KPMG global
tech report
2023
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global tech report 2023

1

Contents
03
06
12
16

Foreword
Section 1:
State of play
Section 2:
Trusted transformation

22
26
29

Section 4:
Momentum threats
Section 5:
Intentional digital transformation

Conclusion

Section 3:
Digital ambitions

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Foreword
Be determined, not deterred. Despite the headwinds of global
economic uncertainty, digital transformation leaders that arecommitted to their innovation priorities continue to realize
value at pace.
By aligning investment in technology with their strategic ambitions,these organizations are upholding momentum. When it comes to digitaltransformation, a hesitant mindset could prove costly, and not justbecause competitors will continue to invest: new technologies cangive businesses ways to deal with the difficult market.
The good news is that the latest KPMG research suggests that manyorganizations refuse to be blown off-track. In this year’s edition of ourglobal tech report, technology professionals are resolute. Some leadingorganizations are already generating profit from their investments inemerging technologies — and are coping well with priorities such as
the environmental, social and governance (ESG) agenda.

KPMG global tech report 2023

3
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This is not to downplay the challenges. Notably, 67 percent oftechnology leaders say they are now expected to do more with smaller
budgets than they were last year: 72 percent and 69 percent of AsiaPacific (ASPAC) and Americas businesses respectively say this, while
61 percent of those in EMA feel the same. Also, coordination issues
between technology functions and the rest of the business frequently
derail digital transformation progress. But despite these pressures,organizations must rise to the challenge and continue to find ways todigitally transform to avoid falling behind the competition.

67%

72%

of technology leaders say they are
now expected to do more withsmaller budgets than they werelast yearof Asia-Pacific (ASPAC)
and 69 percent of Americas
businesses say this, while
61 percent of those in EMA
feel the same

Tech on track

Emerging tech buy-in has leapt forward

In last year’s report, 66 percent of organizations said they were either
very or extremely effective at using technology to advance theirbusiness strategies. Almost all said they had successfully useddigital transformation to improve profitability or performance overthe previous two years. Today, that track record is paying off as buyin from senior leaders for the deployment of emerging tools andtechnologies has almost quadrupled.
These results show what is possible. By demonstrating the potential
returns of well-placed technology investments, tech teams canunlock support for future technology bets. And having madesignificant advances, many businesses are exploring new innovation
opportunities — particularly in areas such as artificial intelligence (AI).
They are also thinking hard about how to build on the improvements
they have already made — with more rigorous management of theircloud-based infrastructure, for example.
In this year’s research, we look at organizational priorities and plans
for technology. We surveyed 2,100 executives and carried out indepth discussions with industry experts to find out how organizations
are looking forward to the next stage of the digital transformation
journey. Where do they expect emerging technologies to drive newvalue? And how will they move forward with pace and confidence?

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10%

38%

In 2022, only 10% of thosesurveyed had leadershipbuy-in for emerging tech

In 2023, 38% have buy
in from leadership for
emerging tech4

About the research:

The study is based on a survey of 2100
executives from 16 countries:

The study is based on a survey of 2100 executives from 16 countries:

We also interviewed seven senior technology leaders and experts:

29 percent from Asia Pacific (ASPAC)•	David Reeve

38 percent from Europe, Middle East and Africa (EMA)•	•	
33 percent from the Americas
There are representatives from across nine industries including:energy, education, financial services, government, healthcare,industrial manufacturing, life sciences, tech, retail and consumer
packaged goods.
A significant proportion of the sample is composed of seniorleadership, including board members or members of the C-suite,
VP or head of department and director level.
In terms of the size of these organizations, annual revenues sit
above $100 million.

CIO at University of Technology Sydney

John (jt) Tonnison
Executive Vice President, Chief Information & Digital Officer
at US Foods

Masashi Kaneko
CDO, Vice President and Head of the Digital Technology Department
at Mitsubishi Tanabe Pharma Corporation

Michael von RoederGroup Chief Digital Officer at 50Hertz Transmission GmbH

Nandha Kumar
Chief Information Tech and Data Officer for Americas at Danone

Nan Wang
Executive Director, China Market IT Head at Merck

Swamy Kocherlakota
Executive Vice President and Chief Information Officer at S&P Global

33% 38% 29%
Americas

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Europe, Middle East
and Africa (EMA)

Asia Pacific5Section 1:

State of play

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6

State of play: unlocking value fromtransforming with intent
Rather than embracing new technologies simply for the sake ofit, organizations should ensure their digital innovation plans areintentionally tied to their dynamic strategic and commercial goals.
“Being intentional means being really clear what value you intend
to generate from the technology you deploy,” says David Reeve,
CIO at the University of Technology Sydney. And this value needs
to be quantifiable in some way, “…whether that’s in dollars or othermeasures of efficiency. When you’re not intentional about the returns
you intend to achieve, technology projects can drift aimlessly, andbecome protracted continuing for far too long.”
The good news is that by following a systematic, value-led approach,many organizations have already created tech infrastructures that are
generating useful benefits for their business models.

