IT is becoming an ever-more important part of the SME's working world, as our second report on the MORI survey for Management Today and Hewlett-Packard shows.
A developing confidence and understanding of how to use information technology (IT) to aid and improve business is accompanying the strong growth in IT investment by SMEs. Evidence for this comes from the recent survey of IT use in UK SMEs conducted by MORI for Management Today and Hewlett-Packard, a leading global supplier of IT solutions. Indeed, 81% of those surveyed believe that their management appreciate what IT could do to improve business performance, and a high 89% consider that they got value for money from their IT spend.
Those who spent more, primarily medium-sized businesses, were stronger in this belief than those who spent less: 'We've all got involved in IT.
We have to. We deal with large retailers and we must keep investing in order to keep up,' remarks Klaus Timmerman of Southport-based Mellors Confectionery.
This attitude is somewhat tempered by the 77% of SMEs that do not try to measure the return on investment that they get from IT. This could be down to the sheer difficulty of isolating the impact of IT from others: 'By bringing IT into the office, we now rely on it totally. This must have brought us some cost savings and allowed us to do more but we haven't evaluated the difference. We just know it has made a difference,' says Peter Croft of Town End, Leeds. 'While we don't measure returns we do know that we can't do without our computers. We've only had one day when the system went down in the last five years and we couldn't get anything shipped. Luckily, it only lasted 24 hours.'
'Measuring return on investment is a tough one,' admits Sally Cackett, small business development manager at Hewlett-Packard. But she adds: 'It comes down to the management having a clear idea of how IT really can help the business. If the objective is to use mobile computing technologies to free up the sales force from some of the day-to-day administration so they can spend more time in front of the customer, then that's what needs to be measured and it will soon tell you if you're getting a return on your IT investment.'
If SMEs believe that IT is doing them good but do not appear, by and large, to be measuring how much good, significant minorities now seem to be interested in generating competitive advantage from their use of IT. This shows itself in 19% of respondents using IT for communications, such as e-mail or a web site, 17% using IT for database marketing, and a similar percentage believing that IT has saved them time or allowed them to respond more quickly. It is perhaps this last point that holds a clue to where SME decision-making processes over IT are leading - it is a tool that can make them stand out in a crowd.
'We are now planning to extend our network to communicate with our customers electronically. It'll allow us to improve relations with our key customers by being able to give them faster service.
Our systems are becoming more integrated which enables us to manage better,' explains Timmerman.
It is often not the SME board on its own that comes up with the vision to invest, however. This, for the most part is driven externally to maintain 'compatibility' with customers, suppliers or other parts of their business, rather than as a result of reacting to improvements from competitors.
Of the respondents to the survey, 65% say they have reacted in this way frequently or occasionally, while only 14% claim not at all.
This reflects the typical model of an SME, which is necessarily very responsive to customer needs and relatively unable to 'push back' on the demands of larger and more powerful players in the supply chain. Clearly, however, the ability of any organisation to absorb more technology and thus change the way that it operates is linked to the ability to purchase and to its ability to use IT effectively. Tim Hart of Citrus Colloids in Hertfordshire is typical when he admits: 'We can't afford to be pioneers. One thing that we've realised from bitter and expensive experience is to learn from the experience of others.'
So where do SMEs get this advice and help? Over 75% take external advice to help make good IT decisions. Of these external advisers, 45% are 'consultants', a term that can encompass a broad range of individual, ranging from an interested accountant to an independent IT specialist. It is the quality of independence that SMEs appear to value the most. 'I rely on the advice of my friends in the trade, many of whom I went to school with,' explains Hart. 'I trust them completely.' Others (around 33%) rely on local IT dealers/resellers or advice from friends (14%). Either way, it is the local nature of the advice that proves significant - people want help from someone they have met or someone they can go back to easily if there are problems.
Ultimately, however, while getting reasonable advice from outsiders can help, such an advisor can't take the actual decision. So who holds the decision-making power within the SME? It appears that most rely on the judgment of the in-house IT specialist (although around 33% don't have an IT specialist). Of these specialists, 69% are responsible for choosing the IT supplier and the IT brand to be bought and 61% also do their own tactical deal making and purchasing.
This does not mean that they have absolute autonomy, however: 31% report to a CEO/MD and 15% to the board. A further 33% report to a specific director, commonly finance. It seems that the CEO/MD is beginning to view the IT specialist as a key person; around 75% of CEOs or MDs meet with them regularly to talk over IT requirements, and over 65% of them take personal responsibility for strategic IT decisions and developments.
While the status of the IT specialist is improving, it is still somewhat weak - only 27% sit on the board and only 61% sit in on board discussions involving IT. Lynn White, IT co-ordinator for Cepcor, says: 'I'm responsible for the IT here. If people want support, help or even training, I'll give it to them. It's very hands-on in a small company like ours.'
