The European e-Business Report The European e ... - empirica

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The European E-Business Report 2005 Opportunities and challenges for smaller firms The e-Business Report 2004 concluded in the executive summary that "large firms continue to drive the development – but SMEs catch up" (p. 12). While this holds true as a general trend, results of the e-Business Survey 2005 point at a peculiar gap in e-business adoption between the small firms (with up to 49 employees) and the medium-sized ones (50-249 employees), as Exhibit 1.1-3 shows. This would reconfirm earlier observations by e-Business W@tch from the 2002/03 period. 6 Exhibit 1.1-3: The e-Business Index 2005 by firm size A B C D Micro (0-9) 35 23 41 45 Small (10-49) 44 29 42 50 Medium (50-249) 72 63 68 82 Large (250+) 100 100 100 100 A = B = C = D = Sub-Index "ICT infrastructure" Sub-Index "Internal processes" Sub-Index "Procurement and supply chain integration" Sub-Index "Marketing and sales" Overall Index (based on firm-weighted data*) large (250+) medium (50-249) small (10-49) micro (1-9) 0 20 40 60 80 100 36 41 71 100 * Firm-weighted data express e-business adoption as "% of firms within a size-band with a certain activity". Source: e-Business W@tch (2005) In general, ICT systems of large companies obviously tend to be more powerful and sophisticated than those of small firms. This translates into more intensive and advanced electronic business practices, and a greater potential for exploiting cost-saving opportunities. However, research by e-Business W@tch conducted in 2005 on the automotive industry indicates that the relationship between innovative activities and firm performance is independent of company size. 7 Consequently, ICT-based innovations are attractive for both large and small enterprises. This should hold true for other sectors as well, and lead to further ICT adoption among smaller firms in the medium and long run. As regards customer-facing e-commerce activities, comparatively many small firms have specialised in doing business online, particularly in service sectors. The tourism industry can serve as an example: the share of firms reporting that online sales account for more than 25% of their total sales (reference period: 2004) is the same across all company size-bands (about 10%). The use of specific ICT solutions for e-marketing and sales, on the other hand, increases with company size. e-Business Opportunities for Small Firms Flexibility: SMEs can be more flexible in decision making and implementing organisational changes than larger firms. Internal communication processes are often 'smoother' in smaller organisations. Used to cooperation: Out of necessity, SMEs tend to be used to cooperating with other companies, for example in tendering. E-cooperation can further enhance this attitude. e-Business Challenges for Small Firms Lack of ICT strategy and skills: Smaller firms often lack a coherent ICT investment strategy or the related skills. Standards: The lack of e-standards and interoperability increases risk in technology decisions and investments. Pressure on prices and margins: Sophisticated e-procurement schemes of large buyers increase the pressure on supply companies, many of which are SMEs. 6 7 A presentation of e-Business W@tch findings at the IST Conference 2003 in Milan (4 th Oct. 2003), for example, was titled "SMEs or MLEs?", indicating that e-business activity in medium-sized and large enterprises ('MLEs') could have more in common than activities of small and medium ones ('SMEs'). See e-Business Sector Study on the Automotive Industry (July 2005), p. 75. 13
The European E-Business Report 2005 Trends from 2003-2005: the base for 'next-level' e-business has matured Firms using an ERP system 2002/03 – 2004/05 * Food Textile Machinery Chem./Pharma Tourism ICT srv. / ITS 0 20 40 60 80 100 7 12 20 20 21 34 37 38 39 48 58 71 2002/3 2004/5 * weighted by employment , for EU-7 / EU-5 companies. Source: e-Business W@tch (Surveys 2002, 2003; 2005) The deployment of Enterprise Resource Planning (ERP) systems is a good indicator for the overall e-business maturity in many sectors. ERP is the technical backbone for various e-business applications, including systems for product planning, purchasing, inventory management, order tracking and finance. A comparison of results to earlier surveys by e-Business W@tch shows that ERP adoption has significantly increased in the EU since 2002/03. Thus, companies can now implement new and more advanced e- business solutions than 2-3 years ago. This should also facilitate productivity growth. Further growth in e-commerce, in particular in B2B online trading Firms buying supplies online (1995-2004) * 100 IT services 80 Automotive Machinery 60 Textile 40 20 50 40 30 20 10 Firms making online sales (1995-2004) * Publishing Tourism Pharma Food Construction 0
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Contact information e-Business W@tc
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