SOFTWARE AND SERVICES

What the Data Tells Us About Digital Transformation,
by Industry

The key ﬁndings for software and services companies
Software’s digital transformation
success rate of 60% is the highest
across all sectors because thesecompanies are inherently digitaland because leaders are naturally
primed to be early adopters ofdigital advances.

Top-quartile companies nail the six
key success factors, while mediancompanies struggle most with talent.

Software companies pursue digital
initiatives more broadly thancompanies in other industries,emphasizing customer experience,
marketing and pricing, and innovation.

Successful digital players areprioritizing areas that have notyet emerged as universal
priorities, such as automatedlead generation, personalization,and automated churn reduction.

Software companies havesophisticated forward-looking
digital agendas in customer
experience and services, security,and support functions.

ESG is becoming more important in
the digital agenda, especially supply
chain, customer and employee datarisk, and cyber resilience.

Source: BCG analysis.

The data in more depth

Rates of successin digitaltransformation

Source: BCG analysis.

Topics of focusfor software
companies

Top priorities forthe future

The criticalhuman andtech enablers

The role of ESG
in digitaltransformation

RATES OF SUCCESS

Nearly 60% of software companies fall in the win zone—a ﬁgure 70% higher
than the cross-industry average
CASES BELOW SUCCESS SCORE (%)
10080

Software company data points

Software andservices
sector average: 7.960
2021 cross-industry
average: 7.440

SoftwareCross-industry
Woe zone (success score <6)
Worry zone (success score ≥6–<8)

20

Win zone (success score ≥8)002468

10SUCCESS SCORE1

2021 BCG Global Digital
Transformation Survey overall

Software andservices sector

13%

52%

35%7%35%

58%

Limited value created(<50% of target); nosustainable change

Value created but total Target value met ortargets not met;
exceeded; sustainable
limited long-term change change created

Source: 2021 BCG Global Digital Transformation Survey.
Note: Survey question: “Across the following dimensions, please rate your organization’s digital transformation experience to date on a scale of 1 to 10, using the guidelines in the table below.”
1Success score is calculated from respondents’ answers on six dimensions of transformation: strategy; leadership; talent; agility; monitoring; and tech and data.

1.7x cross-industry average

RATES OF SUCCESS

Software companies struggle most with deploying high-caliber talent
DISTRIBUTION OF SUCCESS SCORES ON INDIVIDUAL KEY FACTORS1Integrated strategy with clear transformation goals

2

Leadership commitment from CEO through middle management3

Deployment of high-caliber talent

4

An agile governance mindset that drives broader adoption

5

Eﬀective monitoring of progress toward deﬁned outcomes6

Business-led modular technology and data platform
Software average123456789107.8

1Lower extreme

08.5
7.1
7.4
7.7
7.9

Upper or lower quartile Upper extremeWoe zone (success score <6)

Worry zone (success score ≥6–<8)

Source: 2021 BCG Global Digital Transformation Survey.
Note: Survey question: “Across the following dimensions, please rate your organization’s digital transformation experience to date on a scale of 1 to 10 using the guidelines in the table below.”
1Success score is calculated from respondents’ answers on six dimensions of transformation: strategy; leadership; talent; agility; monitoring; and tech and data.

Win zone (success score ≥8)

TOPICS OF FOCUS

Transformation priorities for software companies have been customer
oriented and innovation focused
Strategic objectives

Scope of digital transformation1

SHARE OF RESPONDENTS (%)

SHARE OF RESPONDENTS (%)

CROSS-INDUSTRYAVERAGE (%)

Customer experience and journeys

35

28

1819

Improvement incustomer experienceand go-to-market

Innovation and growthin the core and beyond
Performance improvement
through the operational
value chain
Performance improvementin support functions

Source: BCG Global Digital Transformation Survey, 2021, n=39.
1Respondents were asked to select all priorities that applied.

