RSS feedsAccording to the Department for Business, Enterprise and Regulatory Reform (the DTI in old money), at the start of 2007 there were 4.7 million companies in the UK, an increase of 212,000 on 2006. These companies employed 22.7 million people and had a total turnover of £2.8 trillion.
So which companies are powering the engine of UK plc? Tesco, Barclays, BP, BT, BA? Certainly these large enterprises play a significant part in the private sector but what about their smaller cousins, the so-called small and medium-sized enterprises (SMEs: businesses with fewer than 250 employees)?
A whopping 99.9% of all UK enterprises are SMEs. They employ almost 14 million people and generate over £1.4 trillion for the UK economy. They may not make the business news headlines in the same way as Marks & Spencer, Vodafone and BSkyB, but they are a vital and dynamic part of the UK economy, and Web 2.0 services could revolutionise their business practices.
‘Web 2.0’ is not always a helpful term. It means different things to
different people and can be more hype than help. But some of the new web
services can improve the performance of SMEs in three areas:
• internal communications and information/knowledge sharing
• external communications with customers, suppliers and partners
• marketing to prospective customers
This article will outline some of the ways that SMEs are using Web 2.0 services and will draw on recent research I conducted at the University of Brighton to compare how this usage varies according to SME type.
Costly and complex
To date, most enterprise software has been designed for and marketed to large
organisations with the budget, processes and technical skills to deploy it. An
SAP, Oracle, IBM or Siebel installation can cost millions, take months
(sometimes years) to roll out, and require teams of technical staff to manage.
One of the problems suppliers face in developing enterprise software for SMEs has been the high cost of marketing to and then servicing hundreds of thousands of small companies rather than a small number of very large clients.
Developing ‘low cost, high touch’ systems has proved elusive, but some companies such as Salesforce.com offer customer relationship management (CRM) services that are making inroads into the M part of SME. This software-as-a-service (SaaS) model delivers IT services through the web: customers access and use the service over the internet, while the supplier manages and hosts the data.
One of the key issues has been that SMEs come in all shapes and sizes – everything from manufacturers employing 249 people across a number of sites to a lone IT consultant operating out of a spare bedroom. Having fewer than 10 employees, 96% of UK private enterprises fall below the radar for many business software providers, but that radar coverage is expanding rapidly because of the development of the internet.
According to the UK media regulator Ofcom, 75% of all UK SMEs have a broadband internet connection. In June and July of this year I conducted a survey of 527 UK SMEs to find out how they were using the internet for internal and external communications. I compared SMEs from a range of sectors and of different sizes against SMEs whose primary business centres on the internet and new media sectors (digital SMEs).
My main aim was to see what digital SMEs are doing to incorporate internet and web services into their business processes and use this data to consider where non-digital SMEs may be heading over the coming years.
The left-hand chart on page 12 shows the technologies that SMEs use for internal communications. Instant messaging and Skype may not be classified as Web 2.0 tools, but it is interesting to see the extent to which they are used by digital SMEs: nearly half of them use instant messaging to communicate internally.
The only technology used more by all SMEs than digital SMEs is the intranet, which may reflect the fact that it dates back to the mid-1990s.
The low usage of wikis by both groups is surprising given the coverage given to the technology over the last five years. Some of the SMEs surveyed indicated that their intranets precluded the need for wikis, but might consider switching to a wiki platform in the future.
Perhaps two of the technologies to keep an eye on over the coming years are blogs and social bookmarking. Blogs are used for internal communication by 30% of digital SMEs, and 20% use social bookmarking sites such as Del.icio.us. Some respondents felt these cheap or even free tools offer much of the information-sharing functionality promised by more complex and expensive content management systems.
Outside-facing
There is a similar pattern to the technologies used by SMEs for external
communications with clients and suppliers. Digital SMEs are far more likely to
use Skype, instant messaging and blogs, while all SMEs are still heavy users of
email as the primary communication tool.
