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Bigger is not always better

Nathalie Towner
Small and medium-sized companies are ploughing ahead with their e-business initiatives and remain unaffected by the dotcom slump.

UK small and medium-sized enterprises (SMEs) are making good use of the Internet, particularly in comparison to their European counterparts. According to research commissioned by Cisco, the dotcom slump has had little impact on the SME sector with results showing that business uptake of the Internet is even accelerating.

The research is based upon IDC's eWorld 2001 study, and covers 3,720 Western European SMEs employing between 20 and 499 people, which have access to the Internet. There are currently more than 19 million companies with between one and 499 employees across Western Europe, representing a 16% increase on 1999.

Results show that a hefty portion of IT budgets are still being spent on Internet technology in 2001 with, on average, 25% being allocated to this area. The increased significance being given to Internet-related business is attributed to a change in mindset - decision making is no longer left to an enthusiastic individual but is now dealt with at Board level.

The study divides the SME market into four groups: fastracker, enthusiast, sensitive and laggard. The majority of SMEs are still in the laggard stages of Internet adoption - they have developed their own homepage, but still see these initiatives as separate from their core activities.

In contrast, most fastrackers have an intranet and three out of four have collaborative applications. One out of five Western European SMEs are Internet fastrackers. Of those SMEs covered in the fastracker section, 63% stated that the implementation of additional Internet technologies was driven at Board level.

Presence of collaborative applications such as GroupWare, workflow and email in Western Europe is widespread among almost 60% of SMEs. Three out of four Western European SMEs provide Intranet access to more than 50% of their employees.

Most Western European SMEs tend to address both business partners and customers. However, there is a stronger emphasis on business-to-business across the SME sector as a whole - one out of three company websites are completely focused on business partners.

In the US, the focus on e-commerce by small businesses has paid off with online revenues exceeding those of large businesses. Small businesses will continue to embrace Internet technologies throughout Western Europe, particularly as the global trend of building websites increases and Western Europe plays catch up with the US.

Retail/wholesale is the vertical market that includes the largest number of fastrackers. The need to interact with suppliers and customers has been a fundamental driver, resulting in the necessity to invest in Web technologies.

Laggards are more numerous in vertical markets such as manufacturing and health/government/education. The country in which fastrackers are most numerous is the UK, followed by Netherlands. It is Germany, however, that has the highest percentage of IT spending dedicated to the Web. Italy has the lowest, while in Sweden the levels have tended to decrease in 2001.

The UK has the highest ratio of employees to PCs, while Italy comes last again with an average of more than four employees to each PC. In customer-facing solutions, the UK is leading the way in terms of proportion of Internet-related revenues, presence of customer relationship management solutions and number of websites allowing online payment.

Belgium and the Netherlands conversely have well below the 8.7% average number of websites allowing online payment, with 2.5% and 4.1% respectively. Spanish SMEs also have a greater focus on their customers by means of their websites, which reflects the cultural importance of closeness to customers.

Specific challenges for SMEs in the adoption of e-commerce are linked to the size of the investment required and uncertainty about the return on investment. Fastrackers distance themselves from other SMEs in terms of adoption of employee-facing solutions. SMEs in Nordic countries are more open than their Latin counterparts towards adoption of employee-facing solutions and integration of these solutions to company websites.

Only a small proportion of Western European SMEs have employee-facing solutions integrated with their company's website. So although most SMEs can hardly claim to be at the cutting edge of e-business, usage is on the up and the UK is well ahead of the pack.

Information taken from Fastrackers, a report on Internet technology adoption by European SMBs, commissioned by Cisco and based on the analysis of IDC's eWorld 2001 survey.

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