Being intentional means being reallyclear what value you intend to generate fromthe technology you deploy.
David Reeve
CIO at University of Technology Sydney

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All new technologies are improving
organizations’ profitability or performance

Efforts poured into digital transformation projects
to date are paying off
Similar to the findings in the 2022 research, the majority of thisyear’s respondents confirm they have successfully used digitaltransformation to improve their profitability or performance insome way. But, this year, the performance uplift has experienced ayear-on-year increase. Overall, an average of 63 percent of respondents
have reported an increase in performance as a result of their digitaltransformation efforts over the past 24 months. The largest group of
respondents see technology investment driving profit or performance
improvement uplift of over 10 percent, up from last year’s mostcommon rate of improvement uplift of around 2.5 percent.
In many cases, digital transformation investments are providing returns
that have exceeded expectations and are driving tangible gains:

29%of businesses say they
have seen a profitability
or performance gain of
at least 11 percent frominvestments in data
and analytics

27%

26%

Over the past 24 months, have your digital transformation efforts with thefollowing technologies positively impacted profitability or performance?

Data and analytics
66%

say the same of investment inpublic cloud and as-a-service tools

Cybersecurity
have seen such gains frominvestment in artificial intelligence
and automation

64%
Public cloud and XaaS technologies

Other benefits respondents shared include increased employee
productivity, improved efficiency and cost control, enhanced
customer engagement, higher levels of employee satisfaction,
support for new business development and the enablementof innovation.
But some parts of the world seem to be moving more quickly thanothers. In the Americas, for instance, only 24 percent of organizations
report a significant increase in profitability and performance frominvestments in data and analytics; that rises to 28 percent in EMA
and 35 percent in ASPAC. These regions are seeing more noteworthy
gains across the board.

64%
AI and automation
63%
VR/AR (including the Metaverse)
60%
Low code / no code
59%
Key:
Increase in profit or performance

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8

Against this backdrop of successful recent digital transformation,
many businesses have a level of self-assurance: 73 percent say
they will be able to grow using their existing technology stack.
Interestingly, 38 percent say they now have buy-in from seniorleaders for the deployment of emerging tools and technologies— this figure has increased from just 10 percent when this research
was conducted last year. In the industrial manufacturing sector, thefigure is now up to 50 percent, with energy, government (both at 44
percent) and healthcare (43 percent) not far behind.

Customer engagement and cybersecurity stand firm as
popular focus areas for digital transformation projects

While it is positive to see organizations enjoying the rewardsof their hard work with digital transformation, they must avoid
the trap of becoming complacent. If they fail to stay in tune withnew industry developments and shifts in customer expectations,organizations may soon see their competitors overtake them.

•	
57 percent of respondents say improving upselling andcross-selling opportunities is a leading driver for their digitaltransformation efforts

38%

Consistent with what was observed in last year’s report, digital
innovation projects are primarily focused on achieving performance
uplifts around cybersecurity and customer engagement.
A desire for improved customer centricity, for instance, is a common
trigger for digital transformation:•	
51 percent say that the need to do a better job of converting
prospects into customers is a trigger of transformation

The three most influential customer expectations
in digital transformation projects

01
Stronger data privacy/cybersecurity02

By some measures, ASPAC businesses lead the way here: 61 percent
are focused on upselling and cross-selling, for example, rising to 64
percent in China.

Speed of customer service

Diving deeper into how customer needs are shaping digitaltransformation journeys, tech innovation initiatives are primarily
focused on meeting buyer expectations around cybersecurity,
speed of service and convenience.

03
Convenience(including 24/7 access)say they now have buy-in from senior leaders for the
deployment of emerging tools and technologies

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To get better at converting prospects into buyers and boosting theloyalty of existing customers, organizations should ensure theirdigital evolution journeys involve service and product upgrades thatcan save customers time and minimize any chances of frustration.
Rather than risk becoming complacent about the strength of their
existing tech stacks, leading organizations recognize the importanceof being nimble with innovation in the face of rapid technology
change and evolving customer expectations. It is significant, forexample, that AI is now seen as the most important technology forachieving their organizations’ short-term ambitions. They are moving
quickly to embrace rapid advances in areas such as generative AI.
Swamy Kocherlakota, Executive Vice President, Chief Information
Officer, S&P Global, notes that the financial index firm is assessing
how the likes of generative AI is moving customer behaviors
towards more conversational engagement experiences. “Manuallyreading and digesting information is going out of fashion in favorof more conversational styles of communication, where the exact
information a customer is searching for is served up to them in apersonalized way.”
He adds: “So we are looking at our assets and saying: “That’s going togo out of fashion over time. How are we going to communicate
with our customers going forward? How do we make our products
more conversational, and what new products and business
opportunities come with this new channel of interaction?”

Important technologies are delivering real value,
but management challenges remain
Looking at the research respondent base, progress is faster in someareas than in others. For example, while businesses are excited about
the potential for AI (see Section 3 for more on this), they are still inthe early stages of using it. Just 15 percent have reached a stage
where they are progressing proactively in the delivery of their
AI strategies.
By contrast, 68 percent of organizations report that their work withdata and analytics has gone beyond the experimental phase, while 17
percent describe their approach to data and analytics as “embedded”— it is fully integrated into daily operations and is generating returns.
“We’re bringing all our data to a single platform,” says Nan Wang,
Executive Director and Head of IT at pharmaceuticals company
Merck. “This provides us with solid, rich and comprehensive big data
within and outside the company, which we can leverage to generate
revenue, make decisions, or tell compelling stories.”
Most organizations have recognized the value of data and are well on
their way in executing their data strategies. But they still have moreto achieve, especially around the integration issue of data sets notworking together across an organization.

