested little in new technologies and those that have deployed a moderate amount of new technology but are still figuring out how to make it all work.

Digital transformation has many definitions, and for the purposes of this report, authors John McKnight and Adam DeMattia used three criteria:

  • adoption of new technologies such as software defined infrastructure;
  • process modernization, including self-service provisioning, DevOps and internal clouds; and
  • organizational alignment between IT and business leadership.

Of the 5 percent of organizations that were deemed most mature, a plurality are in the IT, consumer goods or financial services business, McKnight said. However, several other industries are also represented. “There weren’t a lot of industries that are further along the curve than others,” DeMattia said.

One area in which there is broad agreement is the importance of digital transformation. Asked if IT transformation is essential for future competitiveness, 71 percent of total respondents agree or strongly agree. Among the companies that are still stuck in low gear, however, agreement was only 14 percent. “Less sophisticated organizations don’t buy in as much to this transformation journey,” McKnight said.

Cutting maintenance

What is consistent among high performers is that they spend more on new projects as opposed to maintenance. Whereas laggards spend about two-thirds of their IT budget keeping legacy systems going, leaders spend only about half. While the study found no significant variations in total spending, transformational leaders were able to free up about 40 percent more of their existing budget for new projects.

One leading indicator of transformational excellence is cooperation between IT and the business, McKnight said. “It’s a virtuous circle. Organizations that are doing better transformation are more aligned, which leads to a better shared understanding of goals and outcomes, which helps improve those desired outcomes, which leads to better performance delivering on outcomes,” he said. “These organizations have IT as a central part of the business.”

Several other business outcomes distinguish the leaders from the laggards. Companies that are far along the transformation curve are twice as likely as the least mature organizations to exceed revenue goals, with 96 percent saying they beat financial targets last year. They’re also eight times more likely to say the business and IT sides have a “highly cooperative relationship” and they’re seven times as likely to view IT as a point of competitive differentiation compared to their pokey counterparts.

Adoption of modern infrastructure technologies and standards is high among the respondents in general, with 54 percent reporting that they already use converged or hyper-converged infrastructure, 58 percent saying they use scale-out storage and exactly half saying they’re committed to software-defined infrastructure as a long-term strategy.

Nearly two-thirds say they have made “excellent” or “acceptable” progress toward giving end users the same kind of resource-provisioning capability internally that they would get from a public cloud provider, and 43 percent claim “extensive” or “good” adoption of DevOps. The survey included respondents from the U.S., Brazil, the United Kingdom, Germany, France, China, Japan and Australia, but there were no significant regional variances, researchers said.

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