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Mismatch between tech spend, digital expectations in Asia-Pacific: Gartner

LiveMint logoLiveMint 29-05-2017 A Staff Writer

Organizations in the Asia-Pacific region are missing out on opportunities to advance their digital businesses due to a gap between what they want to achieve and where technology investments are being made, according to a survey by research firm Gartner Inc.

In its 2017 CEO Survey, Gartner asked 388 chief executive officer (CEO) and senior business leaders across the world to share their digital priorities, expectations of gains such as productivity improvement and investment in digital and traditional technologies.

The survey found that in the Asia-Pacific region, CEOs expect productivity in their firms to rise 24% by the end of 2018, with revenue (26% of respondents in the region) and profitability (15%) as the top two metrics of success.

But the study found a gap between “what they want to achieve and where technology investments are being made”.

According to the survey, CEOs in Asia-Pacific believe that conventional technologies—cloud computing, enterprise resource planning (ERP), analytics and customer relationship management (CRM)—will help them achieve productivity gains, rather than those that support digital transformation—digital environments, blockchain, the Internet of Things (IoT), robotics, artificial intelligence (AI) and 3D printing.

“Asia-Pacific CEOs want to increase profit margins while maintaining sales growth, and they expect IT to play a strong role in this,” said Partha Iyengar, vice-president and Gartner Fellow in Gartner’s CEO Research team. “The problem is that Asia-Pacific firms aren’t moving fast enough to capitalize on this potential. Their focus on conventional tech will likely have less of a transformative effect than more innovative technologies.”

Gartner said CEOs expect IT to play a strong role in fuelling profitable growth and that “IT-related” appears as the second business priority after growth, reflecting the importance CEOs give to IT. “This continues a trend that first appeared in our 2015 survey, when IT reached the top five business priorities of CEOs. This year’s ranking of No. 2 is the highest ranking IT has achieved in the last three years,” the research firm said.

According to Gartner, Asia-Pacific companies benefit from being located in the region that has the fastest-growing economy, so they worry less about sales growth than companies in other regions. Instead, firms in this region are more focused on increasing profit than revenue growth. Digital business offers a way for Asia-Pacific firms to lower their cost structure drastically and thereby increase margins, but these firms are “not pursuing digital business as aggressively as they could”.

Further, the survey noted that Asia-Pacific enterprises are slightly behind global counterparts in terms of digital business maturity, with 20% of Asia-Pacific CEOs describing their enterprise as “digital to the core,” compared with 22% globally. Asia-Pacific firms are also slightly behind global counterparts in the phase of digital business they are in.

“Digital means different things to different people, and Asia-Pacific CEOs hold less transformative views of digital business than their global counterparts,” the Gartner survey noted. It found that 45% of Asia-Pacific CEOs think of digital transformation as a way to optimize rather than transform their current business versus 42% globally.

“Chief information officers (CIOs) need to take on an evangelizing role with the CEO and other business leaders about the transformative possibilities of digital business using real examples,” said Iyengar. “Many business leaders still cannot describe digital business well, and need education.”

In terms of investing to gain new digital business capabilities, the survey indicates that Asia-Pacific organizations are not as aggressive as their global counterparts.

Only 18% of Asia-Pacific organizations have taken an equity stake in a technology or digital business entity, compared with 24% globally. Despite this, respondents in the region, according to the survey, are of the view that equity stakes pay the biggest dividends. “This disparity may be due to more Asia Pacific CEOs identifying access to capital as a constraint on growth than global peers,” said Iyengar. “There are also regulatory grey areas in parts of Asia that constrain companies from making technology investments or acquisitions outside of their industry.”

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