Thus far, it has mainly been large companies in Europe that have used data to improve their businesses, with SMEs are lagging behind. Being a small country, Hungary should take advantage of the scaling and networking opportunities of the EU’s Single Digital Market to exploit the business value of the data market, says internationally acknowledged data expert Gabriella Cattaneo. She spoke to the Budapest Business Journal about her latest research findings.
This is the fourth year you have published a report. What are the major differences compared to last year or of four years ago?
When we started it in 2014, it was a relatively small, emerging market; now it is becoming much more relevant. The number of companies actually experimenting with or using data technologies has increased a lot. We have a much better understanding of the potential and the business value of this market. Now is the moment when we are moving from innovation to business value; we are entering a period when companies are starting to extract values from data and increase revenues. There is an exponential increase in all the areas in which companies are using data. This is due to a combination of platforms: cloud platforms have become widespread, and there is the emergence of Internet of Things.
Companies needed to become digital to increase productivity, etc., and data is the key to digital transformation. IDC has a number of forecasts: this year we made a prediction that, by 2020, half of large companies will generate revenue from the sales of data.
You mentioned large companies, but how are SMEs doing?
This is exactly the key of our scenarios - clearly this will only become a mass market when small- and medium-sized companies take advantage [of data] as well. By large companies, we mean companies with digital capital. In order to use your data assets, you need to have an advanced information system. Digital transformation and data innovation are adopted by a lot of medium-sized innovative companies in certain sectors. By size, manufacturing is the industry with the largest data market value - it is driven by industry 4.0. and several other factors. Finance is the other big sector and ICT; here telecom and media companies are driving the way. Yet, even if the market value in manufacturing is high, the percentage of data users in companies is low, so there is a lot of potential to grow. Utilities is another sector with a lot of data companies.
The figures seem rather small.
Not if you consider that 99% of companies in Europe are small. SMEs are lagging behind when it comes to digitalization and the use of data. They are part of ecosystems, so those that are part of the value chains of large companies are being driven towards this kind of innovation. At the moment, for traditional SMEs like small shops it may not even be necessary - in time, there will be mass market services available for them and they will use those. It is different, for example, for FinTech startups, of course.
How about large companies: are they making good use of the data available?
In our estimation, going from digital resister to digital disruptor, 55% of European companies are still exploring. Organizations get stuck because of the silos of innovation: They start innovating only in one part of the company while, to exploit data, you need to have an integrated digital process. They don’t measure the right things; they don’t measure their assets. One prediction we make is that within two-three years, most companies will change their effectiveness KPIs and will include data in them. Now companies are starting to work with data but few have data exploitation as a key measure for business success. Limited expertise is another huge problem but it is not the lack of pure data scientists - we don’t have enough of them - but you need only a small number of them. What is needed are data professionals, who understand business and can combine this expertise with data potential. This is an area where companies need to invest.
Are there regional differences in the use of data? Where is Hungary placed?
Data technologies are sophisticated technologies. They can be used in companies with a good level of digitalization. They also have very strong network and scale effects. So big countries with no language problems and big companies have an advantage - in this market size matters. It is not the only factor but it helps to scale up.
For a smaller country like Hungary, for the data industry and data users both, the best option would be the Digital Single Market. Working on the European market would definitely help consolidate the industry and help the users to use their innovation better. It is also true that, at the moment, smaller markets are growing faster. In Hungary, the current size of the market is an estimated EUR 435 million; it should go over EUR 500 million by 2020. The growth rate in Hungary is roughly one percent higher than the EU-27 average (Great Britain excluded).
What do you think this difference is due to?
We consider a number of factors including GDP dynamics, the IT market, we look at the profile of companies, we estimate data users and suppliers separately, we look at their projections of IT spending - so it is a combination of factors. It may not have started as fast - due to the structure of companies, etc. I understand that the Digital Success Strategy is related to it. It is a natural evolution, we project it will continue to grow a bit faster - we expect it also because Hungary has a number of digital startups.
Hungary has a number of successful IT startups. Does this help?
Yes, but it is not enough. This is a business which involves a transformation to design and sell new services and products. Talent is a good point but it is not enough.
Gabriella Cattaneo is the director of the Expertise Center on Competitiveness and Innovation Policies and Strategies of International Data Corporation (IDC) and IDC Health Insights EMEA. The Expertise Center, which focuses on the competitiveness and innovation impacts of ICT, provides socio-economic research and consulting services to policy makers and industry leaders engaged in the development of the information society in Europe and the world. Cattaneo leads the consulting unit of the European Parliament which leverages IDC global research for policy clients, specifically the European Commission and the Horizon 2020 program. On behalf of the Commission, it has measured the European data economy/market. Based on its findings, it produces a detailed report that covers the 28 EU member states and 11 industries. The latest report was submitted to the European Commission last Friday. Cattaneo presented draft data in Budapest, at a conference of the Hungarian ICT Association.
International Data Corporation describes itself as the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in more than 110 countries.