The driving force behind digital transformation varies by industry. Automation is designed to increase operational efficiency. Omnichannel solutions augment customer journeys. Analytics and reporting tools directly increase the accuracy of decision-making. There are a wide variety of different motivations behind different technology investments. Yet, the commonality between these diverse digital transformation initiatives touches on one of the fundamentals of business success: ROI.
Not every available solution will yield returns for your business. However, failing to invest in transformative technology will undoubtedly cause you to lag behind more agile market competitors. This balancing act is where digital transformation services come into play.
Based on the experience of our software implementation experts, this article covers the following topics:
Estimates suggest that 90% of all organizations are undergoing some form of digital transformation. Switching from traditional manual processes to digital workflows simply offers too many benefits to ignore. To succeed in the modern business world, you need to leverage novel digital solutions. The term digital transformation encapsulates this need, describing the transition from outdated, manual, legacy systems to modern technology.
Now, the issue most organizations face during digital transformations is a lack of the internal solution or system-specific expertise required to successfully select, design, configure, implement, test, and manage new digital technologies. This is where digital transformation services come in. These are external teams of highly skilled experts who leverage their knowledge to assist organizations in digital transitions, primarily in terms of strategic planning, technical solution implementation, and long-term system maintenance.
Of course, digital transformation services encompass a wide range of potential functions. The types of digital solutions you use will depend on your industry, sector, or organizational objectives. Consequently, the specialization of your digital transformation services provider should match the category you find yourself in. If you are a sales-based organization, you should work with service providers that offer Sales Performance Management (SPM) solution implementations. Alternatively, if you are focused on pricing or if you are an insurance provider, you should find specialists with expertise in your area of focus.
A study of 80 global banks from 2018 to 2022 found that the group's digital leaders achieved annual total shareholder returns (TSR) of 8.1%, compared to 4.9% for those lagging behind. At the same time, the banks with higher digital solution adoption saw a higher return on pre-tax tangible equity (ROTE) from 15.5% to 19.3%, as compared to lagging group members' growth from 13.6% to 15.3%. This outperformance stems from leaders' ability to grow retail revenue (0.8% annually vs. a 1.4% decline) while containing expense growth (1.3% annually vs. 2.3%).
These findings underscore the strategic imperative of digital transformation, as mature digital capabilities enable superior customer experiences, cost control, and long-term competitive advantage while delaying adoption risks, widening the performance gap, and eroding market relevance. However, the same study notes that while 89% of large companies globally have a digital and AI transformation underway, they have only captured 31% of the expected revenue lift and 25% of expected cost savings from this effort. Consequently, we understand that strategic digital transformation is necessary to keep up with modern competitors; poorly designed or implemented infrastructure upgrades are unlikely to yield returns. In other words, you need to pick the right digital transformation initiative to see the significant revenue benefits you are after.
As with any business investment, you need to carefully consider your potential ROI. To help you weigh the costs and the returns of your digital transformation efforts, this analysis outlines the financial implications of upgrading your legacy systems.
Digital transformation involves upfront investments, which can be significant, but they lay the foundation for long-term efficiency and competitiveness. These costs include fees for service providers, technology investments, data migration, and infrastructure updates. Let's explore each in detail:
As discussed above, implementing digital transformation requires expertise that often comes from specialized service providers. These firms help tailor solutions to your organization's unique needs through services like consulting, system installation, and configuration. For example, a retail company implementing Salesforce might work with software implementation experts to customize the platform for managing customer data and automating workflows.
Depending on your specific digital transformation needs and the scale of your organization, these fees can range from tens of thousands to millions of dollars, yet, the value lies in ensuring the technology fits seamlessly into existing operations. Ultimately, the returns from a well integrated and configured solution will outweigh the initial service fees. In other words, while no investment comes with guaranteed returns, the potential benefits you can see from the right digital transformation project will yield revenue gains proportional to the amount you invest.
Beyond the initial implementation services costs you will incur, you also need to factor in long-term solution management. For example, you should plan to engage your digital transformation service provider in regular health checks with the aim of ensuring that your system is optimized, secure, and functioning as intended. These reviews can identify inefficiencies or vulnerabilities before they escalate. For instance, after migrating to a cloud platform, a technical health check might uncover underutilized resources that can be scaled down, saving costs.
Technical health checks may also be necessary prior to your new solution's implementation to, for instance, solve potential data or preexisting infrastructure challenges. This prevents future inefficiencies by resolving current problems before they impact your new digital solutions.
Depending on the solution you implement and your internal resources, you may need to work with a managed services provider post-implementation for ongoing support, maintenance, and upgrades. This means that instead of handling these tasks internally, you will outsource them to third-party providers. In practice, this looks like a manufacturing company using SAP relying on managed services to monitor system performance, apply patches, and ensure compliance with industry standards.
Check out these buyer's guides to estimate your potential implementation costs for Pricefx, SAP Incentive Management, or Xactly.
Technology investments are the most obvious digital transformation expenditure you will need to make. Yet, it's important to note three key areas in which you may need to invest: software licensing, hardware, and subscription fees.