92

81

Sales and market acceleration

8571

Growth and business model innovation

85

72

Digital ecosystem and partnership

74

65

Marketing and dynamic pricing

72

41

Digitizing support functions

6946

Building resilience via cybersecurity
and compliance6254

Supply chain

49

48

Digital procurement

49

54

New business venture
Digital manufacturing and operations

41
28

45
50

TOPICS OF FOCUS

Software companies that are farther along in the transformation journey
shift their focus toward digitizing support functions and customer-centricity
Scope of digital transformation

SHARE OF RESPONDENTS (%)

10 pp–13 pp

9 pp

–7 pp

93807986

19 pp967279887657

Growth andbusiness model
innovation

Digital ecosystemand partnerships

Woe- and worry-zone software companies (combined)

Customerexperience andjourneys
Win-zone software companies

Sales andmarket
acceleration
Change of +5 pp or less

Source: 2021 BCG Global Digital Transformation Survey.
Note: Survey question: “From the list of most common digital outcome areas and enablers in digital transformation, please help us identify the scope of your digital transformation (select all that apply).”

Digitizing
supportfunctions
Change of more than +5 pp

TOP PRIORITIES FOR THE FUTURE

Nearly all software companies intend to direct 50% of their investments
toward customer experience and delivery of services
PLANNED SHARE OF WALLET SPENDING ALLOCATED ACROSS DIGITAL TOPICS IN THE NEXT TWO TO THREE YEARS (%)197

Customer experience
29100

Delivery of services

2290

Next-generation security
Next-generation salesand marketing
Digital support functions

1782
1790
15
Share of respondents allocating any investment toward each digital topic

Average share of total investment

Source: 2021 BCG Global Digital Transformation Survey.
1For example, the uppermost pair of bars can be read as “97% of software respondents plan to invest in customer experience, allocating an average 29% of total digital investment.”

TOP PRIORITIES FOR THE FUTURE

Software companies’ digital priorities: Customer experience
Digital initiatives (bars indicate relative prioritization of initiatives)
Multichannel customer access

1.00

Identiﬁcation of service improvement
areas based on customer feedback

0.68

Digital immersion experience creation for customer engagement

0.53

Customer services (chatbot, interactive voice response)

0.43

Integrated payments

0.39

Loyalty programs

0.10

Relative prioritization for all software companies
Source: 2021 BCG Global Digital Transformation Survey, n = 37.

Top priorities for win-zone companies

TOP PRIORITIES FOR THE FUTURE

Software companies’ digital priorities: Delivery of services
Digital initiatives (bars indicate relative prioritization of initiatives)
Multichannel sales and customer engagement

1.00

Cloud data warehouse solutions to support dataengineering with integrated pipelines

0.63

Automation of product/delivery life cycles(continuous testing, integration)

0.55

Optimized resource planning and allocation

0.29

Digital control tower for transparency and people optimization

0.21

Eﬃcient teaming by using collaboration tools
and eﬃcient communication channels
Digital tools to support agile delivery(e.g., Jenkins for release, Kibana for testing)Relative prioritization for all software companies
Source: 2021 BCG Global Digital Transformation Survey, n = 37.

0.17
0.10
Top priorities for win-zone companies

TOP PRIORITIES FOR THE FUTURE

Software companies’ digital priorities: Next-generation security
Digital initiatives (bars indicate relative prioritization of initiatives)
AI-powered network threat identiﬁcation

1.00

AI-driven anomaly identiﬁcation

0.81

Cloud application monitoring

0.63

Automated threat hunting

0.58

Data exﬁltration detection

0.35

Text/pattern recognition for phishing

0.31

Automated incident investigation

0.20
Relative prioritization for all software companies

Source: 2021 BCG Global Digital Transformation Survey, n = 37.

