IDC: New Rules, Roles and Demands in the Era of Digital Transformation in China

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International Data Corporation (IDC), the world’s leading provider of global IT research and advice, held its annual forum on Chinese IT market predictions on November 8th in Beijing.

China's economy has entered into a period of transformation and both the governments and businesses alike are actively seeking new growth modes. Digital transformation (DX) of business, backed by the latest ICT technologies, is the answer. IDC forecasts that digital transformation will attain macroeconomic scale over the next three to four years, changing the way enterprises operate and reshaping the global and Chinese economy. This is the dawn of the “DX Economy”.

Kitty Fok, Managing Director of IDC China, said: "DX will be a top priority for all business in the coming decade. Executives must adapt to the new rules of competition and accelerate DX process; meanwhile IT executives must take up new roles, transforming IT department into a strong technical partner. Executives of ICT vendors must be aware of their customers’ new demands, changing from its role of tech support to a DX partner for customers. "

Chinese economy is expected to continue growing steadily in 2017, with GDP growth of more than 6%. The four main objectives of the 13th Five-Year Plan are: an economic growth that is powered by the service industry and smart manufacturing; innovation and entrepreneurship become the new norms of social development; globalization is the direction of government and enterprises; environmental protection and improving people’s livelihood are key to sustainable development. The four objectives form the foundation of China’s steady economic growth.

IDC forecasts that the Chinese IT market will expand by 2.3% in 2017, entering into a period of adjustment. Personal device market is likely to remain flat whereas the enterprise infrastructure hardware market is expected to grow 7.3% in 2017. Software market is forecast to expand 7.5%, while the IT service market to grow 8.7%. Growth in the traditional hardware, software and services is likely to slow, but rapid growth of 15% or higher is forecast for markets that are associated with innovation accelerator technologies (3D printing, robotics, cognitive system, Internet of Things, AR and VR, and the next generation security) and the 3rd Platform (cloud computing, big data, mobile, social).

Base on the new rules, new roles, and new demands of a DX economy, and taking into account IDC’s estimates for worldwide IT industry, DX, and CIO agenda, IDC has the following predictions on the Chinese IT market:

New rules of business competition

#1：Dawn of the DX Economy: By 2020, 50% of China’s Top 1000 companies will see the majority of their business depend on their ability to create digitally-enhanced products, services and experiences.

#2：Mass customization to accelerate business transformation: By 2018, the top 10% of China’s industry leaders will develop the ability to allow customers to build custom product and service bundles. By 2018, Chinese companies investing in IoT-based operational sensing and cognitive-based situational awareness will see 40% improvements in the cycle times of impacted critical processes.

#3：Information-based products and services gaining popularity: In 2018, one fourth of China’s Top 1000 companies will gain the revenue from information-based products. By 2020, the demand for digital-related services will account for 30% of total worldwide services spending.

#4：Crowd-funding to improve startup’s success rate: By 2019, China’s Top 500 firms and lots of internet companies will use Kickstarter-like methods to allocate capital to 10% of new projects, aiming to increase their new product introduction success rates by over 30%

New roles for IT executives

#5：Digital revenue streams to drive business growth: By 2019, 20% of China’s IT projects will create new digital services and revenue streams that monetize data.20% of CIOs will shift primary focus from physical to digital and move away from BPM and optimization by 2018.

#6：Leading in 3D to help CIO shift their roles: By 2019, 60% of Chinese CIOs will recognize the limitations of traditional IT and embrace a leadership approach that embodies a virtuous cycle of innovation (Leading in 3D: Innovate, Integrate and Incorporate).

#7：Self-adaptive security and risk management: Chinese government will further tighten policy on security and controllability, driving investment on IT security by governments and large state-owned enterprises to grow by 15% on average annually. By 2018, 50% of CIOs will help drive global risk portfolios that enable adaptive responses to security, compliance, business, or catastrophic threats.

New demands for ICT vendors

#8：Cloud computing 2.0 to facilitate ICT ecosystem revolution: By 2020, 40% of all enterprise IT infrastructure and software spending will be for cloud-based offerings. The Cloud will morph to become distributed, trusted, intelligent, industry-focused and channel-mediated. By 2018, the number of Industry Collaborative Clouds will be more than 40; by 2020, over 50% of the China’s Top 100 will be digital services suppliers through ICCs.

#9：AI, Everywhere: By 2019, 30% of all Digital Transformation initiatives – and 100% of all effective IoT efforts - will be supported by Cognitive/AI capabilities. By 2020, nearly 30% of operational processes will be self-healing and self-learning; 5% of revenue will come through interaction with a customer's digital assistant.

#10：Immersive Interfaces Gaining Traction: In 2017, 20% of consumer-facing China’s Top 500 companies will experiment with AR/VR as part of their marketing efforts. By 2019, 20% education training institutions and cultural & creative institutions will adopt AR/VR to deliver services.

In the medium and long-term outlook, 4th Platform on the Horizon. By 2020, 1/5 of China’s Health/Life Sciences and Consumer Product companies will begin to develop the first wave of products and services tightly integrating 3rd Platform technologies with the human body; "Augmented Humanity" offerings mainstream in the mid-2020s.

“The next 10 years is a decade when China will restructure and upgrade its economy, and change its growth model, a decade when IT technology and business model will innovate and upgrade,” said Wu Lianfeng, Chief Analyst and VP of IDC China.“More importantly, it is also a decade when business DX will be in full swing. We are facing unparalleled challenges and opportunities, and therefore IT vendors and customers should fully comprehend the new rules, roles and demands in the DX era, building up technical strength and capabilities of integrating resources, and achieve full transformation in the super-digital era, in order to stay one step ahead of others.”

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.