IDC forecasts that digital transformation spending in the META (Middle East, Turkey and Africa) region will top $48.8 billion in 2023. By 2026 digital transformation investment will reach $74 billion and account for 43.2% of all ICT (Information and Communications Technologies) investments made that year.
Obviously, without digital transformation it’s not only impossible to compete, it’s hardly feasible to keep pace with the world.
But why do we still keep talking about digital transformation? Predominantly because it’s a never-ending process. The introduction of new technologies inevitably leads to a new wave of digital transformation with different inputs, priorities and outcomes. In other words, this process will always be trending and organizations need to be agile to thrive in this change. Let’s dive in and contemplate what digital transformation is and will be in the near future and how businesses in the META region are doing it.
What is digital transformation?
Digital transformation does not equal digitalization as is and it’s far more than simple deployment of the newest software. It’s all about changing the approach to making business, to corporate culture, to managing relationships with customers and to day-to-day operations. It’s dangerous wishful thinking to expect that digital transformation will substitute human-managed operations with high-precise programs and algorithms. It doesn’t work like this, you have to change all the processes.
To be frank, I have to say that some time ago we used to say, ‘Ok, we’ll do the transformation and will deploy SAP.’ The project would take two years and would embrace business process re-engineering, operating model redesign, and so on. And upon reaching all the goals set at the launch, the project would be considered finished. Now it’s different.
For instance, our client, a coal mining company, reached us with the problem of spending millions of dollars on a certain issue. We analyzed the situation and offered to integrate AI technology — and we got a real result, first for one mine. In seven-eight months the process was still effective and delivered optimally, so we moved further and introduced AI to new mines, factories, etc. It’s a never-ending process. The important thing is to stay focused on your main goals.
What benefits does digital transformation bring to businesses?
Since we agree that digital transformation is not a mere installation of software but a change of attitude toward doing business, it alters how everything is done. It impacts productivity, efficiency, revenue, customer experience, cross-department cooperation, business models and more. In the end, digital transformation helps companies outperform the competition.
Increased efficiency
Thanks to digital transformation organizations can reach new levels of their productivity and efficiency, be it the main business or collateral operations. From our experience, we managed to transform the drilling center for one of the oil producers in the Central Asia by implementing state-of-the-art digital and immersive tools, and this increased their efficiency by over 3 times. Also, thanks to the automation of the loan origination process, an Asian bank decreased related labour costs by three times.
New business models, channels and markets
Proceeding with the tangible results of digital transformation, I’d like to mention that it often leads to the emergence of new business models and opens new markets. Digital solutions and means of interaction with existing and potential customers allow companies to come up with new propositions or use new channels. For instance, after we deployed a marketplace for a large Central Asian retailer, the company opened a brand-new client service channel, increased revenue and started a new stage of digital transformation.
Unrivaled customer experience
It’s rather typical that digital transformation changes the ways a company communicates with its customers. It’s not only about making this interaction more digital, it’s about eliminating wearing procedures that are now automated and streamlined. It’s about being more customer-centric thanks to AI-based analytics that helps better understand customers’ needs and priorities. It’s about reaching your customers at the right time with the right offer. To illustrate the benefit, I would mention a project that we realised for one of the Central Asian banks. We drastically changed their mobile app UX (User Experience) and this led to a 2.5 times increase in app usage.
New jobs, delivered better
Digital transformation doesn’t change organizations alone, it also changes the jobs market. You might have heard numerous times that digitalization leads to people getting substituted by technology and eventually sacked. In reality, it’s not. People remain and even deliver better. Thanks to the automation of routine processes and implementation of big data solutions, employees have more time and opportunities for more creative tasks.
For example, one of our customers, a mining company, employed security inspectors who used to descend into dangerous undergrounds with flashlights. Now, after digital transformation, they stay above and use cameras to navigate drones. The whole process became safer and more efficient.