We’re bringing all our data
to a single platform. This
provides us with solid, rich andcomprehensive big data within
and outside the company, which
we can leverage to generate
revenue, make decisions, or tellcompelling stories.
Nan Wang
Executive Director and Head of IT at Merck

Similarly, the everything-as-a-service (XaaS) approach to technology
is benefitting many organizations in a number of ways, but managing
XaaS environments is far from straightforward. Apart from thecyber and compliance benefits, the advantages of XaaS in 2023
are different from those reported in 2022. The new entrants to the
top four include better data management, accelerating technology
innovation and reducing the carbon footprint.

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These benefits seem to be supporting
an increase in productivity:

63%of the organizations we surveyed haveincreased their profitability or performanceby using XaaS in the past 24 months
say the risk of moving to XaaS is worth
it for the opportunities

Having successfully shifted to XaaS, organizations should now learn
how to intentionally optimize managing their technology estates.
This is an important lesson — particularly in the context of budget
constraints. KPMG research from 2022 found that 77 percent
of respondents were at least considering pausing or reducing
digital transformation investment as economic uncertainty
escalated. Businesses want to manage initiatives intentionallyto get the highest returns possible. This means looking at how to:•	Bring people and technology together more closely

When looking ahead at organizations’ top ambitions for XaaSin 2023, the goals that revolve around optimizing existing XaaS
environments all sit outside the top three priorities.

What are your primary ambitions for cloud at the moment?

Supporting the operation of emerging technologies(e.g, AI, quantum computing etc)
51%
Connecting data sources to enable advanced analytics•	Work with partners to drive value•	
Use emerging tools to get closer to customers

XaaS gives us important insights into some of the challenges
of digital transformation. Our research shows that while manyorganizations are preoccupied with the benefits of further
migration, they are not managing their existing XaaS
environments efficiently.

Primary ambitions for XaaS are mainly
focused on migration

Overall, the lessons of the past 12 months are clear. Digitaltransformation must be done with intent. To build on the
momentum they have created so far, technology leaders must work
closely with business partners to align their innovation efforts tostrategic ambitions. The way they achieve those ambitions mightchange as emerging technologies continue to evolve rapidly, but itis the business outcome that is all-important.

44%
Maximizing the amount of applications that are shifted to public cloud(XaaS technologies)
41%
Enhancing security and compliance40%
Supporting new products/service development
40%
Cost optimization (FinOps)
35%
Transforming the business model
Supporting new products/service development
35%

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11Section 2:

Trustedtransformation
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12Trusted transformation:
leading to better outcomes
To preserve the hard work put into digital transformation journeys,technology leaders are intentionally keeping a close eye on
cybersecurity considerations. In fact, many organizations havediscovered that proactively managing security risks in the earlystages of projects has significantly increased the success ratesof their transformation projects.
This is a wise approach, because digital transformation and theadoption of new technologies can increase cybersecurity risk. As
the surface area of a business’s systems expands, “bad actors” havea bigger target. And changes to the business’s infrastructure canintroduce points of weakness. Greater connectivity, meanwhile — for
employees, customers and partners — creates new attack vectors.
Crucially, this is not simply a technical challenge. Businesses that do
not prioritize security in transformation processes will undermine theirtrusted relationships with stakeholders ranging from customers to
suppliers. An emphasis on security during innovation is therefore avital part of transforming with intent, and the business ambition here
should be to drive trust in the organization.
Cybersecurity and privacy concerns were ranked as primary factorsthat could slow down transformation progress. And amid the ongoingmigration to cloud infrastructures, 40 percent say that enhancing
security has become a key goal in their XaaS projects.

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Security is being acknowledged as an opportunity
Rather than just being regarded as a resilience necessity, cyber isbeing recognized as a key commercial opportunity. Organizations that
perform strongly on security will secure competitive advantage;
63 percent of the organizations in our research say that improving
cybersecurity and privacy helps them to provide a loyalty-winningcustomer experience. They can also move forward with digitaltransformation more rapidly, because business leaders will likely be
confident in their ability to protect the organization even as it changes.
No wonder, then, that enhancing resilience and trust through cyberis now one of the top innovation goals for technology functions.
More than half (51 percent) of cybersecurity teams are focusing on
how to automate, streamline and embed security into the core of
the business. Their challenge is to do this without making security
a hindrance. If they can manage that, it can help people to work
confidently, make productive choices and play their part in protecting
the organization.
This work must be an integral element of digital transformation
projects right from the start — it cannot be an afterthought.
Thankfully, security by design is becoming an accepted principle: 62
percent of businesses have discovered that managing risk in the earlystages of projects, with security and control by design, significantly
increases the success rates of transformation programs. And in somecountries this figure is far higher: 74 percent in Brazil, 83 percent in
China and 88 percent in India.

