The COVID-19 pandemic was not a time for businesses to stop investing in technology.
In fact, companies that were already all in on technology grew five times faster than those that did not, according to an April Accenture report.
"It became evident that technology was becoming the backbone to pretty much every organization," said Ramnath Venkataraman, integrated global services lead at Accenture. "There was a resilience built into these organizations, and they were able to react much faster to changing business needs."
Companies that aggressively ramped up their digital transformation during the pandemic benefited, too; they're now growing at four times the rate as those still sitting on the sidelines, according to the report.
Those enterprises aren't necessarily left behind, but the gap between the leaders and laggards is growing quickly. Catching up isn't just vital to staying competitive, it's also important in keeping top talent.
Organizations pushed forward on existing transformation plans during the pandemic, with incentive from fast-approaching competition and the potential revenue upsides of having a nimble infrastructure in place. Now, businesses are called to continue transformation with a consumer-first approach, but without neglecting the employee experience.
Pandemic amplified technology investments
Spending on digital transformations had already been pushing enterprises ahead of their competition before the pandemic — but recent spending has set them further apart.
When Accenture first conducted this kind of survey in 2019, it labeled 10% of enterprises as "leaders" based on the extent of technology adoption across the organization and organizational and cultural readiness for tech-enabled evolution. They called the bottom 25% "laggards."
Accenture found that leaders' revenue grew at twice the rate of that of laggards. The pandemic exacerbated that difference.
In the "Make the Leap, Take the Lead report," which surveyed 4,300 global executives, Accenture found the gap had widened with leaders growing at five times the rate as laggards. They also identified a new category of enterprises: "leapfroggers," the 18% of enterprises that compressed their digital transformation and aggressively invested in forward-thinking technologies in the last year.
The leapfroggers' revenues grew at four times the rate of the laggards between 2018 and 2020. In fact, their growth rate was even higher than that of the leaders, in part because they were starting from a lower spot on the technology adoption scale, and had so much room to grow.
The pandemic has been "an opportunity for leapfroggers to make a top-down strategic investment, and make it pervasive across the organization and culturally embrace it to drive outcomes they need from a business point of view, and grow," said Venkataraman.
Despite this mass movement towards digital transformation, companies are still going to spend in 2021 and 2022, said Andrew Hewitt, senior analyst serving infrastructure and operations professionals at Forrester.
Forrester predicts the U.S. tech market will grow by 6.6% in 2021 and 7% in 2022. For 2021, they anticipate 10% increase in spending on software, 12% on communications equipment and 6% to 8% on integration services and tech outsourcing services.
Shifting to the cloud ramps up revenue
Most of the digital transformation acceleration was through moving to the cloud, according to the Accenture report. leapfroggers outspent every other kind of company on nine types of cloud technology. The report found that 67% of leaders accelerated their cloud investment; for leapfroggers, it was 47%
This isn't surprising, according to Seth Robinson, senior director for technology analysis at CompTIA. "Cloud computing has been a major investment over the last year," he said. Companies already in the cloud doubled down on their investment, and some sideline sitters "had to invest in order to get some resiliency and flexibility" in their system architecture.
Those still in the laggard category can learn from the leapfroggers, and they still have a chance to catch up making that cloud transformation. Not only will it increase computing power and flexibility, but moving to the cloud also reduces redundant technologies and disconnected technology across the IT stack.
Laggard organizations also need to adopt a technology-first strategy that shifts the entire enterprise's mindset toward viewing potential future downturns as opportunities to innovate, Venkataraman said.
Focus on customers, but don't leave employees behind
While the differences between companies that invested in technology before and during the pandemic, and those that did not, may seem insurmountable, the laggards can still catch up.
Organizations don't have to make a digital shift all at once, Venkataraman said. "It's not a switch, it's a dial," he said.
Anything customer facing-should be transformed first, followed by back office functions, like finance, accounting and human resources, according to Venkataraman. Keeping momentum moving forward is crucial, as is changing the mindset of the entire organization towards transformation and innovation.
The employee experience shouldn't be discounted either, said Hewitt. Forrester found that 30% of an employee's experience at work is related to technology factors, according to a March report.
Making work easy — from anywhere — is likely to become even more crucial for enterprises as they plan for their employees to come back to the office, in a full-time or hybrid form.
"The more you can engage that person in an at-home scenario, the better the employee attention, engagement, satisfaction and productivity," he said. A cloud-first strategy is critical in retaining top talent by letting them connect to work and co-workers, whether they're coming back to the office or not.