Zoho: Why UK Firms Lag Digital Health as AI Adoption Grows
Digital transformation has become a defining challenge for businesses across Europe as they navigate AI adoption, cloud computing integration and workforce modernisation.
Against this backdrop of technological change, new research reveals significant disparities in digital readiness between nations and business sizes, with UK enterprises showing mixed progress in their transformation journey.
Technology adoption across UK businesses remains low with only 28% of companies achieving good digital health in 2024, according to research from Zoho.
This represents a 9% increase from 2023, when 19% of firms achieved good digital health ratings.
Large enterprises lead UK digital transformation as small firms struggle
Zoho’s study, which evaluates digital transformation practices, shows large UK enterprises perform strongest with 40% rated as having good digital health, compared to 27% of medium-sized businesses and 18% of small firms.
"Digital transformation is a journey and users of digital tools must understand they cannot just 'switch on' a tool and hope to see immediate and ongoing benefits."
In comparison, German businesses lead European digital adoption with 33% achieving good digital health ratings and Spanish firms match UK levels at 27, while French and Dutch companies trail at 20 %and 19% respectively.
Meanwhile, the Netherlands recorded the highest proportion of businesses with poor digital health at 45%.
AI investment rises as cloud platforms show increased adoption rates
Zoho finds that companies with strong digital foundations demonstrate greater AI readiness.
Among UK firms with good digital health, 46% view AI technology as critical to operations and report benefits from deployment – which contrasts with 24% of businesses with average digital health and 6% with poor ratings.
Additionally, over half of UK businesses (54%) plan significant AI investment, marking a 7% increase from the previous year.
In this context, cloud computing platform adoption, which enables businesses to access software and services via the internet, has increased among companies with weaker digital health scores.
- 46% of businesses with good digital health are already seeing the benefits of AI
- The UK is lagging behind Germany but is ahead of the Netherlands and Spain
- Only 4% of UK businesses don’t use any cloud platforms
Only 4% of these firms now operate without cloud platforms, down from 16% in 2023.
Digital transformation shows mixed progress across UK sectors
Zoho finds 33% of UK businesses run at least half their operations using digital tools, while 25% operate mainly through digital systems - an 8% increase from 2023.
The company reports that UK respondents are twice as likely to report being at the start of their digitisation journey (12%) compared to those claiming full digital operations (6%).
However, companies with good digital health show higher rates of complete digital adoption at 15%, versus 2% for both average and poor health categories.
"Businesses must think more clearly about creating long-term partnerships with the right vendors for their digital transformation journeys," says Sachin Agrawal, Managing Director at Zoho UK.
"We advise taking a strategic approach where aligning tools, consolidating platforms, and closely mapping to business goals is critical to avoid some of the challenges raised in the study and to improve the digital health of UK businesses."
Implementation challenges
Despite digital transformation progress, implementation challenges persist, with 87% of surveyed firms reporting difficulties in digital transformation.
Common issues include unexpected effort in tool deployment (33%), requiring external support for integration (28%) and infrastructure management complexity (27%).
Furthermore, Cloud platform usage patterns show 57% of UK digital transformation leaders employ two to three platforms, while 47% use one to five applications and a third use between six and ten applications – and only 2% operate without cloud platforms and 3% without cloud applications.
When evaluating new software applications, 41% of UK businesses prioritise customer service improvements and additional considerations include employee experience enhancement (35%) and integration capabilities with existing digital applications (34%).
Benefits driving adoption include improved customer experience, noted by 51% of respondents compared to 43% in 2023 and operational efficiency gains reported by 46 % versus 38% the previous year.
Finally, employee experience improvements increased to 36% from 32%.
"Digital transformation is a journey and users of digital tools must understand they cannot just 'switch on' a tool and hope to see immediate and ongoing benefits," Sachin says.
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