This year has been a watershed for digital transformation. Like any strategic change, digital initiatives have traditionally been hampered by a lack of vision, urgency, budget or all three. But by making physical interaction impossible or risky, and digitisation a matter of survival, Covid-19 provided the clarity of purpose that any significant upheaval needs if it is to succeed.
As a result, the traditional barriers to digital transformation fell, especially in industries that have been slow to adapt. A study by cloud communications provider Twilio found 54% of energy companies reported that Covid-19 had removed a ‘lack of clear strategy’ as a barrier to digital adoption.
Covid-19 accelerated digital transformation strategies by an average of six years globally, says David Parry-Jones, vice president EMEA for Twilio. “The pandemic significantly accelerated the adoption of digital products and services as businesses had to quickly pivot, moving operations online and staff remote,” he says.
“Energy, healthcare, construction were among the sectors that saw the biggest change. These industries were ripe for digitisation but perhaps lacked a real impetus to do so prior to the events of this year.”
The Covid-19 IT budget bump
The urgency of the pandemic also helped many organisations find the budget for technology innovation. A survey of CIOs by Harvey Nash and KPMG found that tech investment grew at a greater rate in the early months of 2020 than at any other point in history, equal to an extra $15bn per week over this period. And 29% of global CIOs surveyed said that their IT budgets have permanently increased as a result of the pandemic.
For most organisations, however, the Covid-19 IT budget bump will be a one-off, the study suggests. Only 43% of IT leaders expect their budgets to increase next year, compared with more than half pre-pandemic.
This likely reflects muted expectations for economic conditions in the coming year. But the post-pandemic dip in IT spending is unlikely to be as steep as in the wake of the 2008 financial crisis. In 2009, fewer than 30% of CIOs expected a budget increase in the following year.
“There’s quite a lot of research that suggests that in a downturn the one thing that you should be investing in heavily is technology,” says Steve Holmes, head of law firm Baker McKenzie’s global information technology and communications practice. “There’s no doubt that by investing now in digital, in the medium and long term, that will not only position you better in the market, but it will enable you to compete better from a cost perspective.”
The Harvey Nash/KPMG survey also found that CIOs who described their organisations a ‘very’ or ‘extremely’ effective at using digital technology to advance their business strategy expect to increase technology spending more than other companies.
This means that, despite the acceleration of digital transformation in 2020, the gap between digital leaders and laggards could widen in the coming years. For companies that have fallen behind, the pressure to digitalise will only increase, says Holmes, adding that the acceleratory impact of Covid-19 will long outlive the health crisis.
“The winners from this pandemic will be those that have used the impetus of this year to accelerate their digital transformation,” he says. “If anything, the need to transform will even further increase [in the future] and for those that haven’t started yet or are not far enough down the journey, it just increases further the urgency for them to act.”
A lasting legacy
The long-term impact of 2020’s accelerated digital transformation on organisations and the global economy at large will take years to manifest. But evidence from France suggests that it has already improved organisational resilience.
A study by Banque France compared the extent to which companies were able to maintain operations during lockdowns in April and November. It found that the investments French businesses made to support remote working between lockdowns allowed them to maintain a higher proportion of operations in November.
The Covid-19 pandemic will have multiple legacies, many of them tragic. For technology leaders, this year will serve as a case study in how much can be achieved when an organisation has a clear purpose and a sense of urgency.