Some of the more advanced Web 2.0 services used by digital SMEs include Twitter (a web-based notification service), Ning (social media) and Basecamp (project management).
The right-hand chart on page 12 shows the importance of LinkedIn for digital SMEs as a tool for promoting their services as well as their own blogs and Facebook. By contrast, MySpace is little used for marketing purposes despite having more users overall than Facebook. This may be a reflection of the demographics of MySpace users.
So what broader conclusions can be drawn from this research? The term Web 2.0 has, with some justification, been criticised as a buzzword to hype the value of companies that have yet to demonstrate viable business models.
The overriding concern of many such companies has been to attract users and worry about making money later. It is a state of affairs reminiscent of the dotcom boom of the late 1990s, and we all know where that led.
I remember writing about application service providers (ASPs) in 1999 and making a case for the future of applications delivered over the internet. Although that did not happen in the way that I and many others envisaged, there is substance to some of the claims being made for this later stage of the development of the web.
While many of the business-to-business (B2B) web services of the dotcom boom have long since disappeared, one of the defining characteristics of many successful Web 2.0 services is that they were originally aimed at consumers but have since been adopted by many SMEs.
The charts on page 12 show that a sizeable minority of UK SMEs are using Facebook, Skype, blogs and instant messaging to communicate and share information internally and externally.
The user-friendly nature of these services and the fact that people are comfortable using them in their personal lives are key factors driving this adoption.
Between two stools
Over the last few years, large enterprise software providers have launched a
range of web-based versions of their systems for SMEs. But many smaller
companies are put off by the complexity and range of features of some of these
systems. The diagram on this page illustrates how SMEs fall between two stools:
the top-down offerings from large suppliers and the more organic adoption of
consumer services.
The space they occupy is one of the most interesting areas for web services. It is one with huge potential, and a number of suppliers are developing web services aimed specifically at the SME market. Companies such as Clarizen, Zoho and 37 Signals with its Basecamp project management product are good examples of innovators with an understanding that the requirements of smaller companies are often very different from those traditionally targeted by the large suppliers.
37 Signals talks about its customer base as being the Fortune 5 Million, while Clarizen’s CEO, Avinoam Nowogrodski, points to the collaborative nature of web services as being particularly attractive to SMEs. “Speed is the biggest advantage the SME organisations have over large companies,” he says. “Collaborative project management infrastructure is the key asset for these SME organisations.”
Who will be the winners in this middle space remains to be seen. Google has a suite of web services from Gmail to Google Docs and Google Sites, which are becoming widely used as collaborative tools by organisations.
Microsoft has entered the market with Microsoft Office Live, which allows users of its ubiquitous Office suite to store and share documents online. For Microsoft, as with some of the larger enterprise software suppliers, there is a tension between the traditional and highly profitable shrink-wrap model of software delivery and the migration to a web services model. It is possible that web-only companies such as Google and Clarizen will have the advantage here in that they do not have to deal with legacy businesses as well as having a better understanding of designing web interfaces that users are comfortable with.
The internet is now a integral part of the operations of many SMEs in the UK. Three-quarters use broadband and over 90% have some form of web presence. Many use a range of web services in innovative ways to share information, to communicate with customers and to market themselves.
Systems and tools that were once the preserve of large corporations are now available at little or no cost to companies of all sizes.
Of course, the extent to which the internet can help small businesses will vary greatly depending on the sector they operate in. Plumbers and hairdressers may have less use for blogs and wikis than web designers and IT consultants, but even traditional small businesses can benefit from plugging into Web 2.0.
As search engines increasingly become the first port of call for customers looking for professional services, an electrician or plumber with a web presence and able to furnish positive reviews for their work is likely to fare better than those relying on traditional paper-based directories.
Theatres sell off unfilled seats at discount prices on the day, so why shouldn’t hairdressers Twitter to their customers about a spare slot for a discount haircut that afternoon?
At the end of the day, it’s all about information and getting it into the hands of those that need it.
Download a free summary of the research at coldlime.com/smesurvey.pdf
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