Download the full study reports:
Qualitative report : Key issues, case studies, conclusions
(July 2005, pdf, 3.5 MB)
(Sept 2005, pdf, 2.0 MB)
According to the NACE Rev. 1 classification of business activities, the manufacture of machinery and equipment is defined under Division DM 29. This study focuses on the NACE groups 29.1 – 29.5, which are mainly producing machinery for other businesses. The sub-sectors "weapons and ammunitions" (29.6) and "domestic appliances" (29.7) are not included, as these industries mainly produce for government agencies (29.6) or end consumers (29.7) and thus differ from the other sub-sectors.
Firms in this industry continue to make progress in their usage of Information and Communication Technology (ICT) and in understanding the strategic scope of e-business initiatives. Numerous innovative and interesting examples of e-business usage among firms in this sector suggest that the potentials of ICT to improve the competitive position of firms are far from being exhausted yet. According to the survey results (2005), the machinery and equipment (M&E) sector exhibits an average usage of ICT compared to other sectors. It is neither a late nor an early adopter of most e-business solutions.
Many firms in the M&E sector focus their e-business initiatives on innovative ways to support traditional business functions with simple, user friendly ICT systems.
The outsourcing of ICT solutions is currently an important sector-specific trend. Outsourcing is one way for firms in this industry to cope with potential shortages of in-house ICT experts and a lack of ICT know-how among employees.
A digital divide between SMEs and large companies remains visible and there is no clear indication yet that this gap will be overcome soon. Yet, many concrete examples show how small and medium-sized enterprises (SMEs) can benefit from implementing e-business solutions. Thus, there are still numerous opportunities for SMEs to benefit from investments into e-business and ICT.
Standards for codifying product-related information remain an important issue for e-business development in this sector. A lack of standards and their application seems to slow down e-procurement related activities of firms in this sector.
Firms in the M&E industry show a high endowment with basic ICT infrastructure like internet access (95% of firms) and Local Area Networks (LAN) (49% of firms), but a slightly below the weighted average usage of advanced infrastructure technologies like Wireless LAN (WLAN) (10% of firms) and Virtual Private Networks VPNs (7% of firms).
The digital integration of internal information flows and processes is an important issue in the M&E sector. This is reflected in an above average endowment of firms with Enterprise Resource Planning (ERP) systems (58% of firms in the industry) and other specialised ICT solutions that support internal processes, such as Engineering Data Management (EDM) systems (14% of firms). In fact, the diffusion of ERP is almost twice as high in the M&E sector than on weighted average for 10 sectors covered by the e-Business Survey 2005. Yet, there remain pronounced size-class specific differences: While almost all large companies in the sector use ERP systems (85%), only 11% of micro-enterprises do.
The survey data (2005) support previous evidence that purchasing online remains one of the most popular applications of ICT and the internet in the M&E sector. More than one third of all firms in the sector currently purchase online. Large firms are more prone to e-procurement than small firms, but small firms that actually do purchase online procure higher shares of their total purchasing volume via online channels. Compared to other sectors, however, purchasing online is not as common in the M&E industry as on average. Also, firms in this sector primarily use simple technologies to purchase online (instead of specialised e-procurement solutions) and support rather traditional procurement processes, such as finding suppliers and running Request for Quotations (RfQs) or Request for Proposals (RfPs),instead of online auctions, for example. In addition, total online purchasing volumes remain rather small.
An above average share of firms in the M&E sector has a website (61% of firms, representing 88% of employees in the sector). Yet, the sector continues to show low usage rates for online sales and e-marketplaces. 5% of firms in the sector sell online, compared to 15% on weighted average for 10 sectors. The majority of firms that sell online rely on simple sale-side e-commerce activities rather than complex, sophisticated systems. This complies with the insight that there are limits to the usefulness of the internet as a sales channel for the mostly customised, capital-intensive products of this sector that do not easily lend themselves to be sold to an anonymous mass market. Yet, several business examples show that there are potentials in this industry to use customer-facing e-business solutions to improve productivity and customer service.
By increasing market transparency and the geographical outreach of companies, the further development and application of e-business could increase the degree of rivalry in some market segments of the industry. Yet, early movers in this development might be able to capture competitive advantages. Also, for those companies that consider the negotiation power of their suppliers or customers as an important aspect, the further development of e-business could significantly influence the “balance of power” between closely integrated business partners.
Measures to promote e-business applications are starting to take effect in the M&E industries. Awareness programmes have contributed to lower barriers for SMEs and to the perception of the potential benefits of e-business.
However, disseminating information does not seem to be enough. Companies need to translate general information into their own business cases; they need to filter relevant material from the inscrutable and sometimes contradictory supply of information. Hence, to overcome fears and to reduce the risk involved in e-business projects, concrete advice that accompanies individual implementation processes looks like a promising approach. Local and regional e-business competence centres could be the organisational form for the provision of such a service, and some are already operating to this end. A lack of ICT skills among SMEs in this sector remains an important issue for public policy.
Public-private-partnerships could be formed to support the compilation of comprehensive product classifications. Extensive engineering knowledge from practitioners is needed to accomplish the task. Industry associations or public bodies could guarantee the neutrality of procedures and outcomes.