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The difference between digitization, digitalization & digital transformation

(Image credit: Ditty_about_summer)

Digital is dominating our century. Organizations simply would not survive long term without embracing it. From mail to email, telephones to smartphones and DIY to AI, the digital landscape is constantly evolving. The digital era has created concepts previously not even thought of. These concepts are in place in an attempt to describe the reality we live and run business in. Three of which consist of: digitization, digitalization and digital transformation. Often used interchangeably, it’s difficult to identify the difference between them. Yet, it’s actually vital for the organization’s business development team to be able to know the difference as they look to embrace them on their technological journeys. So join me as I unpack these three terms and find out how they can impact your business. 

Digitization: first step in securing processes  

Defined by Gartner, digitization is the process of changing from an analog to digital form, also known as digital enablement. In other words, digitization takes an analog process and changes it to a digital form without any different-in-kind changes to the process itself.

Ultimately this is a business’ first step in creating significant value in digitized data that is ready to be analyzed. It also helps save considerable amounts of meaningful documents, historical files and precious art from destruction and oblivion. By having all sensitive information in a digital format, the risk of a security breach is reduced. Encryption and tracing technology can also be implemented here to provide extra layers of protection. Where many industries have been historically document and paper-heavy in their processes, such as insurance, mortgage, finance, and healthcare, digitization of these forms will help them to future proof their organizations. 

What’s more, the recent events of the Covid-19 pandemic meant that entire workforces had to work from home. And the paper-reliant sectors and businesses really struggled as they could no longer control which employees were printing documents and where these were going to end up.

Digitalization: advancing with Cloud migration 

Now, perhaps more disputed is the definition of digitalization. According to Gartner, we can define it as the use of digital technologies to change a business model and provide new revenue and value-producing opportunities. This means that businesses can start to use their digitized data. Through advanced technologies, businesses will be able to discover the potential of processed digital data and help them achieve their business goals. This includes: improved internal or external business processes, gaining higher effectiveness in various fields, giving employees access to the necessary data, providing better understanding of a target group and delivering a better customer experience.

A particularly great example of digitalization is for organizations to migrate their business processes to the Cloud. Talk of a Cloud-powered future is vast as more and more enterprises move towards remote infrastructure in an attempt to master digitalization. In fact, Gartner predicts that by 2022, over 90 percent of businesses will migrate to the Cloud. With remote working still a dominating factor of 2021, it is essential that businesses are still able to function efficiently as competition is only getting more fierce. With a centralized portal via the Cloud, entire workforces, even globally, are able to collaborate effectively as though they were right next to each other in the workplace. Digitalization through the Cloud is a worthy step in the right direction as supported by our recent report which revealed that 84 percent of businesses positively evaluate the influence of Cloud for organizations in the long term.

Digital transformation: unlocking potential through software development

Finally, we are introduced to the concept of digital transformation. Here, Gartner states that digital transformation can refer to anything from IT modernization, for example, Cloud computing, to digital optimization, to the invention of new digital business models. Namely, this is the process of fully benefiting from the enormous digital potential in a business. It is a complex change for a company that affects all aspects of business, including its models, internal and external processes, management at all levels, as well as its products and services.

A big part of achieving seamless digital transformation is through software development. Being able to leverage the newest developments in technology is a huge advantage for businesses operating within competitive industries. But new technologies can be daunting and often a barrier for digital transformation as delivering reliable and high-quality results is a key focus for the majority of organizations. To help combat this, businesses can look to evaluate exactly what its strategic goals are and implement the software that is going to help it reach those ambitions and achieve tangible results. Businesses should also ensure that the technology it selects is equipped with sustainable software that is going to withstand the inevitable digital advances and deliver the requirements of the next few months and years.

Outsourcing to nearshore software development companies is a valuable way to build on existing staff skills and progress with digital transformation. In fact, our recent research showed that the most popular solution to skills shortage is to invest in the company’s employees with training and preparation for new Cloud-related challenges. For businesses looking to further improve, they can leverage services from an experienced partner. Not only does this help to make informed decisions in the early stages of migration, but it also ensures organizations can better learn how to make the most of the Cloud in the longer term.

A strategic partnership with software developers allows businesses to simultaneously decrease expenses, save time and bring years of experience to a project with ease. What’s more, a local investment can bolster an organizations’ competitive advantage by creating high-quality and innovative software solutions making them more agile than their competitors.

Preparing for the future 

Now that we have unpacked and discussed the differences between digitization, digitalization and digital transformation, what’s next for businesses? Despite the turbulence of the past 16 months, the future will remain tumultuous. By surviving so far, businesses can now look to prosper off the uncertainty and embrace the various digital strategies by considering which software applications are right for them in order to stay on an upward trajectory. 

Whether it is making the first step to digitize analog documents, digitalize through Cloud migration or digitally transform via software development, the digital landscape is constantly evolving and the time to invest is now. Harnessing the potential of the digital economy will be essential in the recovery of businesses in the coming months and offers the chance for the brave to seize new opportunities which will be pivotal to shaping the future of businesses.

Krzysztof Szabelski, Head of Technology, Future Processing (opens in new tab)

Krzysztof Szabelski is Head of Technology at Future Processing, one of Europe's leading software development companies.