Increased revenue
With all these new opportunities gained from digital transformation, a company eventually starts to generate more revenue. For instance, in the past, we implemented personalized B2B marketing and digital twin for a global FMCG company, and it resulted in 12% revenue growth and 20% reduction in cost. Another example: after we introduced a credit conveyor (i.e. fully automated the loan origination process) for a bank, it resulted in a triple increase in revenue from the loan business.
What is needed to thrive in this digital race?
In our practice, we see that many companies don’t get what they expected to get as a result of digitalization. The main issue, accounting for this dissatisfaction, is the lack of a broader scope. When a company doesn’t have a comprehensive strategy, processes are digitized chaotically and in the end, nothing changes except that now they have a digital mish-mesh instead of a non-digital one.
So, what capabilities should a company have to thrive in digital transformation?
Agility
It may sound like ‘Thanks, cap’ but in reality, too many organizations, especially from the Enterprise sector, are not capable of adapting quickly to changing circumstances. It’s crucial to monitor and evaluate digital transformation right when it’s happening and not to wait till the project is done. Some things may go wrong, and it’s normal. The point is to understand it sooner than later and change strategy or methods or stop investing if it’s not worth it.
Talents
Digital transformation requires a lot of talented specialists both in the process and upon its completion. Technology alone won’t do much good for a company, it’s the people that are needed. So, a business that is determined to succeed in digital transformation has to search, acquire and keep talents.
Scale-up
It’s quite common for an organization to embark on a digital transformation journey step by step. It all starts with a minor part: certain procedures or tasks are being digitized while the majority of business functions as they used to do. The important thing is to be able to scale up the process so that the whole company can benefit from digital transformation.
Collaboration
Digital transformation often presupposes partnerships or collaborations since many technologies and resources are unavailable within the organization. And it’s vital to be able to co-work with your partners so that both of you can succeed. From my experience I see that it’s easier to say than do, especially for large organizations that are inclined to subdue everything to their own guidelines and procedures. But if a company manages to establish a mutually beneficial partnership, it gets much more opportunities.
How is it done in META? Which vistas does the region have?
The META region, like many others, is experiencing a rapid digital transformation. In its full force, it’s happening in the national mega projects that the region is famous for, like Neom or The Line in Saudi Arabia. They are ambitious, expensive, extensive and they set the bar high, but they are true drivers of digital transformation in the Middle East.
Apart from that, the governments in Middle Eastern countries invest heavily in digitizing governmental services, especially in the UAE, KSA, Qatar and others. This is where all the innovations are introduced and tested. The results are impressive, and there is a lot to be done yet, as new technologies and new user expectations appear.
In terms of spending, IDC predicts that in the META region:
- Spending on public cloud services will grow at 25.% to surpass $10.4 billion in 2023.
- SaaS apps will account for 43.2% of public cloud software spending in 2023, with IaaS constituting 24.5% and systems infrastructure SaaS and PaaS making up 18.1% and 14.2%, respectively.
- Cloud managed services will grow 16.1% to surpass $1 billion in 2023 and $1.4 billion by 2025.
- Spending on big data analytics will grow 11.4% to top $4.1 billion in 2023.
- Spending on AI will grow 16.3% to reach $7.9 billion in 2023.
- Spending on RPA software will grow 34.5% to surpass $192.7 million in 2023.
The numbers show that digital transformation in the META region will continue gaining speed. So, we are definitely to witness more disruptive projects and innovations.
Bottom line
The META region is definitely one of the pioneers in digital transformation with its mega projects, talents and growing spending. And it will only gather pace in the coming years. So, it’s important to be ready to participate in this race, to know the advantages and pitfalls.
Digital transformation is truly drastic to any company. It is complex, long-lasting and expensive. To be able to realize it and to succeed, a business has to think several steps forward. Like in a classic situation of establishing remote online client service for bank customers. The bank will evidently get its branches empty. And what shall they do with the people who worked in these branches? The options are plenty: they can become support services, sales departments, consulting specialists, etc. The point is to think about it before you start any transformation. It’s the only way to success. And the whole world is adapting to this approach right now.