KPMG surveyed 811 technology business leaders globally, including 33 from Russia, on their expectations for the innovation and technology sector.
The aim of the survey was to assess the potential various countries to drive technology breakthroughs and to identify innovation trends, and the scope of change. The Russian companies surveyed included 14 start-up, 11 medium-sized and 6 large IT companies, plus two angel investors. A third of the Russian respondents are companies with annual revenue of less than 23 million rubles, while another third are large companies with annual revenue of more than 1.5 billion rubles.
Cloud and Mobile are expected to continue to gain momentum as the most disruptive technologies in consumer and business markets over the next three years, according to the Global Technology Innovation survey by KPMG. The technology leaders also expect biometrics and data and analytics (Big Data) technologies to develop as key breakthrough technologies.
In a change from last year’s survey, 37 percent of the respondents said the United States shows the most promise for disruptive breakthroughs, while 24 percent cited China, and 10 percent predicted India, followed by Korea (7 percent), Japan (6 percent) and Israel (6 percent). Russia shared 9th-10th place with the United Kingdom (1 percent).
"The 2012 results reflected some uncertainty in the U.S.'s long-standing position as a technology innovation leader but over the past 12 months, the continued growth in the U.S. tech sector and improvement in the U.S. economy has removed much of that uncertainty," said Gary Matuszak, global chair, KPMG's Technology, Media and Telecommunications practice.
"China continues to innovate at impressive speed. We believe that domestic consumption in the country will drive the majority of new innovation. China will innovate for China's sake. This is supported by Chinese consumers who are driving the desire for local brands, which are unique to this market," said Egidio Zarrella, Partner, Clients and Innovation Consulting, KPMG China. "We see Chinese organizations increasingly establishing innovation hubs where their research and development can thrive. We believe this will also help to bridge any gaps where Chinese brands may face difficulties when looking to expand into the global market."
Factors fostering innovation: Importance v. Accessibility
KPMG surveyed tech leaders on a number of topics, including which factors are most important to fostering innovation. More than three-fourths of them said that the availability of talent is the most important factor enabling technology innovation, followed by access to technology infrastructure (69 percent), ability to drive customer adoption (68 percent), and access to capital (66 percent).
For the Russian respondents, the key factors are the availability of talent, the development of innovative thinking, and educational programmes, and only then infrastructure and finance (the availability of technology infrastructure and access to capital). Their foreign colleagues agree that talent will be decisive, but those from the USA see access to capital as just as important, while those from China and India highlighted government incentives.
"In this context, what Russian respondents think shows that a dearth of talent is a much more serious problem than raising finance, even though more than 50 percent of the Russian respondents represent start-ups. Moreover, this is not so much a question of a shortcoming in the academic sphere (researchers, developers and inventors) as of a lack of middlemen capable of translating innovations to the business environment, reproducing them and generating economic benefit," said Alisa Melkonian, Head of Innovations and Technology at KPMG in Russia and the CIS.
"Researchers rarely bring the results of their work to the stage where they can be put into practice and make a profit. They have neither the skills nor the time to consider the profitability of the innovative products they create. Looking for commercialisation opportunities is a job for professional managers with a mixture of economic and technical skills. These are the people the Russian technology sector is sorely lacking."
In addition, the Russian respondents, unlikely those from other countries, say that the main barrier to the commercialisation of innovative technologies is government regulation (33 percent), whereas their foreign colleagues are more concerned with data security, particularly that of personal data.
Global innovation centres
Fewer respondents than last year believed a serious rival would emerge to Silicon Valley as an innovative technology centre: 33 percent of the respondents, compared to 44 percent in 2012, said that the world's technology innovation centre would move from Silicon Valley to another country in the next four years. This is further evidence of confidence that the USA will remain the world's main technology innovation centre in the next few years. Not surprisingly, only 25 percent of the U.S. respondents believed the shift was likely. However, 64 percent of respondents from India and 49 percent of those from China predicted the centre would shift.
Among respondents who believed the centre would shift, China again is seen as most likely to become the leading innovation centre. On the other hand, 33 percent of the Russian respondents (compared to 30 percent in 2012) named Russia as the most likely candidate, and 27 percent named China. Even so, the Russian market is as yet showing only very modest growth (in particular, the IT market grew by just 4.4 percent in 2012 according to the Ministry of Economic Development).
Countries' innovation confidence index
This year the survey also debuts a confidence index gauging each country’s prospects for tech innovation. The index is based on tech leaders in each market rating their country on 10 success factors including talent, infrastructure, incentives, and capital.
Of the 10 factors assessed globally in this technology innovation confidence index, the highest marks on average were given for talent supply and technology infrastructure. The lowest rating was for government incentives, judged weak by more than one-third (36 percent) globally.
India grabbed the country lead with an index of 72, ahead of the other countries on practically all the factors. The high confidence India’s technology leaders have in their own country's prospects spans several of the 10 factors. High marks were given for talent, mentoring, ability to drive customer adoption, technology breakthroughs, and technology infrastructure with the lowest rating reserved for government incentives.
