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April 2016, IDC Manufacturing Insights #US41079116


Speeding the Future Transformation Journey in Manufacturing:
A Guide to Transforming Your IT Operations

Sponsored by: NTT DATA Services, formerly Dell Services

Kimberly Knickle

April 2016


In this white paper, IDC Manufacturing Insights identifies what business and information technology (IT)

leaders should know to face the challenges of the manufacturing industry today and in the future. We

present priorities for the manufacturing industry as it prepares for digital business transformation. We also

identify a future-ready IT infrastructure that can adapt to business needs and that incorporates

technologies such as cloud, mobile, analytics, the Internet of Things (IoT), and next-generation security.

Manufacturers require a modernized approach to IT that not only enhances core infrastructure such as the

datacenter, servers, storage, and networking but also facilitates higher-performance levels, increased

quality, and self-service delivery.

The document discusses how manufacturers depend on IT to provide them with greater efficiency,

visibility, speed, and resiliency in their operations, as they collaborate in their value chains, and in how

they satisfy customer requirements with improved processes and even connected products and

services. IT modernization is the first step to allow manufacturers to realize value from all of their IT

assets and provide a backbone for their future business requirements and transformation.


As an industry, manufacturing is "hot." Regions are creating manufacturing initiatives, and countries

are creating policies to lure manufacturing back and prepare the next generation of talent. Maker fairs

show entrepreneurs and small-scale artisans how they too can design and manufacture their own

products, and what global manufacturers sell goes well beyond the 100-year-old recipe and the

mechanical drawings. And new technologies are changing the economies of scale so that large- and

small-scale value chains can be successful.

But in this market, it's not enough for manufacturers to pursue the same strategies they have followed

in years past — improving productivity or adding capacity and changing suppliers or paring down the

number of suppliers to minimize risk. Manufacturers can't "quick fix" customer service problems by

changing transportation modes from ocean to air, and there is no magic bullet product that is going to

win over the entire market.

According to IDC's 2015 Vertical IT and Communications Survey (conducted by IDC's Global

Technology and Industry Research Organization), the top 2 business priorities are productivity

(selected by 39.3% of respondents) and optimizing business processes throughout manufacturers'

operations (selected by 34.7% of respondents). However, business complexity caused by global

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©2016 IDC Manufacturing Insights #US41079116 2

operations, global value chains, and global markets is creating challenges for manufacturers'

products and processes. Key business themes include customer engagement and customer service,

supply chain modernization to support evolving market requirements and manufacturers' "need for

speed," and the fundamental nature of innovation in processes, products, and services.

IT is increasingly an integral part of manufacturing's success. Worldwide manufacturers will spend an

estimated $315 billion on external IT expenditures in 2016, according to Pivot Table: Worldwide

Manufacturing IT Spending Guide, Version 1, 2014–2019 (IDC Manufacturing Insights #US40587715,

November 2015) (see Table 1).


Worldwide Manufacturing Spending on IT Services, Software, and Hardware,

2015–2019 ($M)

2015 2016 2017 2018 2019

302,171.74 314,918.09 327,920.86 342,031.67 354,249.18

Source: Pivot Table: Worldwide Manufacturing IT Spending Guide, Version 1, 2014–2019 (IDC Manufacturing Insights #US40587715,

November 2015)

And most importantly, the rapid adoption of new technologies and innovation accelerators is preparing

manufacturers for the future as well as changing products, processes, and business models. This is a

digital business transformation. Key findings about how manufacturers can prepare for the future and

speed their journey include:

IT modernization: The journey requires manufacturers to modernize their IT portfolios and

capabilities and enable the business with better IT service delivery. An increasing percentage

of investments are going toward technologies such as big data and analytics (BDA), cloud,

mobile, and collaboration tools as well as innovation accelerators such as 3D printing,

robotics, the Internet of Things, cognitive computing, augmented and virtual reality, and next-

generation security. Furthermore, many should make sure their core IT infrastructure and IT

service delivery are up to the task, including the datacenter, servers, storage, networking, and

end-user support.

Value realization: Just having the technology isn't enough. Companies must work to translate

their IT resources and investments into IT efficiency, IT agility, and business value. In the

future, manufacturers will employ digital technologies and a modernized IT portfolio to drive

changes in business models and value chains and remain competitive in the market.

Speed of the business: IT must work at or ahead of business speed, despite the constraints

that IT organizations face, primarily because of the increasing connection between IT and

business processes, cost competitiveness, and the products and services manufacturers

provide to their customers.

Knowledge and skills: The IT organization must attract and retain the most relevant skills, but

an assessment of the skills that are required should be conducted across the entire IT

ecosystem, in other words, including partners that can provide the necessary IT skills,

knowledge, and other assets to support the business' overall priorities.

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©2016 IDC Manufacturing Insights #US41079116 6


Manufacturers will need to rethink their approach to IT, considering the factors we've outlined — IT

budgets, balancing innovation and maintenance, IT skills, and the speed at which they can deliver.

Manufacturers will look for opportunities to increase their IT efficiency, IT agility, and business

innovation. Some of their changes will relate to a shift in how they spend — funding some projects and

resources through operational expenditures and subscription services rather than capital expenditures.

We also expect manufacturers to evaluate how they can work with external partners to deliver some of

that efficiency and provide the necessary skills and services as well as speed projects along. For

some, the ideal partnership with a service provider could mean freeing up their internal resources to

work on the most business-critical projects while outsourcing core end-user services. More than one of

NTT DATA Services' customers emphasized the need for a global partner that can support its IT

requirements regardless of the customer's location.