In addition to direct expenses, digital transformation often incurs several indirect costs. Operational disruptions often arise during system integrations or data migrations, leading to temporary downtime that can impact productivity and service delivery. For instance, a retailer transitioning to a new inventory management system might experience delays in order processing during the migration phase. However, you can mitigate these disruptions by working with an experienced software implementation partner who knows and follows transformation project best practices.
Change management is another challenge, as employees may resist adopting new tools or processes, requiring time-intensive training and communication efforts to ease the transition. Adjusting to new workflows can temporarily slow operations, as teams learn to navigate unfamiliar systems. The key to avoiding the costs of shelfware and increasing solution adoption is proper training.
Digital transformation services offer a range of benefits that enable organizations to thrive in a fast-paced, technology-driven world. These advantages span operational efficiency, customer experience, revenue growth, risk mitigation, and employee engagement, ultimately driving business success.
Operational efficiency is one of the most immediate gains. Automation eliminates repetitive manual tasks, reducing the likelihood of human error and enhancing overall productivity. For example, robotic process automation in invoice processing can cut hours of manual work into minutes. Cost savings also emerge as digital processes reduce reliance on paper, energy consumption, and outdated systems. Furthermore, cloud-based solutions provide seamless scalability, allowing businesses to adapt quickly to growth or changing demands without the need for substantial infrastructure investments.
Another standout benefit is the enhanced customer experience delivered by digital transformation. By leveraging improved data insights, businesses can personalize products and services to meet individual customer needs, such as recommending tailored financial plans in real-time through an app. Digital tools also accelerate service delivery, ensuring faster response times, while integrated platforms provide consistent experiences across multiple channels, from social media to in-store interactions.
In terms of revenue growth, digital transformation enables organizations to explore new business models, such as subscription services or e-commerce, which can open up additional income streams. Digital tools also facilitate market expansion by breaking geographical barriers and giving businesses global reach. Moreover, predictive analytics and business intelligence tools empower companies to make smarter decisions, identifying opportunities and mitigating risks more effectively.
Risk mitigation is another critical benefit. Advanced cybersecurity tools protect sensitive data, fostering customer trust and preventing costly breaches. Compliance becomes more manageable as systems are designed to meet industry standards. Additionally, disaster recovery and cloud backup solutions ensure that operations continue with minimal disruption in the event of unforeseen challenges.
Finally, employee engagement improves as modern tools eliminate tedious tasks, allowing staff to focus on meaningful, high-impact work. Flexible digital platforms also enable remote work and collaboration, catering to the growing demand for work-life balance. Finally, organizations that invest in employee training to master these tools foster growth and retention, cultivating a workforce that is both skilled and motivated.
It's not possible to provide a guaranteed ROI prior to your digital transformation implementation. There are many moving factors, both internal and external, that will impact your total returns. Therefore, it's important to note that any prior figures are simply a potential estimate of your returns and not a promised outcome. Moreover, your exact costs will vary based on your system requirements, organizational scale, and other unique factors. However, to help you do your due diligence as a savvy investor, let's explore a quantitative analysis of a theoretical investment of one of the most prominent best-in-class incentive compensation management platforms: Xactly.
Forrester's Total Economic Impact (TEI) study indicates a 328% ROI over three years for organizations using Xactly Incent. This figure implies that for every dollar spent on implementing Xactly, businesses gain $3.28 in returns.
For a more in-depth understanding of the costs and returns of this theoretical example, let's start with this implementation estimate cost framework:
For a large implementation, let's assume a cost of $112,500 as the midpoint of the $75,000–$150,000 range. Then, for the sake of our calculation, let's use a theoretical licensing fee of $175,000 annually, making a total three-year investment of:
Returns: Applying the 328% ROI benchmark, the returns over three years would be:
Net Gain: Subtracting the total investment from the returns:
This analysis demonstrates that even for a large implementation with its associated costs, Xactly delivers a substantial net financial benefit by driving efficiencies, reducing errors, and enhancing sales performance.
Digital transformation services can be game-changing for businesses in an increasingly digital world. By automating manual processes, improving operational efficiency, and delivering seamless customer experiences, these services offer tangible benefits. For example, businesses leveraging cloud-based solutions gain scalability to meet growing demands, while predictive analytics and AI-driven tools empower smarter decision-making. However, these benefits are not automatic—successful digital transformation requires the right technology, implementation strategy, and long-term support to ensure ROI.
Whether digital transformation services are worth it depends on the business's goals, industry, and readiness to embrace change. For organizations that lack in-house expertise, working with a digital transformation service provider can mitigate risks and ensure the smooth integration of new systems. Strategic investment in digital tools can drive substantial financial gains. However, achieving these results requires careful planning, effective training, and ongoing optimization. Ultimately, digital transformation services are worth it for businesses that approach the process strategically and align their technology investments with their long-term objectives.
Reach out to our team today for an expert opinion on how digital transformation initiatives would impact your business.