Thursday, October 24, 2019

Revenue from Digital Transformation Will Take Twice as Long as Enterprises Expect

Through 2021, incremental revenue from digital transformation initiatives is largely unlikely, Gartner researchers predict. That will not come as good news for executives hoping for revenue growth from repositioning existing business practices for digital delivery and operation. 

On average, it will “take large traditional enterprises twice as long and cost twice as much as anticipated,” Gartner researchers predict. 

"In most traditional organizations, the gap between digital ambition and reality is large," said Daryl Plummer, distinguished vice president and Gartner Fellow.. "We expect CIOs' budget allocation for IT modernization to grow seven percent year over year through 2021 to try to close that gap."

We probably should not be surprised, as major new technologies quite frequently take decades to show visible financial results. That might be another manifestation of the productivity paradox

Quite often, big new information technology projects or technologies fail to produce the expected gains. That “productivity paradox,” where high spending does not lead in any measurable way to productivity gains,  is likely to happen with artificial intelligence and machine learning, at least in the early going. And that “early going” period can last far longer than many believe.

To note just one example, much of the current economic impact of “better computing and communications” is what many would have expected at the turn of the century, before the “dot com” meltdown. Amazon, cloud computing in general, Uber, Airbnb and the shift of internet activity to mobile use cases in general provide examples.

But that lag was more than 15 years in coming. Nor is that unusual. Many would note that similar lags in impact happened with enterprises invested in information technology in the 1980s and 1990s.

investments do not always immediately translate into effective productivity results. This productivity paradox was apparent for much of the 1980s and 1990s, when one might have struggled to identify clear evidence of productivity gains from a rather massive investment in information technology.

Some would say the uncertainty covers a wider span of time, dating back to the 1970s and including even the “Internet” years from 2000 to the present.

Computing power in the U.S. economy increased by more than two orders of magnitude between 1970 and 1990, for example, yet productivity, especially in the service sector, stagnated).

And though it seems counter-intuitive, some argue the Internet has not clearly affected economy-wide productivity.

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