Zinnov, a global management and strategy consulting firm, has released results of a global survey, estimating that the global enterprise digital spend was US$575 billion in 2018 and is expected to grow at a CAGR of ~20%, to $1.2 trillion by 2022.
The study, titled 'Zinnov Zones for Digital Services - 2019', analysed the Global Digital Spending across enterprise segments and evaluated outsourcing service providers on the breadth and depth of their capabilities.
Zinnov defines digital spend as investments on modern data-driven digital technologies that help companies improve customer experience, drive higher operational efficiencies, and build new digital products and services.
Spend on building intelligent and connected products (i.e. digital engineering) increased to $293 billion, while IoT spend alone, reached $201 billion in 2018.
The study further revealed that 85% of the top global enterprises are creating intelligent platform-centric business models to compete against successful start-ups, unicorns, and tech giants in the quest to stave off competition and stay relevant.
Today, over 40% of large global enterprises have already set up one or more digital CoEs focused on IoT, AI, and RPA.
The Zinnov study also detailed that outsourcing service providers generated $40 billion in digital services revenue in 2018 and estimated that this number is likely to cross $110 billion by 2022.
Interestingly, a significant proportion of the digital and platform engineering opportunities happened in industries beyond software and high-tech.
Customer experience management, intelligent operations, insights-as-a-service, security, and legacy modernisation emerged as the other top digital services opportunities for service providers.
As enterprises increasingly shift their focus towards creating new digital products and services, a significant share of services projects is expected to be driven by the convergence of disruptive technologies such as AI/ML, IoT, AR/ VR, and RPA.
To capitalise on this growing opportunity, service providers are adopting a multi-pronged approach of talent upskilling, ecosystem and start-up partnerships, setting up digital CoEs, and mergers & acquisitions, to expand their digital capabilities.
Leading service providers are elevating their positioning by demonstrating a deep focus on industry-aligned digital solutions and are starting to bet on outcome-driven engagement models.
Incumbent service providers, however, continue to struggle with relatively smaller digital deals, intense competition from niche providers in the industry, and geographical and use case limitations.
“The $110 billion addressable opportunity in digital services is forcing a reset in positioning, partnerships, and go-to-market strategies of service providers,” says Zinnov digital transformation partner and practice head Praveen Bhadada.
“Building expertise at the convergence of disruptive technologies and creating deep know-how of customer programs should be an integral part of the go-to-market to create new opportunities. As digital buy centres get decentralised across functions and geographies, service providers will have a steep task of managing relationships to be able to participate in large opportunities in the future."