Annual Report
State of Digital Transformation 2024
Bridging the Digital Divide
State of Digital Transformation
Navigating the Divide Between Laggards and lEADERS
In today’s rapidly evolving business landscape, the term “digital transformation” (DX) can become a buzzword, devoid of meaning. It refers to the integration of digital technology into all aspects of an organization, fundamentally changing the way it operates and delivers value to customers. This transformation is not just a technological shift; it’s a paradigm that’s dividing companies into two distinct categories: digital leaders and digital laggards.
Our 2024 State of Digital Transformation report explores the key differences between these two groups and highlights how the gap between them is widening, with digital leaders gaining a significant competitive advantage.
Many organizations delayed or canceled technology projects in response to the threat of a looming recession. In the aftermath of economic uncertainty, there’s a compelling narrative unfolding, as technology spending returns to premarket downturn levels. Companies are investing in digital transformation services more than ever, aiming to bolster their customer experiences and drive projects to replace or upgrade legacy IT systems.
In gearing up for 2024, technology and business leaders are urged to strategically allocate resources for optimal ROI and to position their companies for future growth. With our 2024 State of Digital Transformation report, let’s dive into the details.
Prioritize Business Transformation Efforts
Our research examines the characteristics of digital leaders to help companies make informed decisions, adapt strategies and accelerate business transformation.
Navigating Economic Uncertainty
Digital Leaders Thrive and Transform
In the ever-evolving business landscape, the imperative need for digital transformation has become more pronounced than ever as organizations navigate the complex interplay of technology evolution and strategy. But talk of a looming recession and economic uncertainty led many organizations to delay or defer pivotal digital projects in 2023. However, amidst these challenges, a discernible shift is underway. Spending projections for 2024 indicate a resurgence in digital business transformation investments, illuminating a collective recognition of its indispensable role in fostering resilience and agility. Our research reveals a competitive dichotomy, as digital leaders are poised not only to rebound but also to outspend their lagging counterparts, underscoring the pivotal role of visionary digital strategies and the widening divide between digital leaders and laggards.
72% of digital leaders expect to increase spending in 2024.
Key Takeaway
Be Bold and Act Now
Organizations have an ambitious agenda in 2024. There may not be enough resources to allocate to every priority. Business and technology leaders must clearly articulate the business outcomes and demonstrate the return on investment to sustain their agenda.
Accelerating Spending Plans
Spending plans for 2024 signal that organizations are ready to move forward on technology projects that were delayed or deprioritized in response to economic uncertainty.
However, inflationary pressures may limit spending, as around a third of organizations anticipate significant impacts on technology expenditures due to IT cost increases. Challenges may arise in meeting expected returns on digital transformation investments, with DX leaders expressing twice the confidence compared with DX laggards. Additionally, there’s a notable disparity between C-suite expectations, which anticipate quicker returns when compared with employee perspectives on the timetable for recapturing digital business transformation costs.
1 in 3 organizations expect to spend on average $10 million or more per digital initiative in 2024.
Survey on the State of Digital Transformation, TEKsystems, 2024
Fig. 2.1DX Investments (Per Initiative)
Fig. 2.2Technology Spend Projections
Fig. 2.3Greatest Impact on IT Spending
Fig. 2.4ROI Expectations
C-suite members are over two times more likely to expect ROI in six months or less than line-level managers.
Survey on the State of Digital Transformation, TEKsystems, 2024
Fig. 2.5Confidence That DX Investments Will Meet the Expected ROI
Transforming in the Digital Era
The goals of any digital transformation plan must be closely aligned with the business strategy. First and foremost, businesses are driven to improve the customer experience by creating user-friendly digital interfaces, personalizing services and optimizing customer journeys.
Next, upgrading legacy technology systems is essential to ensure the company’s IT infrastructure is efficient, secure and adaptable to evolving needs. Simultaneously, efforts are directed toward reducing operational inefficiency through automation and improved data management.
