Speech to the follow-up Seminar

Speech to the follow-up Seminar
of concerted actions 2&3
"Boosting SMEs through the Internet": February 8&9, 1999 PARIS

Director DG XXIII/A European Commission

Ladies and gentlemen,

May I add my own congratulations to the French authorities on taking the initiative to propose and organise this important Seminar in the context of our programme of Concerted Actions.

The event is very timely. Everyone is talking about the Internet and the new Information and Telecommunication technologies.

This seminar gives us the opportunity to take stock of recent developments and of their implications for small and medium-sized enterprises. For those of us who are engaged in the development of enterprise policy and particularly for those providing support services to enterprises, it enables us to better understand what are the market possibilities and what are the needs of SMEs.

The seminar forms part of a series, in which we are examining, with the Member States, how support services can be better used in the promotion of growing enterprises. The aim is to follow up the discussion that was launched at the Forum in Baden near Vienna under the Austrian presidency last September.

The challenges and opportunities for SMEs, will be further addressed at the Forum to be held in Leipzig in May, with the title : " SME 2000, how to meet the challenges through communication, innovation and co-operation" It will devote two workshops: "communication and electronic commerce" and "Innovation and technology transfer" to matters related to to-day’s seminar.

In addition, a forum under the Finish Presidency at the beginning of the autumn will consider how support services can assist rapidly growing SMEs in the area of Information Technologies.

This illustrates the importance that the Commission jointly with the Member States, is giving to the Internet and the related Information and Communication Technologies and their impact on the performance and potential of businesses.

This was further underlined recently by the Commission and the Member States report on the Pilot Initiative on Benchmarking of framework conditions, which was presented to the Industry Council of November 16, 1998. The report shows the importance of the role that ICT-O plays in increasing the competitiveness of companies.

The increased competitiveness of European businesses from making use of these opportunities is also a major factor in the performance of the European economy relative to the USA and Japan.

On average, businesses in the USA spent 2.9% of their annual revenue on Information and Communication Technologies in 1996. In Europe the figure was 2.1% and in Japan approximately the same.

In the USA there has been considerably more staff involved with IT than in Europe (3.5% versus 2% of employees). We still have some way to go, though, both in the USA and Europe and in nearly all sectors characterised by growth, there is extensive networking (intranets, extranets, groupware) and IT is heavily involved in enterprise resource planning systems.

Of course these figures mainly reflect the structure of large enterprises. If we had to focus on SMEs, the percentage of financial and human resources would be less significant.

As we know, Business support services are a crucial facilitating factor in the business environment. They form an interface between individual enterprises and their local environment, their market and their suppliers. They represent a "soft" infrastructure for enterprises, which is becoming increasingly important in competitive processes.

Many SMEs turn to their business support organisations, whether these are Chambers of Commerce, trade associations or the more specialised support agencies. The question is what kind of assistance can be provided?

In the private sectortoo, there is a rapidly developing service industry offering assistance and practical advice. Comparison with American experience, however, suggests that there is still some way to go in Europe before the market potential in this area is fully realised.

We are asking if the traditional delivery systems of public and semi-public business support give the kind of information, advice and training required. The business environment is changing so rapidly and involves a degree of technical knowledge, an appreciation of business strategy and an understanding of the inter-relation between the different functional areas of business – marketing, finance, production and distribution management and so on that support services must adapt to keep up.

It is clear that support organisations are indeed rising to the challenge. They are recruiting new staff with the necessary technical background and they are developing new services. Demonstration of new applications of information technology, training and practical assistance in the design and maintenance of Web sites are fairly common examples.

But support organisations also face a challenge in adapting the way that they deliver their traditional services.

The initial promise of access through the Internet to immeasurable amounts of information on any subject that could be imagined, has given way to a more sober reflection on the effective management of this access to information. As providers of business information of long standing, many business support organisation have substantial experience of managing information for their clients. The immense possibilities provided by the new technologies mean that the structures and discipline of professional information providers are required more than ever.

Thus, the objective of this seminar is to identify how we can enhance and make more efficient the provision of business support services to SMEs by making use of the Internet and its associated technology. This has two aspects: first new services have to be provided; and secondly old services have to be provided in a new way. This applies both to the way that services are structured and delivered and also to the way that they are promoted among potential clients.

As examples to improve the way services are structured, there is a wide range of new developments with a major emphasis on the competitiveness of SMEs. These are high value added support services related to applications of information and communication technologies and new organisational arrangements (ICT-O).

For companies ICT improves productivity, flexibility and reaction capabilities and it creates new value and business options.

- to the introduction of advanced logistics networks in the supply chain, which is creating a new base for inter-firm relationships,

-to full service delivery or 7 days/24 hours customer care: help desk, directory services, anytime and anywhere availability

- to the support of the human resources department through the construction of new recruitment sites or

-to the support of the financial department through the establishment of an electronic banking system. The use of ICT in this area can be used for both cost savings and productivity increase, through the improvement and the creation of new services and products in the banking and accounting sector.

- in the first place, the whole area of ‘electronic commerce’ which covers any form of business and administrative transaction that uses some form of information and communication technology. The concept encompasses relatively simple shopping systems, as well as complex solutions that integrate the whole commercial cycle. I shall come back to this later.

Electronic commerce has the potential to improve Europe's competitiveness and of make companies’ structures more efficient. It enhances the enterprise’s opportunity to expand and it enriches the dialogue between producers and consumers, thereby improving the quality of products as well as pre- and after-sales service.

Furthermore, it enables SMEs to come together in order to pool their purchasing capacity, to reach new and distant markets at low cost, get access to market information, improve their logistics and develop co-operative R&D facilities.

