Canadian businesses still aren't that far along the path to digital transformation. The plus side for partners is that many of them know it, and fear the consequences.

TORONTO – A new study prepared on behalf of Dell Technologies and Intel indicates that most companies are in the rearguard of digital transformation rather than the vanguard. While the numbers are up from an earlier version done in 2016, they aren’t up a lot, given the massive increase in awareness of digital transformation over these two years. The news was released, and discussed, at the 2018 Dell EMC Canada Partner Summit here.

The study, the DT Index, is the Canadian component of research that spanned 42 countries, conducted by research firm Vanson Bourne. Of the 4,600 businesses in the total survey, 100 came from Canada.  The full global results will not be released until early 2019 however, so at this stage, we really have no comparative benchmarks to assess the Canadian data against those of other nations.

We do have the Canadian data from 2016 to compare the 2018 data against, and the contrast is not really inspiring. The DT Index’s calculations are based on companies’ perceived performance in four areas: delivering against the core attributes of a digital business; their existing IT strategy; workforce transformation strategy; and planned investments.

The DT Index found that only 6 per cent of Canadian businesses can be classified as digital leaders, where digital transformation is ingrained into the DNA of the business. The good news is that is twice the number from 2016. The bad news is that given the increase in awareness of the correlation between digital transformation and competitiveness over the last two years, the number really should be higher.

“80 per cent of IT budgets are still spent on keeping the lights on, because it was done that way in the past,” said Kevin Connolly, President of Commercial Sales at Dell EMC Canada. “There’s a lot of wasteful spending going on.”

“Those are the things that need to change,” said Mike Sharun, President of Enterprise Sales at Dell EMC Canada. “It means that if they don’t spend on innovation, they will be gone.”

The most positive part of the study is that Digital Adopters, defined as those having a mature digital plan, with investments and innovations in place, has increased from 29 per cent from 12 per cent in 2016.

“This is a sign that more are finally starting to realize that digital transformation has to be part of their DNA if they want to be successful,” Sharun said. “It can’t be a skunk works project that’s out there and doesn’t do anything.”

On the other hand, the third group Digital Followers, who have very few digital investments, and are only tentatively starting to plan for the future, is still at 34 per cent, compared to 44 per cent in 2016. And the bottom group, Digital Laggards, who have no digital plan at all, is still at 9 per cent, compared to 18 per cent in 2016.

While some have a narrower view of digital transformation, defining it as the ability to communicate with your customers online or by mobile, according to their preference, the Dell EMC definition is more comprehensive, and thus more difficult to fulfill. In addition to customer relations, it also includes making all of a company’s internal processes fully digital as well.

“We believe it’s not something that’s done on the side,” Sharun said. “If you embed things in day-to-day business, encompassing all those different pillars, that’s digital transformation.”

The research found that 89 per cent of Canadian businesses are facing major barriers to digital transformation, with the top five being: lack of budget and resources; data privacy and cybersecurity concerns; information overload; lack of the right in-house skill sets and expertise; and lack of the right technologies to work at the speed of business. It’s thus not surprising that almost half fear being run out of business by more agile competition. Less than a third (31 per cent) believe they will disrupt rather than be disrupted. 28 per cent fret that they will struggle to meet customer demands. 21 per cent fear their organization will be left behind.

“What’s really astounding is that 45 per cent are worried that they will be made obsolete in five years,” said Joyce Mullen, president of global channels, OEM and IoT Solutions, Dell EMC, in her keynote address to the assembled channel partners at the Partner Summit. “That represents enormous opportunity for everyone in this room.”

Companies are spending on digital transformation initiatives – at least some of them. 28 per cent of Canadian businesses have embraced agile software development allowing them to code and securely launch new applications within much shorter cycles. That’s up 6 per cent from 2016, a major increase. 50 per cent are also building security and privacy into all devices, applications and algorithms, although that’s only up from 45 per cent in 2016. Increased numbers of companies are also changing internal processes. 42 per cent are developing the right skills sets and expertise in-house, such as teaching staff how to code, up from 18 per cent in 2016. 45 per cent are also equipping IT leaders with business skills and business leaders with IT skills, up from 25 per cent two years ago.