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USE OF INTERNET BY SMALL AND MEDIUM SIZED ENTERPRISES

SUMMARY OF A STUDY REPORT

by Venla Berg and Heikki Karttunen

for the Finnish Ministry of Transport and Communications, 1998

Objectives of the Study

Firstly, the object of the study was to learn how Finnish small and medium sized enterprises (SMEs) use information networks as well as to evaluate from the SME’s perspective the importance of information networks now and in the future. Secondly, the study aims at forming a picture of the opportunities created by Internet for business activities of SMEs. Thirdly, the study outlines obstacles and delaying factors confronted by SMEs in the use of the new technology.

 

Methods Used in the Study

 

Scandinavian NetCommerce Consulting Oy was responsible for carrying out the study. The study consisted of two phases. The first phase consisted of a quantitative telephone interview carried out in co-operation with Taloustutkimus Oy. A total of 999 decision-makers in strategic positions of SMEs employing 5 to 250 persons participated in this phase. The second phase consisted of personal meetings and in-depth interviews of 25 directors and owners of SMEs. These interviews were aimed at establishing additional information relating to the results of the telephone interviews.

 

 

Main Findings

The Use of E-mail in SMEs

According to the study 45 % of the directors of SMEs use e-mail and Internet daily. The use was found to be in direct conjunction with the size of the enterprise. Only less than one third of the interviewees in enterprises employing ten employees or less used e-mail on daily basis.

 

General attitudes in SMEs towards e-mail were found to be positive. The use of e-mail for different purposes is increasing rapidly. E-mail was most frequently used for external communication.

The Use of Internet in SMEs

More than 40 % of the interviewed enterprises had Internet homepages for company presentation. One third of the enterprises used their homepages also for product presentation. 75 % of the interviewed directors believed that their company shall utilise Internet for company presentation within the next couple of years. Almost as many believed that their company shall use Internet for product presentation and more than a half believed that their company’s products can also be ordered via Internet within the next few years. Further, SMEs were very interested in using Internet as a channel for customer feedback and customer services.

 

SMEs use Internet more and more for information searches from their operating environment. The interviewed directors generally expected that relationships with authorities can be managed via Internet in the future. One half of the interviewees were assured that their company shall order products through Internet within the next few years. Telecommuting was also expected to increase: over one third of the interviewees believed that their enterprise shall use Internet as means for telecommuting within a few years.

 

The Importance of Internet for SME’s Business Activities

Every two out of three interviewed directors described the current importance of Internet for their enterprise’s business activities as non-existent or low. However, it was generally felt that Internet’s importance shall grow rapidly: over 70 % of the interviewees believed that Internet’s importance to their enterprise shall become moderate or high within the next few years.

 

Opportunities Created by Internet

The interviewed directors believed that Internet shall create opportunities for the development of their business. Most interviewees (76%) believed that their enterprise shall benefit from the development in the speed of communications. More than 60 % of the interviewees believed that their enterprise shall gain benefits also in the form of more effective customer feedback and other business functions as well as the new business opportunities created by Internet.

 

Obstacles and Delaying Factors

According to the study SMEs find the lack of know-how to be the largest obstacle for developing their operations in Internet. A total of 40 % of the interviewees expressed difficulty in imagining and creating suitable business strategies as regards to Internet for their enterprise. It was clear from this that the business operations of the enterprise had not always been taken into account when planning the enterprise’s homepages. Obstacles created by the lack of the referred know-how and vision seemed to exceed the problems relating to technology.

 

The interviewees often expressed the lack of potential customers and partners in Internet as a delaying factor as regards to the development of Internet services of their enterprise. The study also showed that fear for criminal actions and industrial espionage act as a delaying factor. On the other hand most of the directors who participated in the in-depth interviews considered these risks to be small compared to the risk of not using Internet in their business at all.

 

Different Levels of Progress

The study showed that SMEs can be divided in three groups based on the level of activity: I enterprises that do not use Internet, II enterprises that use Internet passively and finally III enterprises that utilise Internet actively.

The interviews showed that a remarkable amount of enterprises using Internet passively shall turn into active users during the next two years. Also a large number of enterprises that do not use Internet at the moment shall begin to utilise Internet in some way or another during the next two years.

 

The following three chapters describe the typical features of SMEs in different levels of progress in the use of Internet.

 

Enterprises that Do Not Use Internet

Enterprises that do not use Internet neither usually use information technology for other purposes in their operations. Directors of these enterprises do not currently find Internet significant to their enterprise’s business. Often these directors seem to question the right moment: should they proceed now or should they wait.

 

Enterprises that Use Internet Passively

Enterprises that use Internet passively usually utilise at least e-mail. Possible homepages of such an enterprise are static and have only few functions. The use of e-mail and homepages have not yet been incorporated as an important function in the activities of these enterprises.

 

A number of directors stated in the in-depth interviews that they had found that the transition from having static homepages to utilising Internet for active commercial purposes to require a surprisingly large amount of work. Transition is found to require, among other things, analysing the rapidly changing operating environment as well as going through the enterprise’s business strategies. According to the general opinion expressed in the in-depth interviews the directors of SMEs can not find the support and know how needed for the development of their enterprise’s Internet-related business activities.

 

Enterprises that Use Internet Actively

Enterprises that use Internet actively include the predecessors of Internet business in Finland. These enterprises are well aware of the opportunities available in Internet. They utilise Internet in their customer services and usually also as a channel for buying and selling at some level.

 

The enterprises that use Internet actively compare their development resources as well as Internet business strategies and models with those of US enterprises. One of the findings in in-depth interviews is that the directors of these enterprises even ask themselves whether they are already late in the development of the Internet activities.

 

The directors of enterprises using Internet actively, unlike directors of enterprises of the other categories, note the risks related to business activities in Internet. However, these directors seem to analyse the risks in a businesslike manner and realise that the risks are manageable.

 

According to the in-depth interviews a number of the enterprises using Internet actively are hindered by restricted resources when developing their Internet-related business activities. The development of logistic solutions, integration of new systems to other processes of the enterprise as well as fulfilling other development needs were often considered to require such remarkable contributions that they could not always be realised.

 

Conclusions of the Study

The largest obstacle for the use of Internet by SMEs is the lack of know-how. The enterprises do not sufficiently realise what the practical requirements of the new electronic operating environment are for the development of their business activities.

 

Decision-makers of SMEs consider that the importance of Internet for their businesses shall grow rapidly.

 

The use of Internet shall rise to a new level during the next two years: static homepages will be replaced by active sales and interactive customer services.