"India topping the innovation confidence index is a confirmation of business leaders' faith in the country's technological capabilities. Despite several concerns on data privacy and local technological infrastructure, the outlook for the sector is largely positive," said Pradeep Udhas, Head of Markets, KPMG in India. "The government can assist the technology sector by enabling easier access to capital through investor friendly policies and strengthening IP protection laws."
Israel ranked second (71), as the country received high ratings from its tech business leaders for technology breakthroughs, talent, technology infrastructure, and mentoring and access to innovation network, while government incentives earned the lowest rating.
The U.S. ranked third with an index of 65, as U.S. respondents judged their own country’s tech prowess the strongest in tech infrastructure, access to alliances and partnerships, talent, and technology breakthroughs, and weakest in educational system and government incentives. China’s score of 64 (the same as Singapore's) was driven by its highest marks in talent, capital, and mentoring and access to innovation network but China’s tech leaders rated their country low on educational system.
Russia, with a score of 50, came 10th out of the 12 countries surveyed, ahead of just Japan and Slovakia. This relatively low standing was due to the fact that the Russian respondents gave practically all the factors average marks.
"The answers from the Russian respondents, particularly in the light of those of their foreign colleagues, reflect a degree of uncertainty and even a lack of confidence in themselves and their country as an environment for innovation. This may be related to the fact that the Russian innovative technology sector is still in its infancy. Individual companies have managed significant achievements, but for the most part this is niche success and looks more like an exception. For Russia to become a global innovative technology leader, it undoubtedly needs to tackle vital challenges such as ensuring transparent regulations for the sector, taking measures to increase the number of skilled professionals working in the country and strengthening government incentives for innovation. It needs to back up the intention to tackle these challenges with high-level programmes, and it has to take specific coordinated steps to implement such measures. So far, the industry is not feeling real support in these areas," said Alisa Melkonian, Head of Innovations and Technology at KPMG in Russia and the CIS.
The most promising areas
Survey respondents selected mobile, cloud, and biometrics (gesture/facial/voice) as the top three technologies that will enable the next indispensable consumer technology in the next three years.
Asked which technologies would drive business transformation for enterprises, technology leaders selected cloud, mobile and data and analytics as having the greatest impact. However, in China, tech leaders differed from the global view in two ways.
"Continuing developments in cloud and mobile, and the interplay of these technologies, is enabling new business models that take advantage of economies of scale, provide virtual access to supply chains and allow physical products to operate in the Cloud.
The survey findings indicate that tech leaders are bullish on the power of these technologies to continue to fuel innovation in coming years and drive disruption in many industries," said Gary Matuszak, global chair, KPMG's Technology, Media and Telecommunications practice. "At the same time, the ongoing emergence of other technologies such as biometrics and artificial intelligence prompts innovation opportunities in the next three to four years that we cannot imagine today."
"China's tech leaders placed artificial intelligence third, ahead of data and analytics as a business transformation driver, and they ranked cloud ahead of mobile as the top choice to enable consumer technology," said Richard Hanley, Advisory Leader, KPMG in the US's Technology, Media and Telecommunications practice. "China's tech leaders believe that mobile innovation has advanced far enough, and much quicker than other regions of the world, that they are now turning a greater amount of their focus to cloud."
24 percent of the Russian respondents see nanotechnology as the area with the greatest potential to enable the next indispensable consumer technology in the next three years, 15 percent selected cloud, in particular Platform as a Service (PaaS), and 9 percent chose collaborative software (application software designed to help people involved in a common task achieve goals) and mobile apps and software. These technologies, the respondents believe, will make it easier for users to access up-to-date and personalised (i.e., tailored to their individual interests) information (27 percent) and improve personal performance (24 percent). However, the Russian respondents named the following as barriers to consumer adoption: the complexity of actually getting the technologies to users (21 percent) and unhelpful government regulation (21 percent).
In terms of driving business transformation in the next three years, the Russian respondents saw artificial intelligence (15 percent) and search technologies (12 percent) as having the greatest potential. They expect these technologies to contribute to business performance improvement (36 percent) and cost optimisation (18 percent). However, they expressed concern that business take-up could be hindered by the fact that companies themselves see the implementation of such innovations as technically difficult (33 percent) or too expensive (18 percent).
Last year, 23 percent of the Russian respondents selected nanotechnology as the most promising area, with 19 percent choosing artificial intelligence and 16 percent collaborative software. Interestingly, in 2012 government regulation was not seen as a barrier to take-up; the Russian respondents were most concerned about the technical difficulty (42 percent), risk management (39 percent) and the wide availability of alternatives (35 percent).
Further evidence of the global professional community's faith in cloud comes from a recent Gartner survey, which named cloud technologies and open-source software as the IT industries of the future, as they allow applications to be created quickly and inexpensively, thus driving significant change in business and consumer behaviour.
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