Spending on digital transformation to exceed $1.1t this year

OSRAM, Schaeffler, and other manufacturers can yield significant returns when they prioritize digital transformation over other projects this year.
13 June 2018

Olaf Berlien, CEO of the German light technology company OSRAM Licht AG, is focused on digitally transforming his business. Source: AFP

Digital transformation has been on the agenda for several years, however, it seems that companies are finally taking it seriously now.

According to a new study by IDC, worldwide spending on the technologies and services that enable the digital transformation of business practices, products, and organizations is forecast to be more than US$1.1 trillion in 2018, an increase of 16.8 percent over the US$958 billion spent in 2017.

Findings also suggest that a majority of the spending will be led by the discrete and process manufacturing industries. Almost worth US$333 million worth.

From a technology perspective, IDC believes that the largest categories of spending will be applications, connectivity services, and IT services as manufacturers build out their digital platforms to compete in the digital economy.

The main objective and top spending priority for digital transformations in both industries is “smart manufacturing” and explores programs that focus on material optimization, smart asset management, and autonomic operations.

IDC expects that the two industries will invest more than US$115 billion in smart manufacturing initiatives this year.

Both industries are also expected to invest heavily in innovation acceleration (US$33 billion) and digital supply chain optimization (US$28 billion).

Further, IDC believes that smart manufacturing (US$161 billion) and digital supply chain optimization (US$101 billion) will be strategic priorities of digital transformation that will see the most spending in 2018.

Other strategic priorities that will receive significant funding this year include digital grid, omni-experience engagement, omnichannel commerce, and innovation acceleration, according to IDC.

The strategic priorities that are forecast to see the fastest spending growth over the 2016-2021 forecast period are omni-experience engagement (38.1 percent CAGR), financial and clinical risk management (31.8 percent CAGR), and smart construction (25.4 percent CAGR).

What does digital transformation look like?

Well, digital transformation looks different to different companies.

At OSRAM‘s facility in Berlin, for example, digital transformation is about building a connected manufacturing environment. The company just implemented a solution that helps workers use an app to check on their work assignments for the day and keeps them updated on the status of the machines.

The solution also helps the lighting company to dynamically plan its structures and workflows, allowing the business more flexibility when catering to the needs of the market.

At Schaeffler’s precision engineering division, too, the emphasis was on connecting the various manufacturing equipment to a single platform in order to monitor their health and performance.

The company first gained an understanding of the baseline performance of its equipment. From there, they were able to analyze the data, and arrive at more advanced capabilities – more insight from the data, more analytical capabilities, and in the future, cognitive capabilities.

However, once connected, the engineers were also able to plug in advanced analytics to perform predictive maintenance.

For both OSRAM and Schaeffler, the project has yielded exciting results and has opened the doors to exciting projects in the future, as the firms gather data and understand their machines, workflows, and people better.

Like these two companies, manufacturers across the world will be prioritizing digital transformation this year.

If IDC’s predictions are right, beyond the investment, the new capabilities these projects will yield will transform the industry as a whole, forever.