INFORMATION TECHNOLOGY | Staff Reporter, Hong Kong

APAC companies plan on investing 6% of revenue on digitalisation in five years

Industrial companies gearing up for Industry 4.0

It has been noted that industrial companies from all sectors across the globe are getting down to business with Industry 4.0.

According to a release from PwC, its new report “Industry 4.0: Building the digital enterprise” surveyed over 2,000 Chief Digital Officers or other senior executives with top-level responsibility in their company for Industry 4.0 strategy and activity. The survey examines companies’ levels of digitisation, where they see themselves in the future and the challenges they face.

About one third of companies already rate their level of digitisation as high, and this value is expected to rise on average from 33% to 72% globally (40% to 69% in Asia Pacific) within the next five years. Industrial leaders are digitising essential functions within their internal vertical value chain, as well as with their horizontal partners along the supply chain.

In addition, they are enhancing their product portfolio with digital functionalities and introducing innovative, data based services. Companies worldwide want to invest approximately 5% of their turnover annually on digitisation. In Asia Pacific, respondents indicated spend of approximately 5% of their annual revenue over the last two years and this is set to increase to 6% in the next five years.

Of the companies surveyed within Asia Pacific, 40% of companies currently rate their level of digitisation as high. This value is expected to rise to 69% within the coming five years, indicating that Industry 4.0 has firmly arrived at the operational core of industrial companies and will drive a substantial digital transformation of all industries. When applying Industry 4.0 solutions, Asia Pacific respondents reflected that they plan to use big data to optimise overall business planning and controlling.

In alignment with the global trend, development is gathering speed as far as willingness to invest is concerned: Companies in Asia Pacific spend 5% of their annual turnover on Industry 4.0 projects; meanwhile, according to the results of the current 2016 study, this is forecasted to reach 6% in five years.

Here's more from PwC:

Based on the survey, globally 5% of turnover corresponds to a total investment of $US 907 billion. A major focus of these investments will be on digital technologies like sensors or connectivity devices, and on software and applications like manufacturing execution systems. In addition, companies are investing in training employees and driving required organisational change. More than half of these companies (55% globally, 58% in Asia Pacific) assume they will amortise this expenditure within just two years.

In the course of this transition, the managers surveyed globally estimate a cost reduction of on average 3.6% per year and an additional revenue of on average 2.9% annually. In absolute terms, this corresponds to a total of $US 914 billion, which is made up of $US 421 billion in cost savings and a simultaneous increase in turnover of $US 493 billion.

“Companies expect digitisation to deliver huge benefits and are investing correspondingly large amounts. Our study shows that this transition is taking place in all the countries surveyed in equal measure, not only in industrialised countries. Even if only half of the expectations associated with Industry 4.0 are fulfilled, it will fundamentally change the competitive environment in the coming five years,” says Ong Whee Teck, Technology Consulting Partner, PwC South East Asian Consulting.

At the end of this transformation process, successful industrial companies will become truly digital enterprises, with physical products at the core, augmented by digital interfaces and data-based, innovative services. These digital enterprises will work together with customers and suppliers in industrial digital ecosystems.

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