Understanding the Cost of Digital Transformation Through Expert Lens

Do you know the cost of digital transformation?

Let’s explore with us.

Digital transformation is the need of the hour to keep your business competitive in the coming years. Today, 70% of organizations have a digital transformation plan ready or are currently working on. There has been a significant change in mindset towards innovation and how people embrace new technologies to boost quality work. 

55% of ICT (information and communications technology ) investments go towards digital transformation initiatives. Despite a priority, most digital transformations fail. And cost is the most important concern that deters digital projects from taking off. 

For businesses and technology professionals spearheading digital initiatives, the lookout for cost optimization has become a critical pursuit. We as the digital disruptors have been driving the wheel of digital initiatives and helping brands optimize their digital costs will uncover the Digital Transformation Cost for a Startup.

Before exploring the cost estimation, you must understand why most digital transformation initiatives fail.

Why Do 70% of Digital Transformations Fail?

• There is a high uncertainty of 70% that your digital transformation will succeed. Still, businesses and startups are investing in it. 
• The global spending on digital transformation technology and services will reach $4 trillion by 2027. 

What a contradiction! Why people are investing so much if there is very little chance of success? 

While some businesses see DX as a catalyst some see it as a challenge- resulting in chaos, ultimate failure, and a waste of investment.  

Working with top brands, we come across several reasons that act as a barrier to drive change.

• Change is complex. Getting everyone to have the same mindset is challenging. 
• Internal resistance towards upskilling, adopting new technologies, and fear of losing positions. 
• Weak leadership with internal conflicts and no management strategies. 
• Missing proof of concept with the right technology.
• Assuming DX as an IT task.
• Implementing everything at a time and going fast.
• Last but not least. Change comes at the cost of huge investment, burnout, and investments.

 You must consider your reasons for digital transformation failure and put Startup digital transformation expenses in the right place. A failed digital transformation can result in financial loss, reduced employee productivity, and a dent in brand reputation. This loss is not for everyone to recover from.

Understand your business challenges for digital transformation to understand how much your DX will cost.

How Much Does an Average Digital Transformation Cost?

Every business has its unique digital transformation journey, experience, and needs. The cost for an enterprise digital transformation may vary depending on several factors. To decide on a digital transformation cost budget, you must understand your business landscape, asking yourself-

• What is your technological infrastructure?
• What technology stack you work on?
• What is the size of your organization- small, medium, or enterprise?
• Do you have digital skill gaps?
• Most importantly, what is your business goal, and how do you want to achieve digitization?

These questions will help you assess your digital initiative cost.

What Factors Can Affect the Cost of Digital Transformation?

Deciding on digital transformation cost is challenging with so many variables. Then how do businesses prepare for it?

First, prepare for the innovation, create a product roadmap, understand customer demand, and how to eliminate customer pain points effortlessly with digital products. Include a digital transformation company to develop a strategy to future-proof your business. 

Let’s check out the key factors that you must consider when creating a Digital business model investment. 

1. Understand your transformation requirement

Understand and assess your business model carefully to see how the latest technologies can improve your business workflow. From simple workflow optimization to cloud migration, what is required for breaking traditional siloes and getting a competitive advantage?

Organizations with clear digital strategies are 50% more likely to achieve greater profits.

For example, Pirkx is a platform for employee and employer benefits that revolutionized their benefits management with DevOps. The platform leveraged DevOps to reduce their operational cost and manual efforts, resulting in 

• 10X Improved performance
• 5X More secure
• 30% Reduced cost
• Significant ROI

Explore our digital projects and understand how we helped them reduce overall costs.

2. Type of digital technology you want to invest in

Digital transformation typically refers to adopting and leveraging technologies throughout the business workflow. Some of the top technologies of 2024 are-

• Artificial Intelligence and Gen AI
• Cloud computing
• Blockchain technology
• AR/VR/XR
• Voice-integrated solutions 

And so on. Implementing some technologies is costly, as it might include hiring skilled professionals, upskilling, or upgrades to new systems. So, assess your business goals about what you want to improve with the chosen technology. How can it help your customers with high user experience and your business generate ROI?

3. Cost of Change Management

Change does not happen overnight. For a successful digital transformation initiative, the change must come from within the organization, which takes time. Change management involves introducing new technologies, exploring opportunities, and adapting to new ways to improve customer experience and interaction.

Bringing an organizational-level change incurs huge costs, from upskilling to hiring new leaders for digital transformation. But how much must you spend on change management? Some say it should be less than 10% of their project budget while other says it should be more than 50% based on project size. 

However, there is no correlation between these aspects. The cost of change depends on what areas need improvements and what technology you will be using. 

As per our experience in delivering DX projects, you must allocate at least 15% of your budget to your DX initiative. Focus on these key parts while allocating the change budget.

• Communication
• Training
• Systems development
• Implementation
• Evaluation and adjustment

It’s a big investment but crucial. So, is 15% the right number? Maybe.

You must consult a digital transformation company for your estimate, as poor change management can cost your business. You must consider this factor also while choosing the right digital partner. 

4. Cost to upskill, cross-train, and user support

You will only succeed in your digital transformation initiative if your employees have the right skills, tools, and knowledge to maximize the new systems. Thus, businesses are investing in upskilling and cross-training them to work with new technologies effortlessly. 

