Small and medium enterprises wary of e-business costs

Canadian small and medium enteprises say high costs are putting them off from adopting the Internet business solutions an industry group says they need to be competitive.

The Canadian e-Business Initiative announced the results of its

Net Impact study Friday, a poll of SMEs and their adoption of Internet business solutions (or IBS). Co-chair and president of Cisco Systems Canada Co. Pierre-Paul Allard describes CeBI as a private-public sector partnership that aims to further Canada’s e-business success. It was officially launched in September of 2002 as a successor of the Canadian e-Business Roundtable.

Small and medium enterprises are a significant presence in the Canadian economy. According to a Statistics Canada and Industry Canada survey, SMEs are responsible for 60 per cent of the country’s economic output, generate 80 per cent of national employment and 85 per cent of all new jobs.

The Net Impact study, conducted over the summer, shows that although 50.2 per cent of Canadian SMEs are currently using or implementing IBS ranging from customer service and support to finance and accounting tools, nearly 30 per cent of SMEs report no interest in adopting any IBS.

The researchers were surprised to find that IBS adoption was slowing down in this huge sector of the Canadian business space, says York University Schulich School of Business professor Ron McClean.

“”We don’t know whether that’s the result of the dot-bomb or whether it’s simply a matter of an economic slowdown but clearly it is a disturbing statistic that we are slowing down our IBS adoption when one would think we are accelerating,”” he says.

IBS adoption has a clear correlation to export capacity, one of the best indicators of success in the North American market place, says Industry Canada Deputy Minister Peter Harder.

And with an adoption rate about 10 per cent lower than the same-sized businesses in the U.S., Canadian companies are putting themselves at a competitive disadvantage, the study says, since IBS adoption has direct links to substantial financial benefits.

Study participants who had adopted IBS reported average revenue increases of seven per cent, a 9.5 per cent decrease in the cost of goods sold and a 7.5 decrease in cost of sales and general and administrative costs. Internet business solutions adopters also reported significant gains in attracting new customers.

“”If we want to improve our performance on productivity, on economic performance generally, we know that the kind of (adoption) problems this study is pointing to have to be addressed,”” says Harder.

The Net Impact survey said the main reasons reported by participants for not adopting e-business solutions were cost of technology, time required to implement IBS, skepticism over return on investment and management support for such initiatives.

While CeBI is committed to removing any such barriers, McClean says, before it offers any solutions and practical tools further study will be needed into whether those reported barriers even exist.

“”We want to be careful,”” he says. “”What is happening is that they’re reporting real benefits after having adopted (IBS). We need to find out whether or not the costs are a barrier that people perceive them to be, and if so what can be done about them.””

CeBI, together with the federal government plans to undertake a series of initiatives aimed at helping SMEs, including getting various industry sectors to look at which solutions work, how much they cost and then trying to reduce those costs, McClean says.

Although he says it’s too early in the research process to suggest clear reasons why Canadian SMEs have been struggling with IBS adoption, McClean says the CeBI is going to conduct further studies to root out the causes and possible solutions.

Part two of the Net Impact study will compare Canadian SME study results with what is going on in this sector globally. That study is to be released sometime in 2003, Allard says.

The survey polled companies employing between 50 and 500 full-time employees.

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Jim Love, Chief Content Officer, IT World Canada

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