Businesses battle inflation, delaying tech investments

Research from global digital transformation services provider, Endava, reveals that 90% of Australian businesses are grappling with the effects of inflation and economic conditions. A significant number (51%) has experienced a deterioration in cash flow, while 40% are postponing investments in technology due to market volatility.

Endava's study titled "Core Eight: Laying the Foundation for Digital Acceleration", explores the digital transformation strategies, maturity, and challenges faced by Australian companies across various sectors. These include Communications, Financial Services, Food & Grocery, Data Storage, Defence, Higher Education, Health, and Energy & Utilities.

The study further reveals that 40% of respondents are putting off technology investments due to market conditions, with an additional 30% expecting flat budgets over the next 12 months. A staggering 77% of companies are passing on the inflationary pressure to customers. Half of these businesses are transferring the full costs, while 27% have increased prices but have not passed on the entire increase. About a quarter of the companies surveyed (23%) are yet to pass on any increases.

Endava also found that current technology solutions of 49% of surveyed businesses fail to adequately support their business objectives, with only 42% seeing their technology as slightly enhancing business operations. A sparse 9% perceived full alignment between their technology capabilities and business goals.

"The data shows that the economic scenario is making businesses act more cautiously and look for investments in areas that can lead to significant cost reductions or a sizeable hike in productivity, like artificial intelligence and machine learning. Delaying technology investments can stifle innovation and progress," stated Steve Harding, Managing Director of Endava Australia.

The report shows that just 4% of businesses surveyed believe they have reached an optimal state in their digital transformation journey, with 43% think they are at the initial stages.

Harding further observed, "The fact that most businesses are only partially satisfied with their investments in digital transformation, and expected better results, suggests that many projects are not necessarily focusing on what is truly important or lack the internal support they need."

In terms of digital maturity, Communications, Defence, Food & Grocery, and Health sectors are considered less mature than others assessed in this study. Yet, all sectors reported a significant percentage of respondents indicating their digital transformation strategy to be reactive, harboring many unplanned initiatives.

The survey highlights several challenges impeding digital transformation success. Application sprawl emerged as a significant obstacle, with an average number of 236 disparate applications per business. Alarmingly, 70% of organisations confessed a lack of complete awareness of where they deploy their applications, escalating risks such as cyber threats, data leakage, and poor governance.

Looking forward, businesses appear particularly enthusiastic about Artificial Intelligence (AI) and Machine Learning (ML), with 57% planning to adopt them within the next 24 months. Almost half (45%) anticipate these technologies to positively impact internal operations such as data analytics, IT, and cybersecurity, while external functions like marketing, advertising, and content development are also expected to benefit significantly.