This success is fueling appetite to become even more proactive withcybersecurity. Seventy-one percent of organizations say they want
to become more proactive at integrating trust, security, privacy andresilience into technology rollouts.
Proactiveness is also part of staying within budget, says Merck’s Nan
Wang. “Sometimes the costs attached to cyber and privacy are higher
than the costs of technology development costs,” he says. “Not onlyis it expensive to tackle cybersecurity and data governance elements
one by one, but it’s also not the most accurate or efficient way tomanage such issues.”
Instead, he says, security should be part of the product itself. But heaccepts that this is difficult: “It’s hard to do, largely due to a shortageof skills around implementing cybersecurity across a plethora ofsoftware and platforms.”

Sometimes the costs attached to cyber andprivacy are higher than the costs of technology
development costs
Nan Wang
Executive Director, China Market IT Head at Merck

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Three top ways to put security at the coreof the business

01
Automate, streamline and embed security
into the core of the business

02
Secure a complex ecosystem of third
parties and external service providers

03 einforce the trust that customers andRclients have in the cybersecurity andprotection of their data and services

14But the alternative may be even less appealing. Retrofitting security
protections can take longer to achieve, with less guarantee ofsuccess. So it makes sense to slow down early on in order toprogress faster later.
This is an important principle to apply more broadly in digitaltransformation projects, says Michael von Roeder, Group Chief
Digital Officer at 50Hertz Transmission GmbH, and is one reason hebelieves in building more varied technology teams. “Sometimes youcome to decisions more slowly when you have more diverse teams
because you have implicitly different perspectives to bring to thediscussion,” he says. “It can feel slower. But in the end my experienceis that every single decision is better.”“The key to diversity is to have a common goal but rememberthat your ways to the goal might be different,” says von Roeder.
“As long as you always have in mind that you all want the samething, it will work out.”
Spending time to establish secure and trustworthy foundationsin tech stacks can empower organizations to move forward withconfidence towards new digital ambitions.

The key to diversity is to have a common
goal but remember that your ways to the goalmight be different
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15

Section 3:

Digitalambitions
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16

Digital ambitions: we aren’t
slowing down
As organizations strive to move their digital transformation plansforward, the most successful innovators will continue to recognize
the dangers of embracing new technologies simply for the sake of
it. Encouragingly, many organizations have clear digital ambitions.
In line with last year’s research, boosting customer engagement andcybersecurity remain significant focus areas for digital investments.
But a notable priority shift is seen in ESG targets rising to the very
top of the agenda for many organizations.
After being ranked as the lowest digital transformation priority outof the areas measured in 2022, advancing ESG commitments is
expected to be the primary driver of technology innovation over the
next two years.

ESG is the top tech innovation priority
Businesses are working to take the initiative on ESG issues, andthis focus will drive the technology innovation agenda too.
Almost half of respondents (48 percent) say that, over the next two
years, advancing their ESG priorities will be a primary innovation
goal for their technology functions; this is consistent regionally with
53 percent in ASPAC, 46 percent in the Americas and 47 percent
in EMA.

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As ESG transitions from being an important reporting responsibility
to a driver of value creation, digital transformation will likely be
crucial. KPMG’s work in this area highlights the role of technology
in helping organizations achieve such a transition.
Almost three-quarters of respondents (72 percent) are confident they
can make progress on their near-term ESG ambitions using their
existing technology stacks. One example of this is using data andanalytics tools to track performance, manage reporting and identify
improvements.
The opportunity here is considerable, and many businesses arefocusing on how they can use technology to tackle their environmental
ambitions. To reduce their carbon emissions through more efficientworking practices, for example, or to measure and report their carbon
emissions more accurately.
Organizations are also looking at how to use technology to drive up
ethical standards in the workforce, and to support diversity, equality
and inclusion initiatives — including during recruitment. There isalso the possibility of using technology to develop more sustainableproducts and services.
As operator of parts of Germany’s transmission grids, not only
does 50Hertz Transmission GmbH have its own environmental
responsibilities, it also helps others achieve their sustainability goals
through technology. Michael von Roeder explains: “Green energy
is becoming an increasingly important factor for new industrial
settlements in our grid area. There is a high demand from businesses
for 24/7 green power. What we can do as a transmission system
operator is to expand the grid and use innovative technologies
in system-operations so that we can integrate a large share of
renewable energies in the electricity grids.”

Our aim is to enable the integration of 100 percent renewables for theelectricity consumption in our area by 2032,” Von Roeder adds.

Tech functions are increasingly contributing
toward ESG priorities
Which of the following innovation goals will your tech function
primarily contribute towards in the next two years?

72%

Advancing ESG priorities / commitements (including carbon emissions targets)of respondents are
confident they can makeprogress on their nearterm ESG ambitions
using their existing
technology stacks.

48%
Enhancing trust through cyber threat detection and management
45%
Reaching new regions / customer demographics

But, organizations admit they are slightly hesitant
about taking risks with new investments
Looking at how organizations plan to evolve their tech stacks to achieve
their goals - there is a sense of nervousness around investing in newtechnologies. Economic uncertainty has left 65 percent of businesses
feeling less confident about investing in new technology; however, it
would be a mistake for them to completely shy away from innovationand settle for the strength of their existing tech stacks. A halt inprogress could give their competitors a window of opportunity toovertake and become industry leaders.
This nervousness around market uncertainty does seem to be
impacting investment plans: 67 percent say they are expected to do
more with a smaller budget than last year — rising to 72 percent in
the ASPAC region.