Employee productivity is also a significant focus, empowering staff with tools and technologies that enhance their efficiency and effectiveness. Finally, digital transformation seeks to transform existing business processes, making them more agile and responsive to the ever-changing demands of the market.
Fig. 2.6Top DX Goals
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202420232022Top DX Goals
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35%40%46%Improve customer experience and engagement.
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34%35%35%Replace or upgrade legacy IT systems.
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31%38%36%Reduce operational inefficiency.
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30%**Enhance employee performance/productivity.
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29%38%35%Transform existing business processes.
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25%31%26%Increase/achieve innovation.
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25%29%23%Bolster cybersecurity.
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24%**Gain competitive advantage.
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18%24%18%Improve employee experience.
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17%22%23%Increase speed to market of existing products or services.
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17%21%22%Introduce new products or services.
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16%23%23%Introduce new business models / revenue streams.
Key Takeaway
Putting People First
35% of companies see improving customer experience and engagement as a main goal for 2024.
Key Takeaway
Thriving in Complexity
The complexity of the current environment and having a siloed mindset/behavior is seen as a top challenge for companies when it comes to their digital transformation efforts.
Navigating the Digital Evolution
DX efforts are filled with challenges that organizations must grapple with strategically. The multifaceted hurdles that accompany the journey toward digital evolution can slow progress, decrease competitive advantage and widen the gap between digital leaders and laggards.
As companies seek to harness the potential of new technologies and realize the value of transforming the enterprise, they must confront various obstacles and navigate increasingly complex technical and business environments.
Additionally, gaps in technical expertise and high or unforeseen costs associated with digital transformation seem to cast a shadow of problems with implementing DX. However, senior-level support has also grown more favorable, given the focus on investing.
Fig. 2.7Top DX Challenges
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202420232022Top Challenges
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32%31%38%Complexity of current environment / siloed mindset and behaviors
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27%22%24%Gaps in technical talent
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26%22%23%High or unforeseen costs associated with digital transformation
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25%25%26%Creation of a culture of continuous learning / workforce upskilling or reskilling
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24%25%26%Change management and implementation complications
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24%18%*Economic uncertainty affecting budgets
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23%22%23%Security concerns and compliance constraints
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22%21%20%Operating-model transformation complications (current business process are too rigid)
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22%19%16%Lack of internal alignment (digital vs. traditional business)
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21%20%17%Too many competing tech priorities
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20%21%23%Alignment of digital transformation with business objectives/KPIs
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20%17%*Lack of strategy around digital initiatives
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13%21%19%Lack of senior-level support
Embracing Technology as a Strategic Imperative
The symbiotic relationship between technology and business success is undeniable within the digital ecosystem. Recognizing that technology is not merely a differentiator but a fundamental component of strategic planning is crucial. As organizations navigate the realm of digital transformation, a well-thought-out digital transformation plan is imperative, transcending mere deployment.
Success lies in defining human-centric outcomes, seamlessly powered by technology, as a means to transform business dynamics and fortify market standing. Notably, digital leaders distinguish themselves by mapping out a strategy and establishing clear metrics that gauge the effectiveness of their technology investments in fostering growth, customer retention and long-term profitability.
The Digital Business Transformation Toolset:
People, Process and Technology
The dynamic evolution of technologies, business models and work methodologies profoundly influences the foundation of any enterprise—their workforce. While digital transformation trends introduce new technologies, the absence of adept talent can expose vulnerabilities. Organizations must establish innovative processes for internal and external collaboration, alongside seeking new talent pools, to propel their initiatives forward successfully.
Half of organizations identified as needing some new types of talent in a few places. But 2 in 5 organizations report needing many new types of talent across their organization, or they need to completely revise the nature of their talent base. Prioritizing training, fostering adoption and retaining skilled employees are pivotal actions for triumphing in the digital business transformation landscape.
