About half (51%) of corporate executives responding to a recent KPMG survey said that, on average, they haven’t seen an increase of performance or profitability from digital transformation investments in the last 24 months.
Among other pitfalls, many technology initiatives are largely driven by a reaction to hype rather than a clear business strategy, ultimately resulting in wasted spending, according to Atif Zaim, KPMG’s national managing principal and U.S. consulting leader.
“Having clarity of thought around how this [investment] will help you achieve strategic objectives, both at the outset and throughout the journey of the project, is really important,” Zaim said in an interview.
Global information technology spending is projected to total $4.6 trillion in 2023, an increase of 5.5% from 2022, Gartner reported in April.
“Macroeconomic headwinds are not slowing digital transformation,” John-David Lovelock, a Gartner research vice president, said in a press release at the time. “IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023.”
The software segment in particular will see double-digit growth this year as companies look to “capture competitive advantages through increased productivity, automation and other software-driven transformation initiatives,” the release said.
According to KPMG’s research, the number of businesses with leadership buy-in for emerging tech spending has more than tripled since last year from 10% to 32%, suggesting that organizations are becoming more open to such investments as a way of driving growth and innovation.
Of technologies viewed as “most important” for achieving short-term ambitions, artificial intelligence topped the list at 52%. Robotics came in second at 45%, followed by virtual reality, including the metaverse, at 43%.
Forty-seven percent of respondents said a lack of governance and coordination is most likely to hinder a digital transformation project. Other top hurdles include a lack of skills within the organization (41%); a risk-averse culture that is slow to embrace change (40%); constraints from legacy technology (39%); and cybersecurity or privacy issues (37%).
According to Zaim, best practices include linking the investment “very tightly” to a business strategy; managing risks such as potential data leakage early on in the project; and fostering collaboration among key stakeholders across the organization, including finance, IT, and legal department leaders.
The finance chief in particular has an important role to play in terms of ensuring a “clear line of sight” toward achieving a return on investment, he said.
KPMG polled 400 U.S. technology executives from April to June.