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43%
Improving processes across the business
42%
Unlocking more value/insight from data
40%
Improving products and services
40%
Expanding into new industries
32%

18

Rather than become frustrated with this dynamic, John “jt” Tonnison,
Executive Vice President and Chief Information & Digital Officer at
US Foods, says technology teams must rise to the challenge. By
demonstrating real value in the early stages of a project, technology
teams can likely unlock more resource or budget down the line. He
says: “In every environment I’ve been in, when returns are clearly
demonstrated, further capacity follows.”“Take the capacity allotted and manage it well to deliver” says
Tonnison. “Demonstrate returns in one area of the business, perhaps
around customer-facing tools or machine learning optimizations ofa major balance sheet item, and you’ll soon see that other business
units will want to be involved. Then you’re in the space where
your business is willing to look holistically at its budget and makereassignments.”
The IT function must learn to tell its story more effectively. Amongindustrial manufacturing companies, for example, confidence andperformance are elevated; it is no coincidence that 81 percent ofbusinesses in this sector say they are fully aware of the productivity
impact and financial costs of their existing technology debts.
No other sector comes close to such self-awareness; only 59 percent
of life sciences businesses, for example, say the same.
Intentionally highlighting the business outcomes and returns up for
grabs can help transformation leaders win access to the support andresources they need to reach their key ambitions, for instance around
ESG or customer engagement.

The AI and machine learning boom continues
to burn bright
Organizations consider AI and machine learning as the most important
technologies for achieving their short-term ambitions. More thanhalf of the technology professionals we spoke to (57 percent) believethat AI and machine learning, including generative AI, will be importantin helping them achieve their business objectives over the next three
years. This is significantly ahead of the next technology in the rankings:
edge computing (42 percent).

Among leading businesses where investment in technology is driving
confidence and profitability most quickly, AI and machine learning areeven bigger priorities. More than two-thirds (68 percent) say thesetechnologies will be vital in helping them to achieve their short-termbusiness goals, compared with 57 percent of the total sample.

AI and machine learning are key to delivering on
short-term ambitions
Of the following technologies, which do you think will be most important in
helping your business achieve its short-term ambitions (over the next 0-3 years)?

AI / machine learning (including generative AI)

57%
Edge computing (inc IoT)
42%
Robotics/automation
41%
VR / AR (including the metaverse)
37%
Quantum computing

57%

68%

35%
Web3 (inc. tokenization)
32%
XaaS technologies (inc. public cloud or multi-cloud)believe that AI and machinelearning, including generative AI,
will be important in helping themachieve their business objectives
over the next three years.

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say these technologies will bevital in helping them to achieve
their short-term business goals,
compared with 57 percent of thetotal sample.

30%
5G
27%

19

AI strategies are changing at speed

How to succeed with AI

As a result of the rapid advances in AI, and generative AI in particular,
many businesses are being forced to reassess their AI strategies. In
last year’s report, 40 percent of businesses said they had reached
the “proactive” stage of their strategy for AI deployment; today,that figure has dropped to just 15 percent. While they recognize thepotential of AI to help them with their short-term ambitions, they arealso determined to be agile in their approach to execution.

It is important to remember that AI provides a way to drive value
from many other investments in technology, particularly in the data
arena, says Masashi Kaneko, Chief Digital Officer at Mitsubishi Tanabe
Pharma Corporation.

One reason for this is the debate about how to introduce AI ethicallyand safely: 55 percent of organizations say progress toward automation
has been delayed because of their concerns about how AI systems
make decisions. As scrutiny of AI increases, organizations will needpolicies and practices they can articulate and apply with confidence.
So while the pace of evolution in AI has accelerated, it remains
crucial that organizations put the right foundations in place before
rushing ahead, says Michael von Roeder.
“I can see why companies have taken a step back with their AI
strategies — in the last 12 months organizations saw that AI isleaping forward and can do awesome stuff, but companies also
realized they need to structure its application,” says von Roeder.
“That is where I see work needs to be done: implementing change
management and ensuring that the right procedures and governanceare in place, especially around the technological and data foundations.”
Generative AI requires high-quality training data that is searchable
and retrievable, he adds.

“Data and AI are important to businesses in two ways,” says Kaneko.
“First, they help us to make better decisions. And second, they canmake the invisible visible. In pharma, for instance, we need evidence
to develop new processes, and we have a lot of data. However, whenit comes to analyzing big data, the human brain is limited. That’s where
AI comes in. The marriage between big data and AI helps us to findwhat we can’t initially see.”
Merck’s Nan Wang says that businesses that are struggling withintegrating multiple technologies or advanced capabilities, suchas AI, in their tech stack may need to revisit the basics. Businesses
often overlook the need to strengthen their foundational IT layers
so that advanced technologies can thrive. “There are three main
layers: infrastructure, process and data,” says Wang. “And with thisfoundation in place you can introduce advanced technology layers
on top.”

Data and AI are important to businesses
in two ways, first, they help us to make better
decisions. And second, they can make theinvisible visible.

