Small businesses to embrace technology in 2010

Small businesses are cautiously investing more in technology in 2010, but some are still sceptical over the benefits it can bring and see IT as a necessary evil.

Small businesses are cautiously investing more in technology in 2010, but some are still sceptical over the benefits it can bring and see IT as a necessary evil.

Experts say the bad weather at the start of the year might have tipped the UK back into negative growth and many small companies are still struggling to gain market share.

But some sectors are thriving. A survey of Microsoft partners working with small and medium companies (SMEs) showed 63% predict their customers will spend more on IT in 2010, up from just 25% in 2009.

But this might not all be new growth, says Robert Epstein, head of small business at Microsoft UK. "It is probably more indicative of under-investment in IT during the downturn as people have realised things are catching up with them."

Changing attitudes

But some suppliers say there has been a genuine culture change surrounding smaller businesses' attitudes to technology during the past year or two, as developments such as Facebook and the iPhone enter the mainstream.

"There has been a genuine change in attitudes that has been driven by social technologies - not just Facebook, but the iPhone and the increasing number of business applications," says Alastair Mitchell, co-founder and CEO of collaboration technology supplier Huddle. People are realising technology is the biggest enabler for a small business to become a bigger business.

He says the technology and professional services sectors have had a good start to 2010 and are investing more, but some service sectors such as retail and hospitality are having a slightly harder time.

The Federation of Small Business says it hopes its members will have a good second half of 2010, but head of public affairs Stephen Alambritis says the poor weather, uncertainty caused by the general election, and the recent ash cloud problems will have contributed to a difficult first half.

He adds that the relationship between businesses and the banks is key and is becoming much better, with access to money improving all the time.

Public sector spending

There are also concerns among many smaller suppliers that public expenditure is likely to shrink, which will exacerbate the problems many already experience with the public sector's procurement process. They say the process of winning public sector work in all areas is too bureaucratic and difficult for small firms to tackle and it is not always clear where the opportunities are.

"The public sector procurement process is torturous. It is not designed to be easy. We spend a lot of time preparing for it and we would like to see a clearer process for understanding where the opportunities lie," said Tom Wenham, co-founder of sports event management company Sportsworks, as a member of a recent Microsoft panel.

Collaboration tools

But he added that Sportsworks had continued to invest in IT throughout the downturn, particularly in collaboration technologies. "You can use collaboration tools to punch above your weight," he said. "We have 11 staff, but we use an extra 15 people or so for additional projects. To do that effectively, technology is vital."

While many SMEs buy technology direct from a retailer, the panel members said getting advice from a few IT providers was a better idea. The internet has also made it easier to shop around and compare prices, and plenty of online magazines provide advice on what to get.

Increasing productivity

Henry Eldebaum, director of AIMS Accountants for Business, said, "If you just want the business to stand still then just having Windows XP to check e-mails is fine. Many small business owners are not entrepreneurial - they just like the lifestyle of working for themselves.

"But one of the biggest problems with small businesses is the vast majority of our clients do not realise that you have to keep increasing your productivity just to stand still, because you have to be ahead of inflation. Once they accept that, they can start looking at the technology they need."

Huddle's Mitchell says recent developments mean this investment does not have to be huge as smaller companies now have lower-cost access to technology that was only available and affordable for large businesses three years ago.

"If you have a collaboration tool to speak to customers and partners with - a voice over IP service such as Skype, and a website-building tool such as Basekit - the business will have what it needs," he says. "This is a massive change and it is attracting people who have been less open to technology in the past."

Microsoft's Epstein says cloud computing could open up a lot of opportunities for small businesses for just a few pounds a month. Possible uses include business-class e-mail software, collaboration tools, unified communications and electronic web meetings.

There is a role for government support as well, with Sportsworks' Wenham reporting that poor broadband connectivity in rural areas is an issue for his company. "You can't work if you can't get online," he says. "This requires support at government level to get connectivity countrywide."

Read more on IT for small and medium-sized enterprises (SME)

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