Digital transformation has found its momentum and is experiencing rapid growth. Digital technology supported by the Fourth Industrial Revolution (Industry 4.0) has accelerated with unprecedented growth.
Digital technologies such as Artificial Intelligence (AI), the cloud, machine learning, the Internet of Things (IoT), and big data analytics bring a wave of huge changes both globally and in Indonesia. With digital transformation embodied in the adoption of new technologies, new business models based on improving customer experience, changing workplaces, and cutting business processes have begun to flourish.
Data from the National Development Planning Agency (Bappenas) and the Creative Economy Agency (Bekraf) reveals that the rapid growth of digital technology is driving the proliferation of startups in Indonesia. The joint report by Bappenas and Bekraf entitled ‘2020-2024 Policy Direction and Digital Economy Development Strategy’ stated that, from 2018 to 2019 in Indonesia there were 992 startups, dominated by 352 e-commerce startups, 53 fintech startups, 55 startups in the gaming space, and 532 startups in other areas.
Of that amount, Indonesia has given birth to five unicorns or startups valued at over US$1 billion, namely Gojek, Tokopedia, Bukalapak, Traveloka, and most recently Ovo in the fintech sector. All startups, in particular these unicorns, are developing rapidly with the support of digital technology that has disrupted the established business order.
Such rapid business growth has inspired corporations in general to embark on an exponential digital transformation initiative. In fact, according to a report released by global research consulting firm International Data Corporation (IDC), with digital transformation initiatives flooding companies, it is not surprising that by 2023 the prediction that more than half of all gross domestic product (GDP) worldwide will be driven by products and services from digitally-altered industries. Such an amount of digital integration shows that the global economy will achieve digital supremacy over the next few years.
Realising this, institutions need to examine the opportunities and challenges of the digital transformation trends that will develop in 2020 and beyond. The aim is to provide comprehensive insights to be followed up and to help companies stay competitive in an increasingly dynamic market.
Challenges such as return on investment (RoI) for technology expenditures in the course of a company’s digital transformation still need to be followed up with comprehensive concrete solutions. Likewise, the challenge of finding talented human resources (HR) is the cutting edge of a company’s digital transformation journey. To help institutions anticipate shifting trends in digital transformation, Telkomtelstra, as a digital technology solutions company, has come up with five digital transformation trends for 2020 and beyond. The latest trends include:
1. Digital technology investment will continue to surge
A study entitled “Disruptive Decision Making“, initiated by Telstra, a leading telecommunications and technology company and one of the parent companies of Telkomtelstra, in 2019 found that more than one third (33%) of local companies in Indonesia had invested over US$500,000 in digital transformation products and services over the past year, while almost one in 10 (8%) Indonesian companies invested over US$5 million.
Telstra’s research found that over the next three years, four out of ten (40%) companies in Indonesia expect total company spending in the digital transformation space to increase by more than 10%, above the global level (32%).
This is in line with IDC’s prediction that in 2023, more than 50% of all investment in information and communication technology (ICT) will go towards digital transformation and innovation, up from 27% in 2018. Increasing investment in digital transformation is a necessity, considering that companies not achieving digital supremacy in IT budgets will become paralysed and left behind.
2. Cyber Security will Boom in Indonesia
Cyber-security is predicted to boom in Indonesia following the increasingly rapid development of digital transformation. Indonesia is still considered to be lagging behind in terms of cyber-security services when compared globally.
In fact, the need for cyber-security is one of the main foundations in the digital transformation journey. Evidently, Indonesia is the third most targeted country in terms of cyber-security threats, after the United States and India, according to a report by Check Point, Software Technologies Inc., Further, the financial industry is the most vulnerable sector to cyber-security threats.
Cloud security will also be a top priority in Indonesia, with data privacy and confidentiality in the cloud environment being the main focus. The greatest risks to cloud security include customer misconfiguration, the mismanagement of credentials and theft by insiders. As more and more organisations migrate their workloads, applications, and data to the cloud, cloud security will continue to be increasingly important in Indonesia in 2020. Companies will also invest in security skills and governance tools to build the knowledge bases needed to keep up with the pace of cloud development and innovation.
3. Increased Use of Edge Computing
Currently, nearly a majority of the manufacturing sector, such as the aircraft, automotive, and pharmaceutical industries, among others, have used the leading solution of the Internet of Things (IoT) whereby the use of sensors covers all production processes. Numerous sensors are installed on an aircraft, enabling it to detect damage and maintenance risks. Likewise in the automotive space, the latest series of cars are full of sensors so that tiny defects such as flat tires can be detected. Data from various sensors is then collected in edge computing to be analysed by machine learning.
Edge computing is an extension of the cloud on the customer’s side. Each IoT device continuously sends data/information and requires instant analysis in the form of machine learning. Edge computing technology is the solution for this.
Therefore, in 2020, digital coverage is not just about connecting the cloud, but also about expanding cloud infrastructure, data, applications, and management, to edge computing.
4. An even greater apps boom
Based on the predictions of a number of experts, by 2023 more than 500 million digital applications and services will be developed and disseminated using a cloud-native approach globally. That number will match what has been developed over the past 40 years. Most will be targeted in the adoption of digital technology to support companies’ digital transformation journeys.
The boom in the number of apps will lead to the development of customer experience-based innovation with the support of big data analytics. Apps will continue to develop competitive intelligence in the digital transformation landscape, integrating ideas into future planning, and ensuring that human resources are ready to contribute to their operations.
In Indonesia, one of the booming trends in the number of digital applications can be seen in the rise of fintech apps and digital wallets. Quoting statistical data from the Financial Services Authority (OJK), as of 26 December 2019, there were 164 registered lending fintechs with permits in Indonesia. This number is very small compared to the total lending fintech population — which provides digital application-based services — with an estimated total of at least 2,000 lending fintechs in Indonesia as per late 2019.
5. Artificial Intelligence cannot be avoided
Artificial Intelligence (AI) increasingly dominates company digital transformation process trends. Not only private institutions, but even the government has become increasingly aware of the need for AI-based technology.
This can be seen from the statement of President Joko Widodo (Jokowi) in early December 2019, which outlined the government’s plan to replace echelon III and echelon IV (public servant) levels with AI. The aim is to improve the bureaucratic system in Indonesia so that it can make changes more quickly, make decisions faster, and act faster on the ground, while creating broad efficiency. The widespread use of AI has been trending globally. In fact, by 2025, at least 90% of new applications will invest in AI to make them “smarter” and “more dynamic.” By 2024, more than 50% of user interface interactions will use vision, speech, natural language processing (NLP), and augmented reality/virtual reality (AR/VR), activated by AI-based AR/VR.