EMEA: Cost Reduction is the Digital Target, Investment Plans Muted
Like most companies around the world, businesses in Europe, the Middle East and Africa (EMEA) plan digital investments with a keen eye on efficiency and cost reductions; executives in this region are, however, less committed than their counterparts elsewhere in the world to increasing those digital investments markedly over the next three years.
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A recent survey on digital and business strategy conducted by the Economist Intelligence Unit and sponsored by DXC Technology found that the 206 EMEA respondents1 (40% of the total) are aligned with their counterparts elsewhere in the world in how integrated their operations are in key functions, their adoption of digital technologies and how good they are at information-sharing. The survey also revealed, however, some significant differences in EMEA firms’ approach to going digital.
Among the key differences: Respondents at EMEA companies are focused on cost reduction far more often than those in other regions. In addition and perhaps related, EMEA executives more often say the CIO is the driver of IT strategy, less often see IT as a crucial partner in meeting strategic goals and more often plan to increase usage of traditional rather than some more modern digital technologies.
IT strategy—leadership and goals
Respondents at EMEA companies more often say that CIOs drive IT strategy, rather than CEOs, the opposite of companies in other regions where the CEO is more likely to drive IT strategy than the CIO. “I do think there’s a little bit of tendency for [IT strategy] to be more on the technology side in Europe than in the US,” says Nigel Fenwick, vice president and principal analyst at Forrester Research Inc. “But I also think there’s a tendency to be more operational-leaning in Europe versus more customer-leaning in the US.”
In terms of IT priorities, EMEA executives cite increased efficiency and cutting costs as the primary goals for becoming more digital—the same top priorities for all companies. Although cutting costs was the second most chosen driver for other companies as well, it was cited much more often by EMEA executives.
On the whole, respondents at EMEA companies less often than others see IT as a crucial partner in meeting business goals (23% v 30%), though they slightly more often see it as providing at least some useful tools and insights (59% v 56%). Aligned with those views, EMEA companies less often view digital technology as a competitive differentiator, executives say, with only 8% indicating that they see digital as a means to surpass competitors, compared with 11% of other respondents.
In many regions, companies’ IT investments and digital activities are driven directly by customer expectations, says Mr Fenwick. But, given the range of economic development across EMEA countries, such consumer expectations could vary across the region more than elsewhere in the world given the wide differences in the local level of technology available, such as the percentage of consumers in a country with smartphones or the state of the local wireless telecommunications technology.
IT spending—control and plans
EMEA organisations slightly less often than those in other regions control at least some of their IT budgets centrally (59% v 65%), respondents say. Interestingly, given technological differences across the region, executives in EMEA less often than executives elsewhere in the world report that spending is at least partly in the hands of regional operations (18% v 28%).
EMEA companies are more avid users than those in other regions of traditional onpremises servers (99.5% compared with 94%), executives say, and they more often use the hybrid cloud (91% v 80%). They are less keen than respondents in other regions on the private cloud and social tools.
Looking at future usage, EMEA respondents plan to start using or increase the use of cybersecurity tools, public cloud and collaboration software more often than other companies. A smaller share of EMEA executives than those elsewhere in the world expect to start or increase the use of social tools and cloud-based app services.
Capabilities and spending plans
Thirty-nine percent of respondents at EMEA companies expect to increase their IT investment somewhat in the coming years, a bit higher than the 33% who expect to do so in the rest of the world. However, only 10% of EMEA companies expect investment to increase significantly, far less than the 22% of companies in the rest of the world that say the same.
Given those budget expectations, it’s not surprising that EMEA respondents cite budget constraints as the top challenge to achieving their goals (37%). The second most often-cited barrier is finding staff with the necessary knowledge and skills, which 33% of EMEA respondents call out compared with 25% of respondents in other regions. (In North America, in particular, executives are least often concerned about finding IT talent, with only 21% saying it’s an issue.) EMEA executives say that their IT departments most often need to build capabilities in application modernisation (38%), managing big data and analytics (35%), collaboration (34%) and mobility (32%).
Nevertheless, EMEA respondents reported less often than companies elsewhere that IT will be seen as a hindrance to meeting strategic goals in the future (7% v 14%), suggesting greater confidence in IT’s ability to adapt to changing business needs.
Broadly speaking, the digital pursuits of EMEA companies are much like those of businesses around the world. Some subtle differences do emerge, however. Most notably, IT strategy more often rests with the CIO rather than the CEO at EMEA companies, and executives at EMEA companies more often view IT as useful but not crucial to meeting strategic goals. And, though EMEA executives indicate their firms plan to significantly increase IT investment less often than others, they are confident in IT’s ability to deliver what they’ll need in the years ahead.