Many of the options for digital business transformation, such as acquisitions and ventures, require significant investment. So where does the money come from?
CEOs in Gartner’s 2017 CEO survey reported that the largest bulk of digital transformation funding comes from self-funding, rather than existing budgets, as they see the primary purpose of digital initiatives to win revenue rather than to save costs.
“This should give CIOs pause for thought, given conventional IT management works mostly on the basis of using operating budgets,” says Andy Rowsell-Jones, vice president and distinguished analyst at Gartner. “Digital transformation requires commitment, leadership, strategy, technology, innovation and importantly, money.”
Globally, interest rates on borrowing are at cyclical lows, and balance sheet cash reserves have been at cyclical highs. According to Rowsell-Jones, this year and next are likely to be the optimal timing points of overlap between the business cycle and the tide of digital business change.
“In two years’ time, the rising cost of capital could make strategic investment more expensive, and playing digital catch-up is harder,” he says.