Enterprise technology and digital advertising spending to rise as traditional connectivity spend declines
The next phase of digital transformation impacts industries across the board. All industries will be affected by this revolution. More verticals and processes will be impacted and automated by digitalisation, and these effects will be felt across value chains, supply chains, consumption and monetisation.
The ‘Second Digital Revolution’, according to analysts at Ovum, examines the digital economy and its key players over the decade to 2025. Ovum predicts that this equates to a US$4.8 trillion global opportunity in 2025 – up 29 per cent from 2015 - for technology companies. These are the digital enablers, including IT vendors like IBM and SAP and communications service providers (CSPs) like Orange, as well as technology giants Google, Apple and Microsoft. Such entities will supply the technology and connectivity making this organisational transformation possible. And it is enterprise technology that will take the largest market share.
Digital enablers set to dominate
Ovum forecasts that digital enablers will benefit the most from the evolution of the digital economy. It defines such entities as enablers in a SMART economy, based around the evolution of Services, Management, Applications, Relationships, and Technology. SMART players enable customers and third parties to access and distribute applications and content. Embedded in many digital enablement segments and with significant breadth of reach, they’ll be able to capture a significant proportion of the total value. Today’s internet platform providers (such as Apple, Google, Facebook, Amazon, Microsoft) are most likely to assume these roles, but new challengers are likely to evolve from the internet or media segments.
Steven Hartley, practice leader, service provider and markets at Ovum, said, “Driven by cost-effective connectivity, greater computing capacity and improvements in technology such as analytics and artificial intelligence, the second wave of the digital revolution is on its way and its impact will be felt across all industries.
“The first digital revolution (1995-2015) impacted key processes and consumer-facing sectors such as media and retail. However, the second will impact a far greater range of processes and industries across the enterprise space, thereby expanding the opportunity to support their transformation – albeit with less direct consumer impact than before.
“Those players providing technology, connectivity and services to the Digital Economy will have a huge opportunity to facilitate this transformation.”
Critical challenges
Success for digital enablers, defined either by growth into new opportunities or even simply survival, depends on several factors - including, critically, prioritising customers and continuous innovation. Those organisations that win out will be those working differently. Still, the core attributes of a successful venture includes collaboration with competitors, partners and suppliers. Digital enablers must also put the consumer at the heart of decision-making processes. Such companies must consistently innovate, too, and they must build scale and reach.
Steven Hartley explained, “Increased competition, attracted by revenue growth and facilitated by more open ecosystems, will mean that organisations must place the needs of customers at the heart of their decisions and processes. Innovation, partnerships, scale, agility and service bundling will all be vital to support this new outlook on the market.”
The global structure of financial activity underpinning market success, Ovum finds, will change. Ovum's analysts predict that enterprise technology spending will claim 32 per cent of the total digital enablement market in 2025, almost doubling to more than US$1.5 trillion by 2025. Consequently, competition in this space is set to intensify as CSPs, Internet platform providers, and network enablers move in. Moreover, communications and broadband connectivity will account for a sizable 28 per cent share, too - albeit with spending declining by eight per cent overall by 2025. And Ovum also examines digital advertising, which is expected to grow fastest, from US$166bn in 2015 to US$385bn by 2025 - although it will account for just eight per cent of total spending in 2025.