Three most common benefitsof AI and automation

01
Supported new businessdevelopment

02
Enhanced customer
engagement

03
Raised employee
satisfaction levels

Masashi Kaneko
Chief Digital Officer at Mitsubishi Tanabe Pharma Corporation

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20

Three steps towards improved integration

01
02
03

Build a strong infrastructure layer, comprising
cloud, on-premises elements if required,and connectivity.
Focus on process: move from manual operations
to digital processes, integrated where necessary
with external processes, especially on customer
engagement. This will enable increased innovation.
Develop deep data expertise: focus on constantimprovement, with foundations such as
governance, as well as with tools that generateactionable insight such as analytics and AI.

According to Nan Wang, Executive Director and Head of IT, Merck

It is sensible to proceed carefully and to be ready to change direction— particularly with generative AI models — and to focus on theneeds of users, such as employees and customers. For example,
limiting what models can do may ultimately be more transformative,
because users are more likely to reject more far-reaching changes.
Similarly, safe usage guidelines for generative AI applications within
the organization can help to ensure proper and effective use. The
guidelines might include a training requirement for anyone wanting
to use these tools.

Beware of following the herd
Despite most organizations demonstrating a strong level ofdiligence in their transformation strategies, the research identifies
a blind spot when it comes to technology choices. When asked
to explain thought process behind their technology selections,the most popular reason given for investing in technologies was:to copy competitors. In a number of areas, businesses in our
research are prioritizing particular technologies because they thinkcompetitors have already made the leap:

Organizations are prioritizing particulartechnologies because they thinkcompetitors have already made the leap

• 45 percent say they are prioritizing AI and machine learning
because they believe market leaders have already adopted this kindof technology• 52 percent say the same of virtual and augmented reality tools,
including the Metaverse
This fear of missing out is understandable, but peer pressure is nota business case on its own. Instead, technology leaders should stay
focused on working with business partners to drive commercial
and strategic outcomes. Valuable outcomes can only be achieved
if business leaders rigorously assess how suitable potential
investments are for their own organization.
To build on the digital transformation momentum so far in the face ofeconomic headwinds, organizations must continue to uphold a levelof intentionality in their strategies to prevent projects from drifting
aimlessly. This will be especially important to ensure organizations
do not waste precious money and resources in an era where budgets
continue to tighten.

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45%

52%

say they are prioritizing AI andmachine learning because they
believe market leaders have alreadyadopted this kind of technology

say the same of virtual andaugmented reality tools,
including the Metaverse

21Section 4:

Momentumthreats
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22

Momentum threats:
culture and collaboration
As organizations embark on their digital transformation ambitions,the journeys ahead will inevitably require them to get over technicalhurdles. But it is not typically these technical factors that organizations
worry about most. In this year’s research, respondents are more
likely to say that culture, collaboration and communication are
the bottlenecks sabotaging successful transformation. Technology
functions lacking coordination is seen by respondents as the top
hurdle in the way of transformation progress.
Almost half of organizations (46 percent) say their technology function
lacks the governance and coordination it needs to effectively support
transformation initiatives. More than a third (36 percent) describe
their culture as risk averse. And the same number are concerned
about the lack of skills within the organization.
Communication needs to go up and down the business as wellas across its functions. In particular, while technology leaders saythey need executive buy-in to succeed with digital transformation
initiatives, 69 percent say they need to get better at helping the board
to understand the potential of new technologies. In the ASPAC region
this increases to 80 percent.

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23

These communication problems extend to external partners.
Third-party relationships can get in the way of innovation by,
for example, stifling overall business agility• 57 percent of businesses say that long-term contracts with vendors
hamper their ability to invest in new technology• 42 percent say the need to manage an ever-growing ecosystemof partners and vendors is a technology stack challenge thatthreatens innovation

57%
of businesses say that long-term contracts withvendors hamper their ability to invest in
new technology

How to drive the collaboration dividend
US Foods’ Tonnison says that solving the collaboration problem often
comes down to digital teams taking the first step. “In a business orindustry that is not digital native, there is onus on the digital folks
to lead with advisory skills. To create and sell a vision for a digital
future and provide inspiration for change. To bridge the language gap
between lived experiences and digital potential.”
To minimize the chances of miscommunication between teams
derailing project progress down the line, be sure to address thedifferent perspectives and levels of understanding.
Mitsubishi Tanabe Pharma Corporation’s Masashi Kaneko says one
way to help employees get better at collaborating across the businessis to take people out of their individual functions and put them
together in new teams. “Create an interdepartmental project,” hesays. “Where different teams can get to know each other, collaborate
and better communicate among themselves and their clients.”

The tech department’s lack of coordination
threatens transformation progress
Which of the following challenges are most likely to slow down
your transformation?

Technology function lacking the goverance and coordination to effectively
support transformation initiatives

46%
Cybersecurity or privacy concerns
37%
A risk-averse culture that is slow to embrace change
36%
Lack of skills within our organization

Filling skills gaps will inevitably be challenging because of the pace atwhich technology is evolving and the huge demand for technologists
across multiple industries. However, pursuing diversity will not only
broaden the potential pool of recruits, but can also provide access to
new in-demand skills.
“The traditional way says to only recruit computer scientists ormaybe engineers, but that’s not the only route forward,” says 50Hertz
Transmission’s Michael von Roeder. “Sure, a medical doctor needs
to major in medicine, but for some digital technologies [educational
background] doesn’t matter: there are all sorts of transferable skills
from other fields.”

