Study finds that small businesses are missing out on Internet opportunities

[July 26th 2000]

In what could be referred to as a classic example of "what you don't know can hurt you" a new study finds that even though small businesses should be one of the main benefactors of the Internet and e-commerce, when compared to larger organizations, it's the small company that is most likely to be missing the call of e-commerce altogether.

This "digital divide" is most often the result of a lack of knowledge, technically adept personnel, or financial resources, and is one of the key contributors to the growing technology gap between businesses that employ fewer than 100 people and larger enterprises.

The study, conducted by Fornova of Southboro, Mass., was completed in May of 2000 and included in-depth interviews with 24 U.S.-based companies selected at random from across the automotive, medical supplies, consumer products, electronics components, telecommunications, chemical, and aerospace industries. The businesses included in the study had anywhere from 25 to 20,000 employees.

In the study researchers found organizations with more than 100 employees had integrated the Internet into their business activities to a fairly high degree. All of the companies had a Web site and made frequent use of email and the Worldwide Web for research. A majority also employed some level of e-commerce.

By contrast, companies with under 100 employees were much more likely to report little or no use of the Internet as part of their business operations. For those who did use the Internet, email was most common. Few made use of e-commerce in any form. Although every small business expressed an awareness and desire to bring the Internet into their organization, most said that they had not because of a lack of staff expertise or the money to do so.

"In many ways the Internet is doing exactly the opposite of what the pundits predicted," said Dr. Kathleen Brush, an expert in business management and vice president of marketing and research at Fornova.

"Initially it was believed that the Internet would be a levelling force among businesses of all sizes; small business would have the same access to a global pool of suppliers and customers that larger, wealthier companies enjoyed. What is actually occurring, however, is that small companies simply don't have the knowledge or manpower to take on the scope of changes that the Internet brings a business. Small businesses struggle with 'if' and 'when' they should connect to the Internet, meanwhile bigger organizations have already made the investment and are reaping the benefits of lower costs and a global market," Brush said.

As evidence of the trend, the Fornova study data shows that while most larger companies have employed Web initiatives for several years and were already contemplating advanced e-commerce and procurement systems, many small companies still had no Web presence and only sporadically used email.

"Our study showed that most small businesses are aware that the Internet can make their business better, they just don't know how," Brush said.

The Fornova study also reveals that the costs and complexity of current e-commerce systems must be significantly reduced before many businesses will adopt them. Software with high installation costs and maintenance fees, as well as systems that required extensive training or revamping of business processes were major reasons for delaying the implementation of e-commerce.

"Based on what they know, small businesses simply aren't compelled to make a big capital or personnel investment in e-commerce. The strongest sentiment seems to be 'my business works fine now, why would I want to make it more complicated?'" Brush said. "In general, this is an accurate perception. Many of the e-commerce solutions available today are far more complex and costly than the traditional systems they are meant to replace."

Although small business continues to lag in the adoption of e-commerce, the study also sounds an optimistic note by pointing out that larger businesses generally lead the way in early adoption of new technologies, with smaller companies following once costs drop and standards have emerged.

"Long-term trends show that the enterprise is usually the one who bears the brunt of the costs and complications of new technologies such as e-commerce," Brush said. "It isn't until the technology has matured resulting in user friendly access and installations, and prices have dropped that large number of small businesses will adopt it."

Brush added that such a maturation level is now approaching. Internet business technologies have evolved through multiple generations and demand for Web-based commerce is higher than ever. For many, e-commerce has become an acceptable, even preferred, method for conducting business; a trend that is bound to grow in the coming years.

Links
Fornova		http://www.fornova.com