There has been a jump in the number of small and medium-sized enterprises (SMEs) connecting to the Internet during the past 12 months, according to the 2004 Sensis
e-Business Report released this week.
Sensis chief economist and report author, Steven Shepherd, says 86% of SMEs are now connected to the Internet.
"Given connection levels were already at such high rates, it is surprising to see a four percentage point increase during the year," he says.
"It appears that the Internet is well and truly a standard tool kit for businesses now."
The 2004
e-Business Report shows a correlation between the number of staff employed and connection to the Internet.
Shepherd says a "staggering 99% of medium businesses", that is, those businesses with between 20 and 200 employees, now have a connection.
"Internet connection among small businesses has skyrocketed over the last six years, up 52 percentage points to 86%," he says.
The retail trade sector recorded the lowest rate for connection at 77%, while business services ranked highest with 97% connectivity.
Increased service is the dominant reason SMEs connect to the Internet. Nearly four out of every five SMEs (72%) connect to the Internet to provide better service. The second reason (cited by 50%) SMEs connect is to make business transactions cheaper.
Broadband appeal
The number of SMEs using broadband has grown 13 percentage points over the past 12 months to 43%.
While 41% of small businesses indicated they currently have broadband access, this was low compared with the 73% of medium-sized businesses.
More mobile workforce
Shepherd says the use of laptops and WAP or Internet-enabled phones by SMEs increased during the year.
Over the past three years notebook computer ownership has risen 15 percentage points from 26% to 41%. Currently, 31% of SMEs have a WAP-enabled mobile phone.
"From our quarterly Sensis
Business Index, we know many small businesses trade on service, so laptops and WAP may be helping them to deliver on this proposition," he says.
"We also know that many small business proprietors work long hours. Technology may be helping them achieve a better balance between work and home."
Email still favourite application
The number one reason (94%) SMEs use their Internet connection is still to communicate via email.
Using the Internet to get reference information or to research has grown eight percentage points to 90% during the year and is the second most popular use of the Internet.
The application with the strongest growth projections (based on those that already are connected) over the next 12 months are:
- to take orders for products and services (expected to rise 12 percentage points to 57%)
- to promote the business using email marketing (expected growth of 11 percentage points to 42%)
- to receive payments for products and services (an eight percentage point forecasted growth rate to 59%)
- to streamline communications with customers and staff (growth of eight percentage points to 69%)
- to place orders for products and services (a projected rise of eight percentage points to 73%).
Websites continue to develop
The percentage of small businesses with a website increased nine percentage points during the year, up from 36% to 45%.
The highest rate of website penetration is in the cultural, recreational and personal services sector (74% of Internet-connected SMEs with a website), while the building and construction sector has the lowest at 20%.
The accommodation, cafes and restaurant sector provides the strongest endorsement, with 73% citing increased business effectiveness, while the health and community services sector has the lowest confidence at 42%.
Electronic procurement on the rise
The report found the use of e-commerce among SMEs in the procurement process increased strongly over the past year, following subdued growth in 2003.
The number of SMEs placing orders over the Internet grew by 10 percentage points during the year. The proportion of SMEs placing orders over the Internet has grown from 17% in 2000 to 55% in 2004.
"Not only are we seeing more SMEs doing business online, but more of it is being done online. Twelve percent of SMEs that order online do the majority of their purchasing online.
"Of the 39% of SMEs that took orders online, some 8% told us that they were now doing the majority of their orders online," he says.
The findings from the report suggest online ordering makes up over 10% of total procurement activity.
SMEs in the health and community services sector are the most likely to place orders via the Internet (74%) while the transport and storage sector along with the building and construction sector are the least likely (48%).
The proportion of all SMEs that pay for products and services over the Internet increased by 11 percentage points over the year to 59%.
Software (43%) is the most commonly bought item over the Internet by SMEs, followed by airline bookings (37%) and stock/merchandise (36%).
Selling over the Internet
There was a further increase in the proportion of SMEs that sell products and services online.
"The proportion of SMEs that take orders online grew from 33% to 39% during the year. That means about one in four SMEs take online orders, making it a conventional method of doing business," he says.
"Forty four percent of SMEs now receive payments online, up 10 percentage points from last year.
E-commerce: its return and appeal
During the last year, there has been a strong increase in the proportion of SMEs that have recovered their investment in e-commerce.
Almost 60% have recovered the investment in e-commerce, up three percentage points from the past two years.
"We have also seen the return on investment grow," Shepherd says.
"The proportion of SMEs that have made a return on investment greater than 50% has increased from 22% to 27%, representing an excellent return on their e-commerce strategy."