by Spencer Nguyen • March 10, 2022
Enterprises are spending more and more of their budgets on technologies and IT infrastructure as they invest in digital transformation. As a result, the “digital economy” — a term used to describe all the economic activity that results from digital technology spending — accounts for 9.6 percent of U.S. GDP, according to the latest statistics. But what is the digital economy, and what are the processes underpinning it?
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The digital economy refers to all the economic transactions and activities from digital technology expenditure. It can include spending on IT infrastructure, smartphones, mobile app development, artificial intelligence, social media, blockchain, e-commerce, broadband, digital media, digital services, the internet of things (IoT), and other information and communication technologies (ICT). This new economy has grown over the last 15 years, with an average annual growth of 6.5 percent from 2005 to 2019. That means the digital economy outpaced total U.S. economic growth — 1.8 percent, on average — during that period. Measuring the economy over the next 15 years will likely show even more explosive growth.
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Businesses like yours are fueling the digital economy every single day. That’s because organizations are devoting more of their budgets to new technologies such as automation, algorithms, and apps. The digital economy now influences many business models and impacts how organizations access services and goods, communicate with stakeholders, forge business partnerships, and work with service providers.
Say you want to improve digital transformation in your business. You might invest in a customer relationship management system, a new mobile app, and other technologies. All of those investments are driving the digital economy. This economy reflects the revolution that is taking place worldwide as enterprises increase agility, productivity, efficiency, revenue growth, and cost-saving.
The digital economy has also helped many businesses become enormous successes. As the need for new digital products and services grows, companies like Microsoft, Apple, Uber, and Amazon have generated billions of dollars in revenue.
Here are just some of the reasons why the digital economy is booming:
Enterprises want to create better digital customer experiences to move consumers through sales and marketing funnels. To achieve this objective, companies need to invest in technologies that understand customer behaviors, improve interactions, enhance engagement, and measure customer satisfaction. As consumption of digital technologies that optimize customer experiences increases, the digital economy becomes more lucrative.
Big data is a necessity for many data-driven enterprises. So more companies are purchasing technologies that enable data integration, data migration, and analytics. That helps these companies optimize data management and get more value from the data that flows in and out of their organizations.
With access to more big data than ever before, organizations require technologies that safeguard that data and ensure it doesn’t fall into the wrong hands. That’s why more enterprises are investing in data encryption, access control tools, and other security products that prevent data breaches and other incidents. Some of these products can cost thousands, or even hundreds of thousands, of dollars, making the digital economy even stronger. Businesses also need to be wary of data governance frameworks like GDRP and HIPAA (for health care organizations) when handling so much data. Technologies like Extract, Transform, and Load (ETL) tools and other data integration platforms help enterprises adhere to data governance frameworks and prevent expensive penalties for non-compliance from regulators.
Successful companies need to create, deploy, and secure various APIs. Some of the most popular products propelling the digital economy are API management solutions that combine unrelated databases, integrate data from disparate sources, and publish APIs.
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The COVID-19 pandemic has made the digital economy even more resilient. That’s because businesses have had to purchase technologies that enable employees to work from home and support remote communications with stakeholders. These technologies include video conferencing software, project management systems, cloud storage platforms, and live chat tools.
Recommended reading: How To Structure a Successful Digital Transformation Strategy
The digital economy is the result of the growing demand for digital technologies across all sectors. As more enterprises invest in new online products and services, this new economy becomes more resilient. Expect the online economy to grow even more rapidly over the next few years.
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