Cost or competitive price is the single most significant factor when making purchasing decisions for over 50% of the respondent SME businesses, with a further 25% detailing value for money or price performance. This is clearly the case with much hardware and packaged software, which can now be bought generically (although one in five say a reputation or brand name is a determining factor).
Service also gets a look in. Just over 25% cite the availability of technical support as being important, with a slightly lower proportion looking for a reliable or professional service. Outsourcing part of IT operations or activities is also undertaken, with IT maintenance, technical support and software programming or upgrades the functions most commonly affected.
Outsourcing tends to occur where it makes economic sense to buy in services provided by third parties because they are substantially cheaper than if they were provided in-house. Around 20% of respondents outsourced their web site management or design, for example, which perhaps provides a clue as to where future purchasing decisions might be taken. It may well be that as IT moves beyond the 'computer device', more organisations will seek to use outside specialists to provide services that may be either too difficult, too expensive, or too slow to do themselves: 'We wanted to get up and running with a web site quickly and needed help. Doing it ourselves, which we had done with almost all our other IT, would have taken too long and, by the time we had trained people, they'd probably have moved on,' states another respondent.
Training is often considered to be something SME managers are loath to conduct as it is perceived to provide the new employer of the trained staff with all the benefit. That said, over 75% of respondents, particularly the medium-sized organisations, believe that money spent on IT training and support is well spent. Indeed, around one in six of the small organisations had no opinion about training and support. Few (4%) see a lack of skills as an obstacle to advancing the cause of IT in their organisation. This could be an indication either of the increasing ease of use of IT equipment or of a poor understanding of the productivity gains that might be achieved from staff using IT properly: 'It isn't the cost of training which is a problem but the time that people are away from the office,' confesses White. 'If we take training, we get someone in to help people at their desks.'
But the pace of IT change can be somewhat bewildering. Of the respondents, 69% admit to being disturbed at the pace at which IT equipment becomes obsolete. This may be a forlorn cry for a slower pace of business life too. 'We used to plan our IT around a three-year write-off and upgrade cycle,' explains Timmerman. 'Now we plan the next one as soon as we've installed the new one - it's an evolutionary process.'
And some IT suppliers don't appear to be helping either. Around 33% of respondents said that their suppliers did not listen to their needs or propose workable solutions within their budgets. This could be the difficulties large organisations face in 'listening' to much smaller ones. Hewlett-Packard's Cackett believes that: 'What is clear is the wealth of information within the IT industry that is not getting through to the SMEs. A graphic illustration of this is that there are numerous financing packages currently available to cushion companies against the issue of IT obsolescence.'
Perhaps the expectations are misplaced on both sides; as we have seen, the reality is that most SMEs use local sources of advice and that these can include the IT supplier's agents, the local dealer or reseller.
Despite this, it is clear from the results of the survey that SME managers are becoming more confident and competent in the buying and using of IT. This is encouraging. The UK SME sector has often been unfavourably compared with its European and US counterparts as being less responsive and less willing to invest. The evidence from this survey suggests that the call has been heeded and rapid progress is being made in management attitudes towards the pragmatic installation of IT systems to support and drive the business beyond just operational use of IT.
For information on this survey, contact Tina Green at Hewlett-Packard on 01344 362126.
Where do you get IT and who's in charge?
The results of the Hewlett-Packard/Mori survey on IT use among 300 British
How often have you altered or improved any aspect of your own IT in order
to maintain compatibility or parity with your customers, suppliers or
other parts of the business?
Not at all 14
Don't know 2
From which sources does your company purchase IT equipment?
Retail outlets 33
IT specialist 26
Management consultants 5
Respondents may buy from one or more sources
What is the job title of the most senior IT specialist in the company?
IS/IT/MIS system director 7
IS/IT/MIS system manager 21
IS/technical support director 1
IS/technical support manager 3
IS/technical support executive 1
What function does this person report to?
Specific director 24
The board 16
General manager 8
Does your company sometimes take external advice on matters concerning
computing and IT decisions?
Not sure 5
IT opinions: with which of these statements do you agree or disagree?
% % % no
agree disagree opinion
Our company has got value for money from 89 8 3
our IT investment
Our company is concerned at the rate at which IT 69 29 2
equipment becomes obsolete
Money spent on IT training and support is
money well spent 77 11 12
Major IT suppliers listen to our IT needs and
propose workable solutions within our IT budget 38 41 21
In our company, IT has been successfully
harnessed to meet the objectives of our business 77 19 4
Our company's management appreciates what IT can
do to improve business performance 81 15 4
Our company's choice of IT equipment is driven
more by financial rather than strategic
considerations 45 47 8.