Industry Developments and Models A Look Into 2017 Vertical Markets and SMBs: IDC European Vertical Markets Survey Methodology, 2016 Giacomo Laurini IDC OPINION Between July and October 2016, the IDC European Industry Solutions group carried out a survey among 1,872 organizations with more than 10 employees across Western Europe. The survey covers the top 5 countries (the U.K., Germany, France, Italy, and Spain) and four Nordic countries (Sweden, Denmark, Norway, and Finland). The results are analyzed by vertical market and company size, and they will be the basis for a series of demand-side reports to be published under the European Vertical Markets and European Small and Medium Business Markets services as well as in selected European Industry Insights research services. The survey covers areas such as: Key business priorities, the role of line-of-business (LOB) managers in IT decisions, IT budget direction, channel selection, and an assessment of the major technology suppliers supporting digital transformation Short-term investment plans for traditional technologies spanning hardware, software, IT and business services, and telecom services as well as security priorities and a wide range of industry-specific solutions Current adoption and future deployment plans for the four pillars of IDC's 3rd Platform: cloud, mobile solutions, social media, and Big Data An initial assessment of the major enablers of digital transformation, including familiarity, adoption, and future deployment plans for a range of innovation accelerators (including Internet of Things or IoT, cognitive systems, robotics, 3D printing, and virtual/augmented reality) A detailed analysis of implementation plans and use cases for the IoT These areas are also the key topics in our series of demand-side reports, spanning both traditional horizontal IT and industry-specific solutions as well as innovative ICT solutions supporting digital transformation, the 3rd Platform, and innovation accelerators. November 2016, IDC #EMEA40710516
IN THIS STUDY This IDC study focuses on the IDC European Vertical Markets Survey carried out between July and October 2016 among 1,872 organizations with more than 10 employees in the U.K., France, Germany, Italy, Spain, Sweden, Norway, Denmark, and Finland. It presents all details regarding the methodology adopted to design and frame the sample and analyze results. Survey respondent profiles by vertical market and company size are also provided. SITUATION OVERVIEW Methodology Conceptual Framework The IDC European Vertical Markets Survey is a landmark study of IT solutions, investment priorities, and emerging technologies in over 80% of the Western European economy. In conjunction with other IDC research, it is fully projectable across countries, industries, and size classes. It also offers an unprecedented view of solutions and emerging technologies' adoption and issues around Europe. Themes include business priorities, IT budget and traditional IT investment trends, industry-specific solutions, security, cloud, mobile solutions, social media, Big Data, and innovation accelerators such as IoT, cognitive systems, robotics, 3D printing, and virtual/augmented reality. Sample Design Sampling Unit: IDC's Definition of "Company" IDC selected the company (or organization) as the sampling unit. For the purposes of IDC's European Vertical Markets and SMB research, a company refers to a legal or social entity (or a group of entities) that engages in activities and transactions (such as the purchase of IT goods and services) in its own right. One of the requirements of a company is having sole ownership or control. It can be heterogeneous with regard to its economic activity and location. It has legal, administrative, or fiduciary arrangements; organizational structures; or other parties having the capacity to efficiently allocate resources to achieve objectives. Examples include corporations, non-profit institutions, and government agencies. When the enterprise is a single-location organization, the concepts of a company and a local unit/establishment coincide. Sample Interviews The sample interviews consisted of 407, 410, and 410 interviews for the U.K., France, and Germany, respectively (major sample interviews), 358 for the aggregate Italy and Spain, and 289 for the total of the four Nordic countries (minor sample interviews). Major and minor sample interviews were established by vertical market and company size (Tables 1 and 2). Vertical markets were defined according to the NACE Rev. 2 coding system. Company sizes were based on the number of personnel employed and aggregated into the following segments: 10 99, 100 249, 250 499, 500 999, and 1,000+ employees. Sample Frame and Sampling Method The sample frame was obtained from a list source representative of the entire local market, regardless of computerization. List sources grouped vertical markets according to standardized industries (based on NACE codes). A predetermined number of interviews were completed in each of the five company sizes and nine industry aggregates to ensure reliable and robust results at 95% confidence interval for each size and industry group. 2016 IDC #EMEA40710516 2
