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SMEs point to IT recovery

Small and medium-sized enterprises are spending a higher proportion of their turnover on information technology each year, according to the SME Survey 2003.In the largest survey ever conducted on IT investment by small and medium enterprises in this country, it was found that, in 2001, 47% of SMEs spent more than 1% of turnover on IT, in 2002 48%, and in 2003 49% expect to spend more than 1% of their turnover on IT.

The findings were released last week by World Wide Worx, which interviewed 5742 companies on their investment in IT, impact of this investment, factors influencing purchases, and their use of financial and business services.

The one proviso for companies being asked to respond the survey, aside from being selected on a random basis, was that they used information technology in their businesses, even if only a single computer.

The scale of the project was made possible by the sponsorship of HP, Absa and PricewaterhouseCoopers, all of whom have identified the SME sector as an essential target market for large corporations. The interviews were conducted through a call centre managed by Netsurit, which provides IT outsourcing to SMEs, and partners World Wide Worx in SME research.

The results bear out the prevailing sentiment that SMEs represent a growth market for the IT sector even as large corporations are cutting back. Overall, investment in IT has remained remarkably stable for the SME sector as a whole from 2001 to 2003, with slight growth each year. Of course, this differs within specific industry sectors, which will be fully analysed in the final report, to be available at the end of June.

A notable finding of the SME Survey 2003 was that the SME sector is generally satisfied or very satisfied with its various service providers, ranging from IT providers and ISPs to banks and business advisory or accounting services.

This suggests that service providers have been forced to focus on their delivery, as small businesses are unlikely to tolerate poor service, regardless of size or sector.

In contrast to consumer attitudes to Internet Service Providers, for example, SMEs are exceptionally positive, with 75% of respondents providing a Good or Very Good rating. The 22% of respondents returning an Average rating indicate a significant target market for ISPs offering more targeted or high-quality services. The 3% of respondents returning Poor and Very Poor responses reflect a relatively insignificant level of dissatisfaction with ISPs among SMEs. The final report will analyse the extent to which this holds true within sub-sectors, companies of different sizes, and different levels of investment in IT.

Satisfaction levels with other service providers were almost identical.

The core of the research project, measuring the impact of IT on the competitiveness of SMEs, examined four key components of competitiveness, namely:

  • Cost reduction, which is in turn a measure of organisational efficiency and financial controls;
  • Turnover;
  • Ability to retain existing clients and win new clients, which is in turn a reflection of SMEs’ ability to grow market share;
  • Profitability.

The survey examined these four areas both in terms of perceived impact of past investment, and expected impact of future investment in IT. The overall findings were that SMEs were relatively neutral on the impact of past investment, but exceptionally positive on the expected impact of future investment. It is significant that negative sentiment is low for both past and future investment. There have been horror stories aplenty of the effect on productivity of computers crashing and similar IT calamities, but it is finally becoming clear that these are the exceptions. In the hard-nosed world of small and medium business owners, IT is earning its keep.

The survey examined these four areas both in terms of perceived impact of past investment, and expected impact of future investment in IT. The overall findings were that SMEs were relatively neutral on the impact of past investment, but exceptionally positive on the expected impact of future investment. It is significant that negative sentiment is low for both past and future investment. There have been horror stories aplenty of the effect on productivity of computers crashing and similar IT calamities, but it is finally becoming clear that these are the exceptions. In the hard-nosed world of small and medium business owners, IT is earning its keep.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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