Digital transformation: 3 driving trends for 2021

The pandemic forced organizations to boost IT investment and prioritize their digital transformation initiatives. These three factors will continue the push toward innovation
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For the past ten years, digital transformation moved at a relatively slow pace, focusing mainly on improving products, processes, and the employee experience. Then COVID-19 hit, forcing IT decision-makers to prioritize their IT initiatives and increase digital investments.

Our research at Software AG showed that companies in 2020 were evenly split on where they invested their optimization efforts, with external initiatives around services beating internal initiatives. Organizations had to take dramatic steps to keep businesses afloat, which meant prioritizing growing customer demands amidst pandemic lockdowns.

As companies continue to cope with the effects of COVID-19 and the expected increase in customer expectations, they will also likely flip the switch on digital transformation, so the impact is directly felt by their customer base. Here are three key trends that will enable companies to make the switch.

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1. Transformation is ready to mean transformation again

At the height of the pandemic, companies were forced to innovate – and do so quickly – to continue operations and serve customers. Ninety-seven percent of global IT professionals we surveyed agreed they went through some sort of digital transformation in 2020, with three out of five saying they went through a “large amount” of change.

With companies prioritizing tech investments to benefit customers, enhancing customer support, and implementing technology like Robotic Process Automation (RPA) to improve customer service, they shocked transformation efforts back into action. Now, the same number of global professionals expect to continue transformation efforts in 2021. The pandemic forced companies’ hands, but the massive change means they’re now poised to use technology to transform the world around them.

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2. Generational change will change business behavior

As Gen Z becomes more influential, companies will need to transform to meet their expectations.

In 2020, many Generation Zers (born between 1997 and 2015) graduated college and entered the workforce, experiencing a completely remote and digital onboarding process. At the same time, Millennials (born between 1981-1997) are beginning to come into their own in the workplace, growing into decision-making roles. While Generation Xers still hold the power in many organizations, these two milestones represent a generational shift that’s driving a change in business practices and behavior.

These digital natives perceive and interact with technology in different ways than their predecessors. They bring an expectation that technology will help employees on a day-to-day basis through real-life applications and view software as “must-haves” rather than “nice-to-haves.”

Younger generations want to go far beyond the basics of technology to optimize and drive value. As a result, we’ll likely see a noticeable evolution where relatively “basic” technology – like Internet of Things (IoT) sensors and artificial intelligence (AI) – will become integral to key initiatives.

As Gen Z becomes more influential, companies will need to transform to meet their expectations around better, more consistent experiences, seamless customer service, and control over interactions.

3. Resilience-building technology is more important than big-bang innovation

Companies faced unprecedented uncertainty and instability throughout 2020, with technology investments focused on returning to near-normal or maintaining some level of stability. In 2021, they’ll need to do the “simple” things using technology better to make their organizations more resilient.

For example, many enterprises manage a wide variety of systems and devices, but not all have mastered integrating existing applications, cloud services, or infrastructure. Data integration is important for enterprises to enable insights and analytics to make quick, agile business decisions. In fact, data and analytics and integration are seen as some of the top technologies organizations will prioritize this year.

As companies continue to deal with the fallout of the pandemic, the driving forces will be the technologies poised to strengthen overall business resiliency, especially against very real business threats like recession, health crises, and competitors.

One of the big lessons of 2020 is the need for resiliency in the face of unpredictable situations. Business and IT executives forged ahead and invested in digital technology. No one can predict with certainty what will happen next, but businesses overwhelmingly believe technology will enable them to be more resilient in the face of uncertainty. 

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Bernd Gross, CTO of Software AG, has been working internationally in the IT industry for over 25 years. He is one of the world's pioneers and thought leaders in the areas of digitization, cloud computing, the Internet of Things and Industry 4.0.