Nearly 2 in 5 organizations report needing many new types of talent or that they need to completely revise the nature of their talent base.
Survey on the State of Digital Transformation, TEKsystems, 2024
People: The Essential Element of Success
A critical aspect lies in identifying, quantifying and implementing training and development programs that focus on instilling new behaviors and mindsets in existing staff. For leading technologies skills such as software engineering, artificial intelligence (AI), machine learning and robotic process automation, organizations face a significant challenge, with half of companies saying it takes more than six months to find talent, potentially causing bottlenecks in transformation efforts.
While the integration of AI, automation and collaboration tools can alleviate skill gaps, addressing these challenges demands creative and holistic talent strategies. This approach allows companies to not only acquire but also nurture the skills essential for cultivating a future-ready workforce.
Fig. 3.1Actions for People
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202420232022Top Actions For People
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43%43%36%Train employees with digital skills across the organization.
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40%41%39%Focus on retaining, engaging and developing existing employees versus recruiting new employees.
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40%40%35%Drive adoption of new tools and technologies.
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39%39%38%Establish new ways of working/collaborating with internal and external partners.
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38%38%35%Offer training and development programs focused on new behaviors/mindsets.
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35%37%33%Identify skills required to deliver digital products and/or services in organization’s portfolio.
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37%36%36%Quantify the gap between current and needed skills to deliver digital products/services.
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24%26%*Set hiring goals based on specific skill needs.
Fig. 3.2Talent Reimagined
Fig. 3.3 Biggest Skills Gap
Process: Process-Driven Transformation
Adapting business processes to enable rapid prototyping and testing with customers is paramount in today’s dynamic business landscape. It allows companies to swiftly transform innovative ideas into tangible products or services and, most importantly, obtain direct feedback from customers.
Most companies are focused on making information more accessible across the organization as they look for ways to get data and information into the hands of employees to help drive innovation and productivity. Companies are also modifying operating procedures as they modernize the enterprise to adapt to new technologies.
Fig. 3.5 Actions for Process
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202420232022Actions For Process
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45%49%59%Implementing digital tools to make information more accessible across organization
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43%50%54%Modifying standard operating procedures to include new digital technologies
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41%46%46%Implementing digital tools to facilitate analysis of complex information
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37%41%45%Creating a network of cross-functional teams with end-to-end accountability
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36%40%48%Implementing digital self-serve technology for employees’ and business partners’ use
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34%38%44%Adapting business processes to enable rapid prototyping and testing with customers
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33%36%*Implementing mechanisms to improve digital governance capabilities
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29%**Implementing a change management strategy
Reshaping the World of Work: Technology has profoundly reshaped the landscape of work, prompting the widespread adoption of hybrid work strategies. The ability to seamlessly connect and collaborate virtually has become paramount, enabling teams to transcend geographical boundaries. Video conferencing, cloud-based tools and collaborative platforms have emerged as linchpins, fostering communication and project continuity. This technological shift has not only redefined the traditional office structure but also empowered individuals to achieve greater flexibility and work-life balance in the evolving realm of hybrid work strategies.
Fig. 3.6 Remote Workforce Expectations
Technology: Transformation Enabled by the Cloud
The high adoption rates of software as a service (SaaS), cloud-native platforms and infrastructure as a service (IaaS) indicate the strong inclination among enterprises toward scalable, flexible and cost-effective solutions. SaaS, with its on-demand software delivery model, provides accessibility and a reduced maintenance burden. Meanwhile, the widespread adoption of cloud-native platforms and IaaS signifies the shift toward agile, resource-efficient infrastructure, allowing organizations to adapt swiftly to changing demands. Businesses are actively embracing cloud adoption, highlighting the shift of the cloud to an operational necessity. While fostering enterprise agility, innovation and continuity, the escalating costs and risks associated with cloud services make it evident that organizations must be judicious to ensure their cloud spending remains under control, even in an environment of rising costs and inflation.