36%
Constraints from legacy technology
34%
Immature data-management strategies
34%
Transformation fatigue
28%
Spiralling costs
27%

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24

To help ensure that IT teams are collaborating effectively with therest of the business, senior leaders in tech departments may needto bridge skill gaps. “Tech talent often excels with technical skills,
but soft skills tend to be a hurdle, so the challenge for tech leaders
is to bridge over the gap to create a healthy blend of both,” says vonRoeder. “Getting this balance right is something the tech industry has
still to master.”Von Roeder adds that many companies need to fight the urge toovercompensate in their attempts to fill the soft skills gap. “I often
see companies in Europe putting non-tech professionals at C-levelto manage the tech team, which sometimes is problematic,” he says.
Instead: “it is very helpful for tech people to have a leader who truly
understands the complexities of technology, but at the same time
respects the value of soft skills.”

Skills needed by tech professionals in
leadership positions
Empathetic skills
1.

Ethical understanding

Commercial skills
1.

Strategic thinking

2.

Creativity and innovation

2.

Technical
and digital literacy

3.

Collaboration

3.

LeadershipTo place future digital transformation projects in a position to
succeed, business leaders must take ownership in troubleshooting
the collaboration and culture weaknesses that exist in theirorganization.

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25

Section 5:

Intentional
digitaltransformation
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26

Intentional digital transformation:
lessons from the leaders
Last year’s KPMG global tech report witnessed a surge in digitalcompetency from organizations in comparison to previous years.
This leap forward in digital effectiveness was to such an extent that it
became very clear organizations had outgrown our initial definitionof digital leadership.
This year, our research utilizes a new definition to identify digitallyadvanced organizations. Observations from this group can provide
best practice lessons for the rest of the market to consider as they
continue with their digital transformation journeys.
To be defined as a digital leader, organizations from our respondentbase needed to meet two important criteria:
1. They have built technology stacks that they are confident will
deliver their digital transformation goals
2. They have already started to generate profit or performance
uplifts from their technology investments
This group is made up of about 15 percent of the organizations
in our research, and the data shows that these digital leaders aretransforming at a faster pace and with better results than the
global average.
For example, 96 percent of the leaders say their technology function
can help the enterprise to confidently explore the potential of
emerging technologies, compared with 81 percent of organizations

To what extent would you say that your digitaltransformation investments in recent years havecontributed to the following outcomes?
overall. Two-thirds of the leaders have reached at least theimplementation stage on projects connected to emerging technologies,
XaaS, data and analytics and AI and automation, compared with lessthan half of the total respondent base.
Also, the digital leaders have made more progress across many of thecollaboration issues that threaten digital transformation progress, andthey continue to work hard on many of them. For example, 93 percent
agree that greater diversity in the IT team can support collaboration
with the wider business, compared with only 67 percent of the rest of
the organizations we spoke to; 94 percent are determined to get betterat increasing board understanding; and 76 percent are conscious of
the need to focus on long-term contracts with vendors.

(Percentages are those answering “above expectations”)

Increased employee productivity
72%
48%

Enhanced customer engagement
71%
49%

Improved efficiency and cost-cutting
68%

As a result of this work, the digital leaders are experiencing awide range of benefits, and are seeing more returns than they had
anticipated. On measures ranging from employee productivity toinnovation enablement, the leaders are far more likely to have seen
business outcomes that exceed their expectations.

How can other organizations catch up with thedigital leaders?
First, they need to focus on agility. When we asked about whatis essential to thriving in a digital economy, two of the actions theorganizations identified were embedding cybersecurity and privacyin their businesses and increasing empathy and communication between
business functions. Significantly, however, the digital leaders are more
likely than other businesses to choose “the agility to accurately respondto market signals” as a vital attribute.

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50%

Raised employee satisfaction
68%
49%

New business development
67%
48%

Innovation enablement
67%
46%

Key:
Leaders
Non-leaders

27

“The key to becoming a digitally enabled enterprise is having
adaptability,’ says Nandha Kumar, Chief Information Tech and Data
Officer for Americas, Danone. “Rather than a luxury, moving forward
it’s going to be a requirement for organizations to be adaptable andagile to the landscape around them.”

Get it right, and the potential benefits are huge:“At the end of the day,” Kumar adds, “truly meeting consumer
needs requires adaptability to re-engineer products, services andtechnologies so they align with the preferences of the customer,
rather than expecting the customer to adapt to your business.”•	
71 percent say they have enhanced customer engagement,
compared with 49 percent

Agility provides advantages in multiple areas that businesses should
consider. To what extent, for example, have they used data andanalytics to create feedback loops that enable them to constantly
iterate products, services and their approach to key businessproblems? Have they overcome the problem of functional silos
to support fast-paced and seamless collaboration across theorganization? Are they set up to pursue partnerships and projects
with third parties?

96%of the leaders say theirtechnology function can help
the enterprise to confidently
explore the potential of
emerging technologies
compared with 81 percent
of businesses overall.

