Central and Eastern Europe Internet of Things Market – Trends and Buyer Behavior
Companies in Central and Eastern Europe (CEE) are increasingly embracing the Internet of Things (IoT), with many planning to accelerate investments in the short term.
IDC recently conducted a unique survey across organizations in the CEE region focused on the demand side of the Internet of Things. The survey addressed the organizational and business impact of IoT, ranging from IoT strategies to adoption drivers and inhibitors. It also examined IoT budget ownership in organizations, sourcing intentions, and approaches to security, cloud, and analytics. Different vendors' market opportunities were also assessed.
I would like to share here some of the key findings from this primary research on how organizations in CEE view the Internet of Things, how they are preparing for the IoT, and the challenges and opportunities presented by this transformative technology. Overall, we are very excited about the survey results, based on 561 respondents across the CEE. That represents a comfortable sample size from which to derive key findings. Eligible respondents of the survey were individuals primarily involved in IT and/or business decisions in their companies, with a director-level position or above. Further, they must have cited familiarity with the Internet of Things term/concept. So now we have an enormous amount of data, very deep and rich, from both the country and industry perspectives. Following are some of the high-level trends that indicate how the regional IoT market has matured.
Strongest awareness of IoT in Russia
First, I would like to focus on the general IoT awareness. In spite of a fairly homogenous trend across the CEE region, Russia clearly leads in terms of awareness regarding IoT. This is not surprising, because we have observed Russia's strong focus on M2M over the past several years. We also see very strong awareness coupled with willingness to invest in Hungary, followed by the Czech Republic.
When we look at IoT awareness by industry, the results get a bit more interesting. Just last month, I spoke with a government group about the Internet of Things, and they had a lot of questions about the very basics. This can be contrasted to customers in the manufacturing or transportation sectors, who are usually quite familiar with IoT. So when we surveyed awareness of the IoT across industries, the fact that government came in at the low end of the spectrum was hardly surprising. One positive and unexpected result was the high level of awareness among retail organizations, as this industry can really be seen as the last mile of the IoT. Because when you start to expand beyond the gateway to the sensor, even as far as the NFC tag or RFID chip, a whole new frontier for IoT opens up.
Business impact of IoT
Our survey then included questions about what business impact the “Internet of Things” will have on respondents' organizations. About a quarter of CEE organizations already sees the impact of IoT on their business as strategic, while the prevailing attitude towards IoT is still marked by caution – try it first and see. So far, only one in ten respondents acknowledged IoT as transformative for their organization. The outlier in terms of responses for this particular question was the government sector. Government organizations are lagging behind in terms of adoption, and 43% of government respondents said IoT will have no impact at all on their organization.
So, taking a closer look at the "Is IoT strategic?" question, we can highlight several industry sectors and the differences in their responses. Healthcare, IT, and utilities organizations ranked ahead the average in terms of regarding IoT as strategic for their business. I believe this is clearly indicative of the fact that discussions about IoT are happening at the executive level in these organizations. Then we have manufacturing, transportation, and retail organizations, which see IoT as an aspirational opportunity that can enhance automation and provide a competitive advantage.
Government organizations are still trying to understand IoT and what it could mean for their operations. This applies not only to central government, but as far down as municipal implementation. In spite of this, some concrete examples of IoT innovation in the Smart City domain are taking place across CEE. By this, I mean not just the roll out of smart trash cans or smart parking, but much more complex deployments such as street lighting and traffic management solutions.
Deployment plans – IoT is gaining momentum
We asked organizations about their deployment plans, and found that 15% have deployed some type of connected solution with additional plans to expand that implementation. Another 15% have deployed at least some type of connected solution, while a similar percentage of respondents are planning to deploy such solutions within the next 12 to 24 months. This confirms that IoT is not only established in CEE, but is gaining further momentum. Within the data set, we see interesting results across different industries and across countries.
Role of "The edge"
Another question in the IoT survey refers to the role of the edge and where data is going to be processed, and IDC's IoT team had a lot of discussions about the latter. IDC defines the edge as the end sensor and intelligent system that makes decisions rather than sending data back over the network to a datacenter. The survey results show that 40% of organizations in CEE expect IoT data to be processed at the edge. When you break it down by industry, however, different perspectives emerge. The two extremes we saw among industry responses occurred in retail and manufacturing. Retail organizations expected almost half of the data to be processed at the edge, with the remainder going into the enterprise; among manufacturing respondents, only about a third would be processed at the edge. Again, the retail sector stands out in our survey with some very curious but intriguing responses.
Opportunities and challenges for IoT
Next, I would like to look at what respondents said about their IoT initiatives — what they see them providing to their organizations and some of the hindrances they have experienced as they have sought to invest or to deploy. The survey asked what respondents viewed as the top factor to influence their company's decision to create an IoT strategy. It is not surprising that the top response was "process automation", followed by "improve security", with "reduce maintenance costs" coming third. We saw these three responses leading all others in frequency, across both countries and industries, albeit in varying order.
Another interesting result is that all of the top drivers cited by survey respondents are strongly internally focused. Globally, we see organizations looking to the IoT primarily for internal benefit, to create efficiencies within the organization, to create or improve products or to reduce costs. Drivers relating to the customer and external benefits were cited in the wake of these responses.
On the flip side of drivers, we also asked about some of the challenges and what factors are actually hindering some of these organizations in their Internet of Things initiatives. The majority of respondents declared that finance-related issues (no budget allocated, upfront cost) combined with security and privacy concerns, were the main inhibitors to IoT deployment. This was, in fact, in line with our IoT team's expectations.
IDC's recent IoT survey confirms that the CEE region has become a very exciting market for this transformative technology, one that is full of both opportunities and challenges. We are well prepared to more fully identify those for our clients and to support your organization's ability to make the right decisions, from business plan and product plans to go-to-market strategies.
These are just some of the interesting observations based on the results of IDC's Central and Eastern Europe IoT Decision Maker Survey, carried out between October and November 2016, which involved 561 organizations with more than 100 employees across CEE (the Czech Republic, Hungary, Poland, Romania, and Russia). More details are available in the recently published report Central and Eastern Europe Internet of Things Decision Maker Survey: Trends and Buyer Behavior in 2016 (#CEMA40563016). Additional details and complete data are also available upon request.