Editor’s note: Sebastian Lagana is a Senior Analyst with Technology Business Research.

HAMPTON, N.H. – A buzz term arises that encompasses a theory. Marketing teams get their hands on it and brand as many offerings as possible under that umbrella. While it is easy to conceptualize, the more the theory is examined, the more questions arise as to the specifics. Digital transformation is one of the more recent buzz phrases entering that fray, with many definitions, few of which are agreed upon, creating confusion in the market.

TBR hears varying positions on the digital transformation market in its interactions with advisory and IT services vendors, with vendors applying the term with extremely broad strokes, often geared more toward marketing than defining a concrete capability. While some seek to bucket digital transformation capabilities as an all-encompassing umbrella under which a huge range of disruptive technologies exist, others use the term more judiciously to discuss leveraging technology to functionally change a business. While digital transformations cannot exist without disruptive technologies, the concurrent, yet also independent themes can complicate conversations about the topic.

  • VIDEO: What is digital transformation? An overview. Watch at: https://www.youtube.com/watch?v=2q_lWLm5qtg

Two of the questions TBR is asked most often are, “What really is digital transformation?” and “Who are the real players in the market?” Parsing through the marketing messages to understand, and most importantly define, digital transformation is a significant task. As noted by TBR Practice Manager and Principal Analyst Patrick Heffernan, within the market there has been significant blurring of the lines between what has long-been referred to as IT modernization and digital transformation. By identifying discrete aspects of the digital transformation spectrum, we can better define the market and how vendors are incorporating disruptive technologies into their offerings to drive growth.

Defining and segmenting digital transformation into discrete pieces will facilitate better partnerships and more targeted offerings

To better define where services vendors fall in the digital transformation landscape, there are three distinct services categories that capture the majority of disruptive technology-focused work undertaken by large-scale services vendors: substitution, extension and transformation

  • Substitution represents fairly basic IT modernization, such as leveraging new consumption models (e.g., cloud, “as a Service”) to directly replace functions that have always existed in an enterprise. Shifting from on premises to cloud can generate tangible benefits for an organization in burst capability or scalability; however, it does not have a large impact on how an end user goes to market. Substitution is the most commoditized of the three areas and is often the entry point for a consumer’s digital initiatives.
  • Extension is where disruptive technology is folded into an environment to provide an organization with capabilities possibly not available otherwise. For example, analytics frameworks are folded into existing data sets to enhance the velocity and visibility of data to managers, allowing for increasingly rapid and defensible decision making. Due to the additional complexity of layering new disruptive technology over the top of existing ecosystems, along with understanding how to best leverage increased visibility to drive business decisions, extension is an area where a blend of consultants and technologists generates ideal outcomes.
  • Transformation is the Holy Grail, hence the inclusion of it in the overarching concept of digital transformation. Truly transforming businesses is generally a multiyear, incredibly complex effort folding in a broad range of disruptive technologies, including but not limited to areas such as analytics, cloud, Internet of Things, robotic process automation or blockchain. Significant front-end strategy is required to conceive and road map the desired impact of disruptive technology adoption on the business, the organizational stamina to go through a multiyear IT modernization program, the capital to invest in enterprisewide implementation efforts, and organization and change advisory to ensure new capabilities and processes stick. Additionally, a broad partner network, including consulting, products, services and software providers able to share one vision for the client, is needed.

It is also important to note, as IT environments are modernized, security is a wrapper that encompasses all touchpoints, given the proliferation of multiple device endpoints from both internal and external consumers; an increase in companies’ leverage of remote employees; the adoption of off-premises infrastructure solutions such as public cloud; and related organizational concerns around governance, risk and compliance.

Leading vendors will identify opportunities to articulate specific value propositions to the market, transforming hype to monetization

Services vendors able to understand and articulate where, specifically, they play within the value stack will be able to better target opportunities with their clients while concurrently identifying partners that fill portfolio gaps, minimizing the need for capital-intensive investments while enabling vendors to capture market opportunity. A great deal of this work revolves around appropriately messaging capabilities within their portfolio ecosystem, such as analytics or cloud, or around capabilities previously not associated with the legacy IT stack, such as organization and change or risk and compliance consulting.

We expect the next 12 to 18 months will be critical to establishing leaders and laggards in the market, with those able to define their value proposition by transitioning the conversation from hype to specifics seeing a rapid payoff. TBR will contrast vendors’ activities in the space, developing a market landscape under these defined constructs and identifying which vendors’ go-to-market strategies ultimately drive revenue growth as their clients’ appetite for disruptive technology adoption increases.

(C) TBR