Opinion published at 05/02/2016

KEY DIGITAL TRANSFORMATION REQUIREMENTS AND THEIR IMPLICATIONS FOR SOFTWARE PROVIDERS

by Katrin Schleife

Software providers with a focus on digital transformation support are currently confronted with highly dynamic market conditions and have to find appropriate ways to address them. These dynamic market conditions are due to the fact that digital transformation has become a primary strategic focus for companies in all industries over the past several months.

Most digitalization activities today center on front-end transformation and are primarily driven by the need to improve the customer experience across all digital and non-digital channels of interaction. PAC calls this stage 'digital front-end transformation’. For software providers with related portfolios, this offering currently creates above-average revenue growth in customer-facing market areas.

However, companies are increasingly looking for solutions and providers that can accompany them in their entire digital transformation journey, broadening the scope from customer-facing areas only to becoming digitally integrated enterprises. Digital transformation software and SaaS providers need to be able to address the manifold requirements in the best possible way in order to achieve a strong position in this rapidly changing market. This also implies, in no small way, that they need to transform themselves in order to support their digitally transforming customers.

In our view, customers' key demands for their digital transformation journey are:

Our latest Market InSight report “Progressing to the next stages – How should software providers move forward?” discusses these key requirements and their main implications for providers offering digital front-end transformation software. In addition, it takes a look at the highly fragmented provider and solution landscape in the digital transformation core segments. For example, many traditional software players have added new or enhanced digital functionalities to their products and there are hundreds of specialized vendors in each digital transformation sub-segment. Software suppliers should take a close look at the changing provider landscape around them. Competition may arise from unexpected market areas – be it innovative new transformation niche players or traditional players from other IT areas (e.g. analytics, contact center) that are increasingly addressing the digital transformation issues of their clients. Consequently, competition is strong but so is the potential for collaboration with partners.

Each software player enters the digital transformation market from a different perspective and with different strengths and weaknesses. Important for all of them is to provide digital transformation software that can easily be integrated and is highly flexible in order to enable companies to create new business models and provide the best possible customer service.