With AI Dominant, Senior Executives Doubting Digital Transformation ROI

A new study from KPMG shows that despite massive digital technology investments in recent years, senior executives are beginning to doubt their big-ticket digital technology transformation campaigns are worth the trouble.

The study, which tracks the sentiments of 400 U.S. information technology officers, notes that 50% of survey respondents “have not seen an increase in performance or profitability from digital transformation investments.”

Simultaneously, 56% of senior decision-makers executives say the return on investment for digital transformation initiatives has “exceeded expectations” in some key areas like boosting efficiency, cost cutting; increasing employee productivity; and enhancing customer engagement.

“We expect to see significant profitability and performance gains as many leading organizations enter into the later stages of digital transformations undertaken in recent years,” says KPMG national managing principal Atif Zaim.

It’s “critical” that CEOs don’t take those gains for granted.

“To maintain a competitive advantage, senior executives must maintain a clear transformation strategy especially now given the prominence of AI and the pace of technological advancements,” Zaim notes. “Companies that lack a sustainable digital transformation vision will eventually be exposed, either through poor customer experiences, lack of investor buy-in, low employee adoption, or wasted spending.”

Technology Spending On the Upswing

Overall, worldwide information technology outlays stand at $4.6 trillion. That’s up 5.5% from 2022, according to Gartner. Consequently, even as corporate decision-makers wonder whether their investments are paying off, spending on company digital tech initiatives should continue to rise.

“Macroeconomic headwinds are not slowing digital transformation,” says Gartner analyst John-David Lovelock. “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.”

Capital funding for corporate technology spending hasn’t slowed, even as the collapse of Silicon Valley Bank and Credit Suisse earlier this year still casts a shadow over the commercial lending market. It’s up to the C-suite to make sure they have their eyes wide open when seeking financing for digital tech expenditures, as business partners, competitors, and even clients will be watching.

“This is not just a tech problem, as these firms lent money to all forms of startups – not just IT,” Lovelock notes. “CEOs must urgently ensure they are moving their organization forward by conserving working capital, monitoring the impact on cash, securing access to credit, and keeping a close eye on talent and culture.”

“Once the organization is properly prepared, CEOs can then direct and engage employees to find, accelerate, and execute on market opportunities,” he added.

As for managing the digital investments in-house KPMG says the chief financial officer will need to step up and take control and establish a “clear line of sight” on digital investments and ROI.

AI Ascending

In terms of technology spending, KPMG says artificial intelligence is the clear winner for companies in 2023.

AI is viewed as “the most important technology for achieving short-term ambitions”, according to the survey. Robotics/automation tracks closely at 45%, with VR/AR including the metaverse standing at 43%

Yet the relative newness of Generative AI is causing corporate officers to think twice about major technology investments.

“Businesses understand the promise of generative AI and the value it will have in the short term, but the uncertainty is causing executives to pause,” said Barry Brunsman, principal of CIO advisory at KPMG. “However, with the right guidance and support, businesses can overcome this uncertainty and fully realize the potential of generative AI for their organizations.”

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