- the internet and Intranet technologies for information sharing and collaboration, that is to say, the creation of virtual teaming or interest based communities;

- the creation of employees self-service applications to provide for single users’ interfaces to corporate applications or
- all ranges of on-line services and the establishment of interactive communication

- the furnishing of access to the Web searching for information and the effective maintenance of Web site, for an effective delivery of a changing information.

By making the information and advice functions of business support agencies more accessible through well designed Web sites, we not only improve the take-up of these services – a long-standing objective – but we demonstrate how to make the Internet into a valuable tool for enterprises

These examples suggest that both, the supply and the demand for support services are being radically affected by the possibilities presented by the Internet and the Information and Communication Technologies. The cases and literature examples show that the present ICT applications are leading to a new type of business architectures and to structural changes in inter-company relationships.

What happened in the late 80s and early 90’s was the restructuring of companies and factories –an intra-company restructuring-. Now the trend is to create new types of demand and supply chains and virtual enterprises, in other words, an inter-company restructuring.

- the first is the lack of professionals and of skills on many levels –from management awareness and capabilities to the lack of experienced and skilled systems implementers and to the lack of general computer literacy.

- the second is the need to change the perception of businesses as being small isolated entities, struggling to survive against all other similar businesses. We are now in the age of working together in networks, sharing information and creating clear identities. Small businesses are at an insuperable disadvantage if they opt out of this trend.

- Another concern is the legislative framework, i.e. European regulations and practices. Small companies, in particular, need a clear and simple regulatory environment in which to operate. They also need adequate telecommunications tariff schemes, which are for example, adapted to the peculiarities of electronic commerce.

At present, cross-border traffic creates uncertainties as to which rules apply. This can discourage SMEs to use several business applications based on Information and Communication technologies, as for example electronic purchases or selling.

The Commission has therefore recently proposed a Directive on the legal aspects of electronic commerce, which answers this problem by applying Internal Market principles as the application of the country of origin rule for setting control in a clear way. This Directive will allow SMEs to trade on-line throughout the Community subject to their national laws and regulations.

Other important aspects in the fields of taxation or customer protection are also being considered at present by the Commission in the context of this necessary legal framework for the development of the use of Internet and related Information and Telecommunication Technologies.

In addition, a series of measures have been taken with the aim of developing electronic commerce as a widely accepted practice by businesses and administrations.

For Internet and ITC to become a reality, we have to achieve the necessary critical mass by promoting their efficient and massive usage by SMEs in the Union.

There is a clear need to co-ordinate and monitor our strategy for promoting SME access . This is to be done by:

Action under this heading is included for example, in the field of the e-commerce, the E-commerce for SMEs, starter kit. This action aims to promote the usage of a number of basic, easy-to-use e-commerce services to SMEs on a mass-market basis.

The Internet and Information and Communications Technologies must evolve from being a rather marginal, although rapidly growing, phenomenon to a fully-fledged mass-market with SMEs getting equal access. This will not be possible without the massive involvement of SMEs. The Commission will help to pave the way for this through a number of awareness and promotion initiatives to build critical mass around the Internet and Information and Communications Technologies.

Promoting awareness among SMEs about the benefits of devising the Internet and Information and Communications Technologiesstrategy through: awareness actions, organisation of thematic workshops and seminars, as the one of today, and media events, establishment of an on-line inventory on awareness activities for SMEs, etc.

Identifying and disseminating good practice for SMEs to successfully develop the Internet and Information and Communications Technologies strategy.

Identification of best practice in creating and operating business through the use of a ICT application and the promotion of co-operation between Member States.

A lack of awareness and training hinders SMEs trying to gain access to the Internet and the Information and Communications Technologies mainstream. The market has failed so far to produce standard, affordable and easy to use interactive business services required by SMEs (electronic ordering, payment, etc.). Moreover, small companies often lack the organisational capability to get the necessary visibility and bargaining power. The Commission should therefore identify the actions necessary to counterbalance the barriers that SMEs face.

Commercial quality certification and arbitration services for SMEs. This action aims to facilitate the provision from the private sector of a number of advanced on-line business services to SMEs. These services (commercial certification, arbitration, quality labels, etc.) would help small companies to achieve visibility and credibility on equal basis to that of large companies

The emergent information society is imposing upon enterprises new operational practices. Companies in general, but especially SMEs have to review the ways they design, produce, market and trade goods and services. Individual companies have to adjust in order to operate in the global market. Consequently, the Commission needs to envisage measures in order to help SMEs adapt to the structural changes triggered by the information society.

To fulfil this objective, the Commission and the Member states can use the Structural and Social Funds funding and the R&D programmes specifically targeted at SMEs. This collaboration should lead to the design and implementation of actions aiming to help SMEs to develop:

The Commission must provide feedback from the market on the views of enterprises and of organisations representing SMEs, including commerce, tourism, crafts and social economy. Moreover, it will seek to ensure that the regulatory framework follows the principle of "think small first" and, in consequence, is SME friendly.

The Commission, is therefore playing its full part alongside the Member States both in establishing the right conditions for a successful exploitation of the Internet and in helping to develop the intermediary services that will make this possible. We believe that our orientation is correct, addressing legal problems faced in all the Member States and providing direct assistance where this is justified, but also encouraging others to develop their own services.

In this context, the method of the Concerted Actions between the Member States and the Commission, is particularly well suited for dealing with the subject of the use of the Internet and the Information and Communication Technologies by SMEs. What we try to do today is to identify good practice, so that when people ask what has to be done, we can point to practical examples. We shall therefore set a great deal of store by the case studies that are to be presented in the workshops later today.

I hope that all of you at this seminar will help us all get a clearer perspective on these issues and provide a rich source of practical inspiration in the way that our Internet services can be delivered .