Digital transformation slowing as firms pull back amid rising costs

A majority of Irish businesses say they are pulling back from their digital transformation strategies amid elevated costs, skills shortages and a rise in external threats, a new report from Expleo indicates.

Some 72 per cent of the 141 business leaders on the island of Ireland surveyed as part of the tech consulting and engineering firm’s latest Business Transformation Index said they have scaled back their ambitions with project delivery slowing and deadlines being missed.

While firms remain optimistic, with 70 per cent of respondents indicating they expect revenues to be higher over the next five years, three-quarters said they are struggling to drive the cultural change required to foster the development of a “digital-first mindset” across their organisation, Expleo said.

The pipeline of digital projects also appears to have tightened significantly over the past year, the report states. Fewer than half (49 per cent) of those surveyed said projects are being delivered on time, compared with 70 per cent in 2022 while just 48 per cent said they were managing to stay on budget, a 27 percentage point year-on-year decrease.

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Cost inflation (47 per cent), skills shortages (40 per cent) and general economic uncertainty (35 per cent) were among the top challenges cited by the respondents.

“Unsurprisingly, given the seismic shifts in geopolitics and the global economy, almost nine out of 10 (89 per cent) business leaders in Ireland say there are significantly more external threats to their business compared to a year ago,” the report notes.

Meanwhile, an overwhelming majority (94 per cent) of decision makers said their organisations were struggling with an IT skills shortage. “Shortage of supply is seen as a major contributing factor in businesses’ skills shortages, and many business leaders believe it is a wide-scale issue, with 74 per cent saying Ireland is struggling to attract top technology talent,” the report states.

Commenting on the report, Expleo Ireland managing director Phil Codd said despite the challenges, “as recent history has shown us, it is during uncertain times that embracing and investing in digital projects is not just wise, but imperative”.

He said: “When the world faces its greatest challenges, digital unfailingly emerges as our steadfast ally, enabling us to conquer obstacles and thrive. To remain relevant and propel ahead, businesses must therefore invest in their digital future. Neglecting to do so runs the high – and far more costly – risk of being left behind.”