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The COVID-19 pandemic has accelerated enterprise digital transformation by three to five years as companies build IT ecosystems to enable growth, innovation and improved customer experiences under new conditions, according to a research report published by Information Services Group (ISG).
The report finds that digital transformation, including the digitalization of existing processes and the development of new and digitally enabled ways of doing business, is one of the major trends in modern business and has increased demand for technology and service providers.
“The pandemic has forced enterprises to explore new ways to enable remote work, manage supply and demand and remain competitive,” said Prashant Kelker, partner and Americas leader, ISG Digital. “Providers are supporting transformations that involve not just technology but a company’s entire operations and organization.”
The technologies most used in digital transformations in 2021 were automation and analytics, the report says. With workforces stretched, automation saved time and effort spent on routine tasks. Analytics provided insights to better manage supply chains and assess customer experiences. Tools based on artificial intelligence or machine learning converted data from multiple sources to predict downtime and apply self-healing measures to prevent it.
Many enterprises in 2021 were focused on delivering “digital human experiences” to customers, employees and partners. In partnership with service providers, companies are now using AI to analyze customer data and create customized, hyper-personalized services for a microsegment of customers.
Several trends are helping to make digital transformation possible through joint efforts by enterprises and providers. The growth of low-code development platforms allows companies to rapidly build and modernize applications while enabling more collaboration and a better employee experience. MLOps, a management and operational framework for machine learning, allows data scientists to focus on development and reduces deployment times.
In addition, many more providers are offering outcome-based pricing, with about 10 to 15 percent of engagements using this highly committed approach. Providers are also developing more in-house tools and accelerators for digital services, as well as ready-to-deploy platforms and industry-specific tools with proven use cases.
The report evaluates the capabilities of 33 digital transformation providers to deliver services to the four archetypes:
These enterprises are legacy-heavy organizations with limited outsourcing experience. They engage with service providers selectively to implement new technologies across one business function, or cautiously across an entire business process. Their digitalization projects are focused on improving operational efficiencies and customer relations. These clients require basic expertise, assistance in digital transformation and enabling programs such as assessment and evaluation tools, workshops and training.
These organizations have successfully executed smaller digital transformation initiatives, such as cost optimization or task automation, and are eager to go further. They invest in business process/function automation, cloud and user experience efforts to achieve business outcomes.
Following earlier successes, such clients are willing to transfer greater operational responsibility to an outsourcing service provider while reducing internal IT staffing. They need comprehensive implementation support and managed services from providers to continue their digital journeys.
The extremely customer-centric enterprises in this archetype seek to implement new services to enhance customer experience or generate more revenue. They are willing to undertake massive transformational projects and prefer to work with large-scale service providers. Transformational clients need providers to deploy applications quickly while offering an end-to-end supply chain design, conceptualizing a new business model and consulting on architecture and cloud application design. They prefer providers with dedicated Agile, DevOps and API teams and expertise in technologies such as IoT, digital twin, blockchain and cybersecurity.
These enterprises are disruptors that partner with service providers to drive their innovation agendas. They seek to extend successful transformation initiatives with niche technologies such as augmented reality (AR), virtual reality (VR), edge computing and 3D printing.
Pioneering clients require robust consulting and advisory services and are willing to co-create digital solutions and form joint centers of excellence to exchange ideas and knowledge. They prefer providers that have large portfolios of digital tools, accelerators and other intellectual property and that offer outcome-based pricing.