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Opportunities for SMEs

Improved access to information at low cost

A rather unspectacular but most important advantage for many small and medium-sized enterprises to be gained from online technologies and electronic business is the improved access to information about developments in their market. The internet has opened up immediate access to a vast amount of new resources and information that was previously not easily available for smaller companies. Thus, the knowledge gap between SMEs and large companies about the situation and trends in the market has decreased. While this is not to say that SMEs can automatically and easily capitalise on this advantage, it is at least the pre-condition for participating in the digital economy and making use of new opportunities. The impact of having better access to information is maybe a yet underestimated dimension of electronic business, as it seems so obvious. This is relevant for all sectors, but in particular for knowledge-intensive and high-tech sectors:

Reduced costs for processing orders and documents

Definitely the large enterprises, but also SMEs should be able to use e-business applications to decrease the costs related to commercial transactions, for instance processing and changing orders, and at the same time to reduce error rates. This is a major driver of e-business particularly in manufacturing sectors with their complex supply chains, but also in retail. Indirect cost reductions as a side effect of reducing the time required for carrying out routine tasks (such as searching for paper-based information about customers) is also important: in many cases, this reduction can unleash additional work time of employees to carry out value-added tasks.

Enhancing third-party relationships

ICT help companies to coordinate and manage their third-party relationships, for instance with sub-contractors, business partners or with the media. The Internet and special software applications enable and help enterprises to manage larger and more distributed projects. SMEs can benefit from this development, as they are empowered to maintain and manage business networks and cooperations in a way which they could probably not without support of ICT. The knowledge-intensive sub-sectors of business services (consulting, law) are good examples.

Facilitating co-operation in the marketplace

One of the strategies for SMEs to counteract their disadvantages compared to large companies in the global economy is in establishing strong co-operations with other SMEs. Successful examples are to be found in the textile and furniture industry of Northern Italy. Tourism is another example where SMEs must cooperate (joint destination marketing). ICT and e-business will be the grid and backbone for such co-operations. ICT enable SMEs to make joint bids, exchange efficiently data and communication, commonly promote their services through an online platform, and to achieve better prices by cumulative procurement processes. However, establishing such co-operations also poses risks and often requires a change of business cultures and attitudes, based on the model of the independent family business.

Developments in the software market

Providers of e-business software solutions used to target the large company market. There used to be a lack of affordable packages and modules which perform the same function for smaller companies. Recently, since growth rates in the large company segment have decreased, even the large software suppliers have increased their efforts to better cater for smaller companies, for example by offering downsized modules of their established SCM or ERP solutions. SMEs may also benefit from he revival of the ASP (application service provider) model, that is leasing software use rather than selling software and maintenance to companies.

Extending the market

Although it is not the main objective of e-business in most cases, e-commerce can indeed be the opportunity for smaller companies to extend their sales area. There are a few main types of SMEs which have been found to benefit from this opportunity in particular:

  • SMEs which are already well established and successful in their local/regional market(s) and are now trying to expand their sales area by using the Internet as a marketing and sales channel
  • SMEs that have specialised on marketing their services and products entirely through the Internet (for example "pure players" in the retail sector, challenging traditional retail companies)
  • Niche players: SMEs which have specialised on providing/manufacturing very specific services/products within their industry, selling to a geographically disperse market (e.g. special arts products, manufacturers of special purpose machinery).
  • Retail
  • Tourism
  • Niche players in manufacturing sectors

Improve customer service and customer relationships

Excellent customer service is often a key success factor for small companies to compensate structural disadvantage compared to large firms, for example in retail. E-business software tools can help to further improve customer service and customer relationship management. This applies, in particular, to service sectors and sectors dealing with consumers.

Integration of fieldworkers

In companies which provide services to a significant extent at the customers’ premises, the integration of mobile workers into the service company’s computer systems is of high relevance for the efficiency of internal processes. Mobile solutions can already be used today, as there is no need for companies to wait for a more widespread availability of UMTS or other new telecommunication standards. Even small companies may gain from the introduction of mobile solutions, as these are affordable and manageable for them.