EMEA Digital Transformation Spending to Cross $1,200 Billion by 2028: IDC
New research from IDC entitled EMEA Digital
Transformation Market Forecast, 2024-2028, based on the Worldwide Digital
Transformation Spending Guide published in October 2024, shows that the Europe,
Middle East and Africa (EMEA) digital transformation (DX) spending is projected
to reach $1,201 billion by 2028, registering a compound annual growth rate
(CAGR) of 15.8 percent over the 2024-2028 forecast period.
The digital spending market is highly influenced by the
strong growth of artificial intelligent (AI) investments, which are sustaining
the double-digit growth rate. This is also evident from survey data indicating
that 99 percent of EMEA CEOs are prioritizing generative AI (GenAI) initiatives.
"AI will reshape digital business models and redefine
digital assets, supporting organizations' efforts to become AI-fueled
businesses by 2027. The future of DX is set to accelerate, creating immersive
new experiences and transforming operational models. As of this forecast round,
EMEA digital transformation spending is poised to exceed $1,200 billion by
2028," said Erica Spinoni, senior research analyst, IDC EMEA Digital
Business and AI Transformation Strategies Research.
The Impact of Technologies on Spending
Digital transformation investments underpin investments in
disparate technologies, from robots to connectivity to cloud. The analysis of
the underlying technologies allows them to be categorized into three growth
groups: steadily growing technologies like personal devices and connectivity
services; technologies growing at the same rate as DX, including IoT and IT
services; and technologies outpacing DX growth, led by GenAI, cloud computing
and emerging technologies like AR and VR. These insights provide a clear view
of the dynamics and strategic priorities driving organizations' transformation
into digital business.
"Digitally transforming the business and operating
models requires organizations to invest in multiple technologies and use cases
to address critical business priorities. Today, GenAI has emerged as the
primary driver of digital investments, surpassing even cloud, with a CAGR that
is four times that of the overall digital market," said Giulia Carosella,
senior research manager, IDC EMEA Digital Business and AI Transformation
Strategies Research.
An Industry Perspective
Organizations are taking a different approach and will
prioritize different use cases based on the industry of adherence, reflecting
specific priorities, investment criteria and needs.
- Financial Services: The industry with the highest CAGR over the
forecast period, keeping the digital investment momentum with a focus on
cybersecurity and customer experience, especially now with the AI pivot.
- Distribution and Services: Despite the harsh impact of current
geopolitical tensions on the supply chain, retailers are maintaining strong DX
investments, primarily focusing on digital platforms and multiple
customer-centric AI use cases.
- Infrastructure: Already characterized by a high level of
digital maturity, digital investment in infrastructure will keep its momentum
to further boost its competitive position in the AI/tech space. AI will play a
pivotal role in further building intelligence into the infrastructure network.
- Manufacturing and Resources: Organizations in this industry are
accustomed to massive technology deployments, reshaping processes and ways of
working. Today, AI and GenAI investments are expected to further boost employee
productivity, creating growth opportunities.
- Public Sector: There is a dual approach to digital
investment in this industry. While budget constraints are imposing investment
prioritization and budget allocation, the usage of modern and emerging
technologies is expanding.
"Digital transformation is the way to expand in
industries where substantial investments are proceeding. It is also a way to
more efficiently reduce costs and optimize processes. These benefits will help
drive DX growth in the double digits over the forecast period," said
Angela Vacca, senior research manager, IDC Data and Analytics.
"Digital transformation is more about new products and
new revenue streams than it was a few years ago," said Neli Vacheva,
research manager, IDC Data and Analytics. "However, the wave of innovation
in the wake of AI will give rise to new optimization projects and levels of
efficiency in areas that have already digitally transformed."
Digital Spending Drivers and Inhibitors
Several factors influence organizations' ability to invest in
digital transformation. On the growth and driving side, EMEA organizations are
propelled by the strategic imperative of AI, which presents a critical
opportunity to lead the charge and capitalize on first-mover advantages. New
regulations and increasing cyberattacks necessitate a robust security and trust
posture, which is equally paramount for ensuring investment.
Conversely, potential projects are being carefully
scrutinized due to high costs and the uncertainty of returns.
"AI and GenAI are not just technological advancements;
they are strategic imperatives for EMEA organizations. However, geopolitical
tensions and macroeconomic uncertainties are pushing organizations to
scrutinize their IT budgets. Additionally, the lack of digital skills and
organizational silos are significant barriers that need to be addressed to
fully realize the potential of digital transformation," said Erica Spinoni.
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