TABLE 1 Number of Interviews by Vertical Market Interviews Finance 222 Manufacturing 277 Healthcare 176 Telecom/media 143 Transport/accommodation 72 Utilities/oil and gas 178 Retail/wholesale 253 Professional services 220 Government/education 331 Total 1872 Source: IDC European Vertical Markets Survey, November 2016 TABLE 2 Number of Interviews by Size Interviews 10 99 216 100 249 289 250 499 343 500 999 448 1,000+ 576 Total 1872 Source: IDC European Vertical Markets Survey, November 2016 2016 IDC #EMEA40710516 3
TABLE 3 Number of Interviews by Country Interviews U.K. 407 Germany 408 France 410 Italy 182 Spain 176 Italy and Spain 358 Sweden 108 Denmark 70 Norway 60 Finland 51 Nordics 289 Total 1872 Source: IDC European Vertical Markets Survey, November 2016 Respondents and Eligibility Eligible respondents were the individuals best qualified to answer questions about the overall IT strategies and activities of their organizations. For medium-sized/large organizations, they were most likely the CIO, IT director, or IT manager. For small organizations, they were most likely the IT manager or owner. A screening question determined eligibility. Interviews The survey was conducted in the native language of each country. Approximately 72% of the interviews (1,356 respondents) were conducted via telephone, which allowed trained interviewers to clarify some of the more complex questions to ensure accurate, meaningful responses. A computer-aided telephone interviewing (CATI) system, which permitted simultaneous interviewing and data entry, was used wherever possible. This system provided various automatic data checks and skip patterns, which occurred while the respondent remained on the line. The remaining 28% of respondents (516) were polled through a computer-assisted web interviewing (CAWI) system. The field survey was carried out from July to October 2016. 2016 IDC #EMEA40710516 4
Confidence Intervals The confidence interval of a distribution is a function of the sample number of respondents and the distribution's variation. Considering a categorical variable where the variation is highest (50% "yes" and 50% "no"), it is possible to establish a priori that a random sample generating proportional results from 100 cases will yield results within +/-9.8% of the estimated proportion at the 95% confidence interval. So, if 50% of all respondents are investing in a new technology, then a 95% confidence interval will be within 40.2% and 59.8%. That is, if the same question was asked again and again to different samples, 95% of the time, the confidence interval from 40.2% to 59.8% will hold the true population proportion. As the sample size increases, the interval shrinks. As the proportion becomes closer to either 0% or 100% (thereby indicating less variation), the interval shrinks. Actual intervals for specific questions may vary due to variations in sample size. For example, when analyzing results of the nine vertical markets at the Western European overall level, the confidence error could reach 10% in the worst case (50:50 distribution). Analysis of the Data SPSS was used to analyze the data collected. The survey comprised both categorical and interval measurement variables. The categorical variables, such as the vertical market, were recoded by SPSS as numeric (for example, the values "yes" and "no" were recoded as 1 and 0). For the categorical variables, the analysis was made using a cross tabulation between the vertical markets and the variable. The cross-tabulation analysis gives the distribution of the vertical market among the categories of the observed variable (for each market, the sum of the distribution of the categories is 100%) and the overall distribution. For the interval measurement variables (such as the percentage breakdown of ICT budgets across external IT spending, internal IT spending, and telecom services spending), IDC's data indicates both the mean values of the variable among the vertical markets and the overall mean. Nine countries were surveyed the U.K., Germany, France, Italy, Spain, Sweden, Denmark, Norway, and Finland and the survey classified 15 vertical markets. For reporting purposes, we grouped them into more aggregated verticals based on sample size and industry segment. Results are therefore typically provided for the following nine sectors: finance (banking, insurance, and other finance), manufacturing, retail/wholesale, telecom/media, transport/accommodation, utilities/oil and gas, professional services, government/education, and healthcare. Compared with the previous year's aggregation, there have been three changes in how