We've also seen manufacturers that successfully work with partners to increase innovation, including

digital transformation. In fact, all of the NTT DATA Services customers we spoke with highlighted their

ability to focus more on the needs of the business and engage with their business counterparts. Not

surprisingly, the emphasis on IT-business collaboration requires the internal IT organization to adapt.

One NTT DATA Services customer referred to how his team must have "more breadth," referring to the

skills required to translate business needs to underlying technology demands and also manage IT

partners that help support the business.

In IDC FutureScape: Worldwide Manufacturing 2016 Predictions (IDC #259783, November 2015), we

identified some of the most important initiatives that manufacturers will undertake that require IT

modernization, value realization, and digital business transformation over the next several years.

Our predictions include:

Achieving the market share consequences of customer-centricity investments

Pushing for global standards for global manufacturers

Measuring the impact of new technology investments for value realization

Transforming operating models with digitally connected processes

Modernizing logistics networks with innovative postponement strategies

Improving resiliency and visibility to eliminate the need for short-term forecasting

Leveraging the product innovation platform to drive enterprise quality

Simulating products, services, and processes with a digital twin

Exploiting technologies in the modern plant for innovation on the shop floor

Transforming IT talent to support digitally executed manufacturing

In the next few sections, we provide more detail on the technologies and strategies manufacturers will

take to move forward and to be future ready, from IT readiness to increasing IT's business value to

digital business transformation, enabling new business models and capabilities.

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©2016 IDC Manufacturing Insights #US41079116 7

IT Readiness for the Future: Strengthening the Foundation and Making
New Investments

Manufacturers will require a level of IT readiness for the future that is much more efficient and agile

than their current level of IT readiness. To prepare, manufacturers will undergo an application and

infrastructure modernization, but with minimal disruption as they transition off legacy assets. Next-

generation IT services will be available as easily consumable, consistent, and standardized services

that can be delivered quickly and efficiently when and where the business needs them at an

acceptable price point. The entire infrastructure will be virtualized and abstracted, governed by policies

and rules, and IT customers will expect self-service and automation at the levels of service and

security they need. The business value of the investment in IT infrastructure shouldn't be

underestimated; according to IDC FutureScape: Worldwide Enterprise Infrastructure 2016 Predictions

(IDC #259813, November 2015), 70% of spend on infrastructure will be related to digital transformation

and will support 3rd Platform workloads by 2018.

Much of this work will be invisible to the users outside IT, but underneath, IT will be taking advantage of a

software-defined infrastructure and a delivery approach that most likely combines on-premise and cloud,

with a central point of management and oversight. It's critical that the IT foundation be future ready,

giving the organization access to new technologies in the datacenter and satisfying business

requirements for performance, speed, and availability. Although work may start in the datacenter, it must

extend out to all users, ensuring that employees, suppliers, and even customers may have affordable

and secure access to the information and systems they need to do business easily and quickly.

Investments that manufacturers will need to escalate include the four pillar technologies in the

3rd Platform, as well as many of the innovation accelerators, with mobile representing one of the most

mature investment areas today (see Figure 3). In the move to digital transformation, many new

technologies will be woven into how manufacturers operate in the future. Some specific examples of

how technologies can and will provide value to manufacturers are as follows:

Mobile: Manufacturers will use mobile applications and devices across the organization.

Adoption will continue in areas with early wins — namely, sales and field service — but we

expect mobile to help manufacturers increase their productivity with objectives including time

savings, increasing visibility, and facilitating workflows and management approvals. Mobile will

be essential to how manufacturers stay on top of quality issues, serve customers, and manage

the plant and supply chain.

Cloud: As the underlying enabler to so many of manufacturers' technology investments and

expectations, cloud is well on its way to being pervasive in the manufacturing industry.

According to IDC's 2015 Vertical IT and Communications Survey, 95% of manufacturers are

planning to use cloud for their new application and infrastructure projects in 2016. That's

because cloud is the means of getting essential business process tools and information assets

to IT customers wherever they are. We've projected that by 2017, manufacturers will actively

channel 25% of their IT budgets through industry clouds that enable seamless and flexible

collaboration models. This will greatly reduce collaboration waste in manufacturers'

organizations and in their value chains.

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©2016 IDC Manufacturing Insights #US41079116 12

Value Realization

Ensure that IT and line of business are collaborating as true partners in the selection and

implementation of new technology. This may seem like an obvious step, but a surprising

number of manufacturers do this poorly.

Know your business priorities and consider options that deliver business value quickly for

some early wins. Also consider stakeholders internally and externally (e.g., along the entire

value chain from supplier to customer/consumer).

Work with partners to accelerate your IT capabilities and serve the line of business. Although

we expect manufacturers to embed and apply more technology to how they operate, they must

also recognize that they need external resources and expertise to move quickly and


Future Business Transformation

Consider how your investments can lead to business transformation, not just incremental

improvements. Some of the most transformative use cases will require excellence in applying

many technologies.

Look at all of the IT resources at your disposal — within your own organization and with your

trusted IT partners. Very few organizations succeed by "doing it all" on their own.

Find a partner that understands your industry and your business and speeds your journey.

It will make sure you have the resources you need, applied to what matters most to how you

do business, how you serve your customers, and how you compete.

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About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory

services, and events for the information technology, telecommunications and consumer technology

markets. IDC helps IT professionals, business executives, and the investment community make fact-

based decisions on technology purchases and business strategy. More than 1,100 IDC analysts

provide global, regional, and local expertise on technology and industry opportunities and trends in

over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients

achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology

media, research, and events company.

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Copyright Notice

Copyright 2016 IDC Manufacturing Insights. Reproduction without written permission is completely forbidden.

External Publication of IDC Manufacturing Insights Information and Data: Any IDC Manufacturing Insights

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