DIGITAL ENTERPRISE 4.0 - Digital Persistence Amid Volatility

While the bullish trends of 2021-22 in technology spending may need to be consciously calibrated to realize full benefits and there is an unequivocal shift towards moderation in overall enterprise technology spending, digital spending in FY2024 is expected to increase across multiple technologies, predominantly cybersecurity, cloud, robotics, blockchain, and AI/ML.

In continuation to our 2022 edition of “Digital Enterprise Maturity 3.0 - Boosting Business Resilience through Technology”, nasscom and Avasant are excited to publish “Digital Enterprise 4.0: Digital Persistence Amid Volatility”. Similar to the previous three editions, this edition of the Digital Enterprise Maturity report is based on an analysis of 500+ (n=515) global end-user enterprises across 12 major sectors of varying sizes from 5 major geographic regions. The objective of the current edition is to help identify and underscore the transition in key aspects shaping the contours of digital transformation in end-user enterprises, such as technology spend and digital investments, mainstream and emerging technology priorities, business process transformation, outsourcing decisions, cloudification, cybersecurity investments, digital talent strategy, workplace model (onsite vs. WFH/WFA), and ESG adoption trends. Further, the key findings of this report span enterprises of varying sizes, coming from different sectors and geographies.

This study also assesses and analyzes past and future digital technology adoption trends, with the purpose of understanding and highlighting near-, mid-, and long-term trends shaping technology investments worldwide and puts forth recommendations for end-user enterprises and ecosystem partners like technology services providers, product creators, and solution developers to support and accelerate organizations in their enterprise-wide digital transformation journey.

Moreover, in line with the previous edition, where we introduced the Digital Enterprise Maturity Index, based on which a Sector Score aimed at measuring, assessing, and tracking the digital enterprise maturity score for diverse sectors was also calculated, this edition too includes the Sector Score, based on 6 key parameters explained in the report.

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Key Findings

Mainstream digital spending focus shifts to integrated use cases & investment optimization, as spending tightens, and the talent gap grows: 72% enterprises are spending less than 30% of technology budget on mainstream digital technologies; 68% of business workflows across enterprises were managed on private/public/hybrid cloud in 2022; 20% companies indicate a rising talent gap in cloud and cybersecurity in 2023, the highest among all technologies.
Emerging digital technology investments increased to deliver faster PoC-to-production, funded by a zero-cost transformation strategy: 77% enterprises invested up to 20% of the total digital spending on emerging technologies in 2022 & 75% are planning to either run a PoC, commit investments, or increase the quantum of investments in emerging digital technologies in 2023.; Metaverse, digital twins, and Web 3.0 will witness the most early-stage investments; ~71% enterprises reinvested 5%-15% of cost savings from previous projects into new digital projects in 2022.

Digital talent demand and gap in core areas of cloud, cybersecurity, and AI are set to soar, driving enterprises to focus on reskilling/upskilling existing and domain talent: ~30% enterprises will have 15%+ of their overall workforce as digital talent in 2023, 2X of the 2022 count; 60% enterprises will continue to prefer full-time hiring for digital talent in 2023, similar to 2022; in 2023, 31% companies indicate upskilling/reskilling to be the preferred way of building/increasing digital capacity over fresh & lateral hiring or acquihiring alone.
Different verticals have moved at different speeds in terms of digital maturity: High-tech, aerospace & defense, healthcare & life sciences, and travel & transportation demonstrated an increase in overall digital maturity; High-Tech will retain the top spot as the sector allocating the highest technology and digital budgets in 2023; digital talent will be a key priority for healthcare & life sciences companies as they plan to invest 22% of their total digital spend on digital talent in 2023, higher than the global average of 20%.

India remains the top preferred location for outsourcing of digital services, & overall technology outsourcing: 53% global enterprises chose India as a preferred technology services outsourcing destination in their top three location choices; 60% contribution to India-bound outsourcing deals comes from five major sectors – BFSI, discrete manufacturing, high-tech, telecom, media & entertainment, and travel & transportation.
36% enterprises are likely to shift outsourcing locations, at least one location, in 2023, the majority of which will be relocating to India, followed by Mexico.
Business workflow digitalization in IT and procurement & supply chain deepens with more workloads migrating to the cloud: ~43% enterprises digitalized 60%+ of IT workflows in 2022, focusing on full-stack observability, threat intelligence, multi/hybrid cloud management, and IT asset management & governance; ~30% organizations digitalized 60%+ of their supply chain workflows by adopting IoT, AI, and blockchain.

Hybrid models mature and formalize as employees weigh flexible work options in job evaluations, with a 2-3 day/week work-from-home model likely to sustain: 60% companies will offer hybrid work to over 40% of their employees in 2023, up from 55% of companies offering similar options in 2022; 45% high-tech companies could offer hybrid models to 60% or more of their workforce in 2023.
Enterprise maturity in the adoption of globally accepted ESG standards on the rise: 60% enterprises either adopted globally accepted ESG norms or built internal ESG norms in line with local/global reporting requirements in 2022, up 13% y-o-y; Aerospace and defense and high-tech enterprises lead in embracing ESG norms globally.
Demand for IT services in enabling ESG reporting set to grow: 60%+ enterprises have partnered with IT service providers for ESG transformation; ESG reporting & analytics services, sustainable business model development services, and decarbonized workplace services emerge as the top three ESG services.
Recommendations to further deepen digital maturity across global enterprises: Focus on a fully optimized and flexible technology architecture and a concerted ecosystem effort; build a Secure, Scalable, Hybrid, and Connected Organization and strengthen the Ecosystem with Platforms, Collaborations, Digital Empowerment, and Digital Skilling.

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