sectors are aggregated: discrete and process manufacturing are now aggregated into manufacturing, results for the professional services will be presented on its own, and transport is now aggregated with accommodation. Results are provided by five countries/regions: the U.K., Germany, France, the aggregate Italy and Spain, and the total of the four Nordic countries (Sweden, Denmark, Norway, and Finland). Results are segmented by company size for the following bands: 10 99, 100 249, 250 499, 500 999, and 1,000+ employees. Other segmentations are available upon request. Definitions Vertical Markets Table 4 presents the survey's vertical markets coverage based on the General Industrial Classification of Economic Activities in the European Union Divisions (NACE Rev. 2). 2016 IDC #EMEA40710516 5
TABLE 4 Survey Vertical Markets Coverage Based on NACE Rev.2 Survey Sector Vertical Market NACE Code NACE Rev. 2 Description Finance Banking 64 Financial service activities, except insurance and pension funding Insurance 65 Insurance, reinsurance, and pension funding, except compulsory social security Securities and investment services 66 Activities auxiliary to financial services and insurance activities Manufacturing Discrete 14 Manufacture of wearing apparel Manufacturing 15 Manufacture of leather and related products 26 Manufacture of computer, electronic, and optical products 27 Manufacture of electrical equipment 28 Manufacture of machinery and equipment n.e.c. 29 Manufacture of motor vehicles, trailers, and semitrailers 30 Manufacture of other transport equipment 32 Other manufacturing Process 10 Manufacture of food products Manufacturing 11 Manufacture of beverages 12 Manufacture of tobacco products 13 Manufacture of textiles 17 Manufacture of paper and paper products 20 Manufacture of chemicals and chemical products 21 Manufacture of basic pharmaceutical products and pharmaceutical preparations 22 Manufacture of rubber and plastic products 24 Manufacture of basic metals 2016 IDC #EMEA40710516 6
TABLE 4 Survey Vertical Markets Coverage Based on NACE Rev.2 Survey Sector Vertical Market NACE Code NACE Rev. 2 Description Retail/wholesale Retail 47 Retail trade, except of motor vehicles and motorcycles 56 Food and beverage service activities Wholesale 46 Wholesale trade, except of motor vehicles and motorcycles Telecom/media Telecommunications 61 Telecommunications Media 18 Printing and reproduction of recorded media 58.1 Publishing of books, periodicals, and other publishing activities 59 (excl. 59.13 and 59.14) Motion picture, video and television program production, and post-production activities, sound recording, and music publishing activities (excluding motion picture, video and television program distribution, and motion picture projection activities) 60 Programming and broadcasting activities Transport/ accommodation Transportation 49 (excl. 49.5) Land transport (excluding transport via pipeline) 50 Water transport 51 Air transport 52 Warehousing and support activities for transportation 79 Travel agency, tour operator reservation service, and related activities Accommodation 55 Accommodation 2016 IDC #EMEA40710516 7
TABLE 4 Survey Vertical Markets Coverage Based on NACE Rev.2 Survey Sector Vertical Market NACE Code NACE Rev. 2 Description Utilities/oil and gas Utilities 35 Electricity, gas, steam, and air conditioning supply 36 Water collection, treatment, and supply Oil and gas 6 Extraction of crude petroleum and natural gas 9 Mining support service activities 19 Manufacture of coke and refined petroleum products 49.5 Transport via pipeline Professional services Professional services 58.2 Software publishing 62 Computer programming, consultancy, and related activities 63 Information service activities 68 Real estate activities 69 Legal and accounting activities 70 Activities of head offices; management consultancy activities 71 Architectural and engineering activities; technical testing and analysis 72 Scientific research and development 73 Advertising and market research 78 Employment activities 80 Security and investigation activities 81 Services to buildings and landscape activities Construction 41 Construction of buildings 42 Civil engineering 43 Specialized construction activities 2016 IDC #EMEA40710516 8