To maximize your return on investment, it is important to implement new technology slowly, ensuring it integrates smoothly with current workflows without overwhelming users. If your team and customers are not ready, struggle to adapt, or use new systems incorrectly, it will incur additional expenses to fix mistakes and retrain them.

5. Industry-specific transformation costs

Industries such as healthcare, financial services, and manufacturing often require extensive digital transformations, which can lead to higher costs. Each project needs to consider specific regulations, supply chain dependencies, and specialized expertise.

For instance, let’s consider healthcare providers. They have had to completely reshape their operations during and after COVID-19 to ensure patient care despite fluctuating supplies and new health protocols.

Today, businesses in these sectors can streamline their operations by partnering with suppliers who offer advanced digital tools like patient management systems, regulatory compliance software, and real-time inventory monitoring. Implementing these digital solutions in sectors like healthcare can be more costly due to the need for precision and scale compared to less regulated industries.

6. Cost of consistent innovation

Digital transformation is not a one-time investment. The technology will change and so does the customer’s needs. Businesses have to find the next way to keep innovation consistent and adopt new technologies to deliver exceptional user experience. 

It will incur more cost. So make sure to adopt a tech stack that will help your business meet future demands. 

7. Cost of Dedicated Digital Leadership

With digitization, new roles have emerged that play a significant and unique role in a successful digital transformation. Some prominent roles are- Chief Information Officer (CIO), Chief Technology Officer (CTO), and Chief Digital Officer.

These roles demand expertise, so the cost will also be high. Consider this factor as well. If you think your business needs expertise like this, connect with our DX experts. 

8. Compliance and regulation costs

The cost goes beyond the technical and upskilling challenges. It is also important to consider factors like environmental, regulatory, and political issues to create a product. It might be a small amount at first but could impact the overall b budget strategy if not considered earlier.

9. Cost of digital transformation consulting

Companies led by digitally skilled teams are 50% more likely to reach their transformation goals.

Digital transformation is not a cup of tea for everyone. Today, businesses are partnering with IT experts to lead their digital transformation initiatives. This partnership can be expensive, depending on the services needed, project complexity, and scope of services.

Organizations may hire digital transformation consultants to devise IT strategies or assist in deploying software and training staff.

The cost of consulting varies based on:

• Consultancy fees.
• Extended project timelines and customization expenses.
• Software purchase and implementation expenses.
• Employee training facilitated by consultants.
• Additional services like project and change management.

We worked with MutualArt, an art auction platform, to reduce their 25% cost and faster deployments with the power of AWS. we have helped them scale and enhance automation for more engagement.

See how we helped them optimize their overall cost.

Also read- Elevate Your Business with Digital Transformation Consulting

Best Digital Transformation Cost Optimization Tips

Here are some tips to reduce significant digitization costs.

1. Overprepared yourself

As per John Rossman, you cannot transform if you do not have a definition for the future state.

Understanding your future goals and how to accomplish them is the key to low-cost success. Having this long-term vision will help you prepare an effective and strategic digital transformation roadmap that will fulfill your current and future market demands.

Analyzing your existing business workflow will help you target your investments in the areas that require digital transformation.

2. Invest in digital solution

A digital solution will help you bridge gaps within the organization while reducing the cost of digital transformation. From automating to delivering real-time insights, you can improve business and employee productivity with the right tool.

There are thousands of digital solution service partners in the market that can help you build advanced digital platforms to streamline your operations. Find the right partner and invest in the right technology to understand Technology upgrade costs.

3. Employee involvement to reduce transformation costs

The best way to ensure team members embrace digital changes is by keeping them informed about project goals and timelines that affect their work.

If employees are surprised by new processes, managing the change can become difficult. Even great software can disrupt workflows if teams aren’t given time to adjust.

Discuss potential challenges with them, such as learning new tools and skills. According to Rossman in The Digital Leader newsletter, leaders should envision how digital changes will impact their brand, culture, customer experience, and business model.

This approach gets employees excited and aligned with the reasons for going digital. Rossman also emphasizes the importance of regularly communicating about the digital transformation journey.

We are Here to Help you Launch Cost-effective Transformation Projects

OnGraph is a digital transformation company that delivers future-ready solutions. But what about the cost? Don’t worry, we have you covered. 

With our 15+ years of expertise in implementing the latest technologies and developing advanced solutions, we have curated the right strategies that cut down your development or say innovation cost. What makes us unique-

• Our adoption of low-code and no-code
• AI-first approach
• White-label solutions with AI integrations
• Streamlined market research tools

And more. Connect with our digital experts to know how your business can build scalable and future-ready solutions at low-cost investment. 

Also Read- Digital Transformation: What is the Role in Business Model?

FAQs

Q. Can digital transformation reduce future spending?

Yes. if implemented well under expert guidance, you can save significant costs with improved efficiency and ROI.

Q. Why is digital transformation a costly affair?

Implementing new technologies with skilled professionals handling complex tasks incurs additional costs. However, it is a one-time investment that will make your business future-ready for a minimum of 10 years from now. 

Q. How can you reduce business transformation costs for enterprises?

We focus on future demands and find areas that can be improved with technologies to prepare it for the coming years. 

Q. How do you measure digital transformation cost?

The budget of the digital transformation project depends on the organization’s size, scope for digitization, skills required, industry regulations, and others based on your requirements.