• 72 percent of digital leaders are recording improvements in
employee productivity from digital transformation, comparedwith only 48 percent of the other businesses• 67 percent say they have better support for new businessdevelopment, compared with 48 percent• 67 percent are enabling innovation, compared with 46 percent
Reflecting on the task of evolving into an agile model and meetingcustomers where they are, Kumar says: “Moving towards an agile
model challenges your conventional way of doing things. At times
it is a little bit scary, because you are rewiring how an enterprisenaturally thinks.”

Rather than a luxury, moving
forward it’s going to be arequirement for organizations
to be adaptable and agile to thelandscape around them
Nandha Kumar
Chief Information Tech and Data Officer
for Americas, Danone

The biggest stumbling block when trying to become more agile isthe struggle to trust team members with more control in digitaltransformation journeys. “Agile teams are autonomous, so when
we ask them to find a way to unlock and deliver more value, wehave to give them the freedom to do so,” says Kumar. “This involves
loosening your grip on past recipes for success and remaining open
to subscribing to new innovations and ways of working. It’s not aneasy thing to work through initially, but the more you do it, the betteryou become.”
The ability to think and act with agility, so resources are pivotedin line with rapidly changing priorities, is going to become a key
requirement for technology leaders. For almost half of the digitalleaders (47 percent), agility is already seen as an essential attribute.

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28

Conclusion

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29

Technology leaders are determined to keep their organizations’digital transformations on track. But they should do it
intentionally, and collaborate with the broader business for
greater impact. Even in a supportive market environment,
investing in technology for the sake of it would be indulgent;
in today’s challenging times, innovation must be tied to clear
business outcomes and carefully monitored for bottom-line
returns.
Agility is crucial. Not every experiment pays off, but nimble
businesses are able to adjust at speed, responding to internal
drivers as well as the changing environment around them tooptimize outcomes. The most successful deployments canbe expanded while less-rewarding experiments are placed
to one side.

To learn from the success of the digital leadersreferenced in this research, consider these factors:

And consider the following questions:•	
9 in 10 digital leaders say they still need to get better at helping
the board understand the potential of new technologies•	
Which quantifiable measures of value are you setting for yourdigital transformation projects, and how tightly are you aligningthese to your organization’s commercial goals?

• 9 in 10 say they are fully aware of the productivity impact andfinancial costs of their existing tech debts• 9 in 10 believe they must be more proactive about integrating
trust, security, privacy and resilience into technology roll-outs

How are you using digital technology to enhance how your•	organization captures ESG value?

• 9 in 10 think collaboration with the wider business would bestronger if their tech function was more diverse•	Which policies should your organization have in place to help
your workforce leverage AI safely and with confidence?

• 6 in 10 say customer expectations of stronger data privacy andcybersecurity are a key influence on their strategic priorities•	
How are you troubleshooting the collaboration weak spots inyour organization, to make sure they don’t undermine yourdigital productivity?

• Almost half say expectations of ESG transparency are driving
their transformation efforts
Above all, focus on what the business needs now and in the future,and how technology can support that most effectively. This is how
the IT function can continue to win the support of the C-suite fortechnology innovation: 38 percent of businesses say that emerging
technology investment has executive buy-in, up from 10 percent inlast year’s research.

90%

of digital leaders

say they still need to get better at helping
the board understand the potential of newtechnologies

KPMG global tech report 2023

60%

•	
How will you ensure your business is keeping up with rapidly
evolving technology trends and remains alert to areas where you
could be falling behind?

•	What more should you do to prioritize cybersecurity as a leverfor driving and protecting business value?
Those who intentionally address these questions will help ensure
their company is equipped to confidently realize value at pace.
If you would like more information on how you can accelerate yourtechnology transformation, speak to a KPMG professional.

of digital leaders

say customer expectations of stronger data
privacy and cybersecurity are a key influenceon their strategic priorities

50%

of digital leaders

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Transformation never stops.
Neither do we.
At KPMG we believe that business transformation is too good an opportunity to miss. Combining the right tech and the best processes withpeople whose insight is as broad as it is deep, are essential ingredients to successfully transform. KPMG member firms have worked at theheart of global businesses for many decades, helping our clients realize the full potential of their people and technology, working together
to achieve real-world outcomes. Because when people and technology are in harmony great things can happen.

Making a world of difference:
KPMG people can make all the difference on your transformation journey. Together we can help you to orient your business around thecustomer, optimize functions for a new era, manage enterprise risk and regulation for a safer future, rise to a new level of value creation,and create an environment for managing ongoing change.

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31

Transforming for a future of value

Contacts
Bobby Soni

Barry Brunsman

Global Technology, Consulting Leader
KPMG International

Global Leader, CIO Center of Excellence,
KPMG International and Principal Advisory,
CIO Advisory KPMG in the US

E: bobbysoni@kpmg.com
T: +1 408 367 1585

E: brunsman@kpmg.com
T: +1 612-232-0072

KPMG firms’ suite of business transformation technology solutions
can help you engineer a different future – of new opportunities
that are designed to create and protect value.

KPMG ConnectedEnterprise

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Enterprise

KPMG’s customer centric, agile
approach to digital transformation,
tailored by sector.

KPMG’s suite of services to transformfunctions. Target operating models
designed and pre-configured on leading
SaaS (Software as a Service) platforms.

KPMG Trusted

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and confidently.

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tech report
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2023
of which is a separate legal entity.

32