This collective embrace of cloud-based technologies suggests a broader digital transformation strategy, emphasizing the need for streamlined processes, implementation of FinOps principals, enhanced collaboration, and the leverage of advanced analytics and automation to stay competitive in the evolving business landscape.
Fig. 3.8 Most Impactful Technologies Over the Next 1 to 2 Years
AI Everywhere, All At Once
In an era characterized by unprecedented technological advancement, digital transformation trends like the pervasive influence of AI have become a focal point for businesses worldwide. As we explore the impact of AI on organizations, the data reveals an overwhelming trend as the vast majority strategically prioritize AI integration.
of digital leaders plan to ramp up AI-related expenditures in the impending year.
Our biggest focus right now is AI. If we can capitalize on the potential of AI, we believe it will deliver maximum competitive advantage.
– Fortune 500 Retail Organization
Notably, a sweeping majority of organizations are not merely acknowledging the significance of AI but actively prioritizing its integration into their operations. The accelerating pace of this trend and the continued expansion of the digital divide is exemplified by 75% of digital leaders (versus 47% of digital laggards), who signal their commitment to ramp up AI-related expenditures in the impending year, reflecting a recognition of AI as a transformative force. As businesses increasingly embrace AI, its multifaceted applications come to the forefront, with organizations harnessing its power to optimize employee productivity, revolutionize customer service interactions, fortify data analytics capabilities and streamline intricate processes through automation.
However, amidst this rapid AI adoption, the survey unveils a complex landscape of challenges. The financial ramifications encompassing implementation costs, ongoing maintenance and robust support mechanisms pose substantial hurdles. Moreover, the data underscores the pressing need for organizations to grapple with overarching concerns related to trust, ethics and legal considerations—an intricate tapestry of challenges that accompany the race to integrate AI into the business fabric. The data reveals the intricate dynamics and challenges shaping the transformative journey of organizations into an AI-driven future.
Fig. 4.2 Primary Use Cases of AI Technologies
Fig. 4.3 Top Challenges Implementing AI
Conclusion
Own the Change Ahead
In this dynamic landscape, the gap between digital leaders and digital laggards is not only persisting but also widening. Digital leaders, who continued to invest in innovation and customer-centric strategies even during periods of economic uncertainty, are reaping the benefits of their foresight.
For business wanting to thrive in today’s competitive environment, digital transformation is not a choice; it’s a necessity. The gap between digital leaders and laggards is growing wider, and the advantages of being a digital leader are becoming more apparent. Those who embrace digital transformation stand to gain a significant competitive edge, while those who lag behind risk obsolescence. Industries across the board are witnessing the disruptive impact of digital transformation, reinforcing the importance of staying at the forefront of technological innovation. It’s a race where the finish line keeps moving, and the only way to win is to keep up with the pace of digital progress.
TEKsystems’ Tips to Digital Transformation Success
Digital business transformation isn’t just about technology; it’s also about people, processes and a mindset shift toward innovation and adaptation.
About the Research
TEKsystems conducted an online survey from November to December 2023 with 855 technology and business decision-makers. Respondents included members of the C-suite, company executives, vice presidents, directors and managers who have final decision-making authority and/or influence on their organization’s digital transformation efforts. The sample includes a balance of decision-makers in enterprise IT and line-of-business functions in the United States, Australia, Canada, China, India, Singapore, Belgium, France, Germany, Ireland, Netherlands and the United Kingdom across a broad spectrum of industries.
Digital transformation refers to the process of using technology to create new business processes, culture and customer experiences to meet changing business and market requirements.
We analyzed digital leaders versus digital laggards to uncover opportunities and achievement gaps so your company can navigate your own digital evolution. In this report, digital leaders are defined as companies with a mature digital transformation plan where digital processes and mindsets are ingrained in the DNA of the organization. Digital laggards are defined as companies with tentative plans and limited digital transformation initiatives and investments in place.