TABLE 4 Survey Vertical Markets Coverage Based on NACE Rev.2 Survey Sector Vertical Market NACE Code NACE Rev. 2 Description Government/ education Federal/central government Part of 84 Public administration and defense; compulsory social security (central) 99 Activities of extraterritorial organizations and bodies State/local government Part of 84 Public administration and defense; compulsory social security (local) Education 85 Education Healthcare Healthcare provider 86 Human health activities 87 Residential care activities 88 Social work activities without accommodation Source: IDC European Vertical Markets Survey, November 2016, based on NACE Rev. 2 Statistical Classification of Economic Activities in the European Community, 2015 Survey Respondent Profiles Given the strategic nature of the survey, interviews were addressed to "one of the most qualified persons to answer questions about the organization's overall IT strategy and activities." Table 5 shows that the large majority of respondents work within an IT department (99.3%), although a tiny portion of respondents belong to non-it departments. Table 6 provides the same analysis by company size. In smaller companies (10 99 employees), 96.8% of respondents operate within the IT department a minor difference compared with the 99.3% total. 2016 IDC #EMEA40710516 9
TABLE 5 Western Europe Survey Respondent Profile by Functional Area and Vertical Market (% of Companies) Q. Which of the following best describes your functional area? IT (%) Corporate Management/ Strategies (%) Marketing (%) Industry-Specific Operations (%) Other Functional Area (%) Total (%) Finance 100.0 0.0 0.0 0.0 0.0 100.0 Discrete manufacturing Process manufacturing 99.3 0.7 0.0 0.0 0.0 100.0 99.3 0.0 0.0 0.7 0.0 100.0 Healthcare 100.0 0.0 0.0 0.0 0.0 100.0 Telecom/ media Transport/ accommodation Professional services Utilities/oil and gas 99.3 0.0 0.0 0.0 0.7 100.0 100.0 0.0 0.0 0.0 0.0 100.0 95.9 3.2 0.5 0.0 0.5 100.0 100.0 0.0 0.0 0.0 0.0 100.0 Retail/wholesale 99.6 0.0 0.0 0.0 0.4 100.0 Government/ education 99.7 0.0 0.0 0.0 0.3 100.0 Total 99.3 0.4 0.1 0.1 0.2 100.0 Notes: Base = All sample Number of valid respondents: 1,872 Source: IDC European Vertical Markets Survey, November 2016 2016 IDC #EMEA40710516 10
TABLE 6 Western Europe Survey Respondent Profile by Functional Area and Size (% of Companies) Q. Which of the following best describes your functional area? IT (%) Corporate Management/ Strategies (%) Marketing (%) Industry-Specific Operations (%) Other Functional Area (%) Total (%) 10 99 96.8 2.8 0.5 0.0 0.0 100.0 100 249 98.3 0.3 0.0 0.3 1.0 100.0 250 499 100.0 0.0 0.0 0.0 0.0 100.0 500 999 100.0 0.0 0.0 0.0 0.0 100.0 1,000+ 99.7 0.2 0.0 0.0 0.2 100.0 Total 99.3 0.4 0.1 0.1 0.2 100.0 Notes: Base = All sample Number of valid respondents: 1,872 Source: IDC European Vertical Markets Survey, November 2016 FUTURE OUTLOOK End-user surveys are a critical input for research groups studying business and IT trends, requirements, solution priorities, and IT purchasing patterns of European companies across vertical markets and company sizes. The IDC European Industry Solutions group will therefore continue to collect crucial information through dedicated surveys among European LOB managers and IT managers. ESSENTIAL GUIDANCE The survey results presented in this document will be used in a series of reports published under the European Vertical Markets and European Small and Medium Business Markets services as well as in dedicated European Insights research services. Readers should use this document as a guide to understand IDC's approach to demand-side reports (vertical, SMB, and midmarket studies). 2016 IDC #EMEA40710516 11
LEARN MORE Related Research IDC's forthcoming European Vertical Markets research based on the 2016 survey will focus on the following subject areas (by vertical market): Business priorities IT budget directions Channel selection Cloud landscape Social media landscape Mobility landscape Big Data landscape Security priorities IDC's innovation accelerators landscape (IoT, 3D printing, robotics, cognitive, AR/VR) IoT (new insights into opportunities and use cases) Opportunities and challenges of the convergence to the 3rd Platform End-user perception of technology suppliers for digital transformation The same topics will be at the base of IDC's forthcoming European Small and Medium Business Markets research. While European Vertical Markets research analyzes the total sample by vertical market, European Small and Medium Business Markets research focuses on the SMB sample (respondents with fewer than 500 employees), providing analysis of the SMB sector by company size. Synopsis This IDC study focuses on the IDC European Vertical Markets Survey carried out between July and October 2016 among 1,872 organizations with more than 10 employees in the U.K., France, Germany, Italy, Spain, Sweden, Norway, Denmark, and Finland. It presents all details regarding the methodology adopted to design and frame the sample and analyze results. Survey respondent profiles by vertical market and company size are also provided. "The IDC European Vertical Markets Survey can act as a reliable Big Data solution, in that it provides a detailed insight and forecast on IT trends, requirements, solution priorities, and IT purchasing patterns of European companies across vertical markets and company sizes," said Giacomo Laurini, senior research analyst, IDC European Industry Solutions. 2016 IDC #EMEA40710516 12
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