Australian businesses invested more than AUD$17.9 billion dollars on digital services in 2008, a survey by the Australian Interactive Media Industry Association (AIMIA), IBM and Hyro has found.

According to the first annual AIMIA Digital Services Index, revenue generated through digital services as a proportion of total revenue jumped by 17% this year, and now accounts for almost one in every four dollars earned.

The research also demonstrated a shift in the way organisations are interacting with customers, with companies planning to target 40% of customers through digital initiatives 2009, as they seek to take advantage of the increased segmentation, personalisation and availability that digital channels have to offer.

Surprisingly, the Index found that online advertising, traditionally regarded as the mainstay of Australia’s digital services industry, accounted for only a third of spend on digital marketing. Furthermore, organisations are making greater use of specialist providers for digital services than in other areas of IT expenditure.

“The AIMIA Digital Services Index is an important milestone for the digital industry in Australia” said AIMIA CEO John Butterworth. “For the first time we have been able to measure the full level of investment being made in Australia to implement digital initiatives.”

“There are important strategic insights in this data.”

“40% of customer interaction for business and government is now done via digital channels and these channels deliver 25% of revenue. Despite this, the levels of support for the digital industry from government and for the public infrastructure initiatives required to further develop Australia as an international leader in digital appear to be lagging.”

“As a $17.9 billion industry, growing at a fantastic rate and covering a wide range of skills and capabilities, the digital industry in Australia should not be ignored as a major employer and growth market for Australia’s future.”

The Index defines and measures digital services using the following four categories; media-related content, services and applications; marketing related professional services, technology software and hardware, and; infrastructure, hosting and connectivity.

More than 100 business, technology and marketing executives across a broad range of industries were polled to provide Australia’s first comprehensive estimate of the size of the digital industry, and the investment intentions of both private and public sector organisations.

Other insights from the Index:

While digital initiatives now sit behind 40% of customer interactions and 25% of revenue, investment in digital services will reach only 14.3% of organisational expenditure for 2009, indicating significant underinvestment in digital services.

Corporate strategy outweighs competitive leadership, competitive catch-up and dissatisfaction with other media as the dominant driver of investment in digital services, pointing to a greater need for an digital strategy aligned to business objectives.

Organisations are spending more on outsourcing and application development of digital services compared with their overall IT expenditure pattern, suggesting greater value is created through partnerships with specialist providers.

Businesses are placing greater focus on performance and analytics for digital services compared with overall IT outlay, reflecting the new level of insight and increased accountability for performance that digital initiatives provide.

Companies often invest in digital initiatives at the expense of other key IT programs, such as security highlighting a need for an integrated digital strategy aligned to overall business processes.

David Murray, general manager for communications at IBM, said the report demonstrated a clear need for an integrated digital services strategy tightly linked to an organisation’s business objectives.

“While most companies recognise the increased role of digital in creating value for customers, it’s vital they have an overarching strategy behind their investment that brings together their business process and technology roadmaps into a dynamic platform for delivering digital services.”

“By partnering with organisations with digital business and technology expertise, companies can integrate their digital programs into their core business strategy, creating the insight, responsiveness and efficiencies they need to differentiate in a competitive market,” said Mr Murray.

Richard Lord, CMO of Hyro, commented that there was a clear underinvestment in digital services in Australia, which presented an opportunity for companies to get ahead.

“This research highlights just how significant digital initiatives are in business today and how much of corporate revenue and customer engagement is impacted by digital.”

“Despite this, the research also shows that digital services are underinvested and that there is clearly a significant market opportunity in the digital services space for companies who can provide the scale and sophistication required.”

“Finally, the research has confirmed for us just how deeply integrated the technology and marketing investments need to be for successful digital initiatives going forward,” Mr Lord said.

”This confirms the proposition that successful digital initiatives are now the domain of the specialist digital services company, rather than an add-on function from an ad agency or other point solution provider.”

For further information go to http://digitalservicesindex.com.au.