Top priorities for win-zone companies

TOP PRIORITIES FOR THE FUTURE

Software companies’ digital priorities: Next-generation sales and marketing
Digital initiatives (bars indicate relative prioritization of initiatives)
Smart customer segmentation

1.00

Personalized and targeted marketing

0.97

Automated lead generation and handling

0.69

Social-media-based customer engagement

0.66

Smart ROI optimization and A&P allocation1

0.47

Personalized oﬀer generation

0.36

Data-driven churn management

0.36
Relative prioritization for all software companies

Source: 2021 BCG Global Digital Transformation Survey, n = 37.
1A&P = advertising and promotion.

Top priorities for win-zone companies

TOP PRIORITIES FOR THE FUTURE

Software companies’ digital priorities: Digital support functions
Digital initiatives (bars indicate relative prioritization of initiatives)
End-to-end hire-to-retire digitization(including integrated training) for HR

1.00

End-to-end procure-to-pay digitization for procurement

0.77

End-to-end record-to-report digitization of ﬁnance activities

0.62

End-to-end order-to-cash digitization for
management of accounts receivable

0.59

End-to-end source-to-contract digitization for contracting

0.58

End-to-end contact-to-resolve digitization for contact center

Relative prioritization for all software companies
Source: 2021 BCG Global Digital Transformation Survey, n = 37.

0.47

Top priorities for win-zone companies

THE CRITICAL ENABLERS

Software companies intend to invest across broad range of tech andhuman enablersNine out of ten software companies plan to invest in infrastructure and cloud enablement, AI and big data, and modernizationof tech architecture, allocating on average about 45% of their total digital enabler spending to these areas
PLANNED SHARE OF WALLET SPENDING ALLOCATED ACROSS ENABLER DIGITAL TOPICS IN THE NEXT TWO TO THREE YEARS (%)192

Tech92

Human90

85

82

17Infrastructureand cloudenablement

14

Modernizationof techarchitecture

12

AI and big data

79

11Cybersecurity

11

Modernization oftechnologyorganization andoperating model

Share of respondents allocating any investment toward digital topic

77

9New ways ofworking

7472

9New talent andleadershipmodelsAverage share of total investment

Source: 2021 BCG Global Digital Transformation Survey, n = 37.
1For example, the leftmost pair of bars can be read as “92% of software respondents plan to invest in Infrastructure and cloud enablement, allocating an average 17% of their total digital enabler spending.”

87

Continuouslearning

Integrated
ecosystems

ROLE OF ESG IN DIGITAL TRANSFORMATION

About 82% of software companies
plan to increase investments in ESG(in line with cross-industry averages)… with greater emphasis on Sand G dimensions

Share of respondents planning to increase/decrease/maintain investment toward ESG in coming years

Leading digital initiatives being prioritized
to support E, S, and G goals

Moderatelyincrease48

Maintain as inprevious year(s)Decrease vs.
previous year(s)25200Source: 2021 BCG Global Digital Transformation Survey, n = 39.

Environment

34· Digital supply chain optimization· IoT for data collection, monitoringproduction processes, andenvironmental impact assessment

SocialSigniﬁcantly
increase

SHARE OF RESPONDENTS PRIORITIZING (%)

CROSS-INDUSTRY AVERAGE (%)· Reducing employee risk
· Ensuring protection of clients’, employees’,
and/or customers’ data

Governance

SOFTWARE AVERAGE (%)· Critical risk incident management,
building cyber resilience· Predictive risk analytics to ensure
improved preparedness and mitigation

56

171~49~62~62If you would like to discuss this topic, please contact one of the authors:
JOSE MARIA MORENO LOPEZ

COURTNEY DONGManaging Director & Partner, Madrid
moreno.josemaria@bcg.com+34 91 5206 173

Associate Director, Growth Tech, San Francisco
dong.courtney@bcg.com+1 818 317 2043

CHEN YU

DEREK KENNEDY

Managing Director & Partner, Shanghai
yu.chen@bcg.com+86 21 20823193

Managing Director & Senior Partner, San Francisco
kennedy.derek@bcg.com+1 415 732 8124

SCOTT STEMBERGERManaging Director & Senior Partner, Denver
stemberger.scott@bcg.com+1 720 800 9803