Large, small firms 'get IT', mid-caps don't, says CBI

Large and small companies are proving more adroit at harnessing IT for competitive advantage, but mid-sized firms, especially in manufacturing, are struggling,...

Large and small companies are proving more adroit at harnessing IT for competitive advantage, but mid-sized firms, especially in manufacturing, are struggling, a CBI report says today.

The report, sponsored by Nominet, the UK internet domain name registrar, shows that UK firms are starting to leverage internet connections to find new customers and to stay close to existing ones.

Jeremy Beale, head of knowledge content at the CBI, said most firms have spent the past five years sorting out and integrating their supply chains. "They have done the B2B bit, now they are looking for the B2C bit," he said.

Beale said UK companies faced a more competitive marketplace as a result of the internet. While it allowed them to seek new customers offshore, it allowed foreign firms to attack their home markets. "That is why they are having to move up the value chain," he said.

The report revealed little support from the IT industry for this. It found only 14% of companies thought their suppliers' R&D supported their business development 'extremely well' more than 20% thought it supported their business 'a little' or 'not at all'.

"The two most effective ways that suppliers' R&D could better support customers' business development are through early engagement and communication on service innovations, and greater alignment with their customers' long-term strategy," the report said.

Beale said IT suppliers needed to think in terms of services and systems rather than boxes. "Services are not a hardware and software issue," he said. "It's about relationships."

He said large firms and smaller companies had "got it" mid-range firms have a problem. "Ironically they tend to outsource all the value-creating activity, such as customer relationship management and supply chain management but retain low value-creating activities, such as day-to-day IT and networking," Beale said.

The report said 33% of chemicals and mining companies and 18% of manufacturing companies indicated they would take IT and networking in-house. This compares to 2% of financial services firms and 3% in the public sector. Mid-cap companies were most likely to bring outsourced IT and networking arrangements back in-house, as well as being the least likely to outsource them.

"This could be a worrying development as our analysis suggests that the mid-cap market should be an area of growth for improving IT-enabled change in general, and outsourcing of IT and networking in particular, in order to increase value-adding," the report said.




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