Companies of all sizes are getting their IT departments in order according to a survey carried out by MORI for Management Today and Hewlett-Packard.
Investment in information technology (IT) by Britain's small and medium-sized companies is gaining pace. So says a recent survey of IT use among British SMEs conducted by MORI for Management Today and Hewlett-Packard, a leading global supplier of IT solutions. More than 70% of companies surveyed say their total IT spend will increase in the next three years: two in five companies claim their spending will increase by 20%. According to the survey, IT is an increasingly vital component of SME success. The workplace is becoming wired with almost 60% of the organisations interviewed stating that their company makes full use of IT in the day-to-day running of the business.
IT is making its greatest contribution to the smooth operation of Britain's finance and accounting departments. Out of a possible 10, respondents rated the contribution of IT to finance and accounting as 8.3, almost two points higher than its contribution to management information and customer correspondence.
Russell Thornhill of London jewellers Theo Fennell is typical in his use of IT. He uses Microsoft office spreadsheets, mostly for accounting, but also relies on a customer database function to mail out the company catalogue each year. Similarly Justin Tun, head of Fortress Interlocks in Wolverhampton, uses a Unix database system to catalogue his company's parts and products.
But, in addition to storing data and dealing with accounts, smaller companies increasingly rely on IT to produce their own documents and other published material. Take, for example, the case of Fiona Wood, IT director at International Students House in London. She favours a scanner and zip drive (used to back up large quantities of data) to publish posters and produce other vital documents.
So, how much are SMEs spending on IT? Some 60% of small enterprises spend £10,000 a year or less on hardware, software and peripherals. Two-thirds of medium-sized companies spend £10,000-plus. But even small companies are ready to make major IT investments where necessary. Barry Tunnicliffe, head of Staffordshire-based printing firm Panda Press, employs only four members of staff and claims to be comparatively low-tech. Yet Tunnicliffe is looking to spend more than £100,000 on sophisticated technology capable of taking electronic text direct to plate.
Significantly, whatever their current spending on IT, almost three-quarters of respondents believe their investment in IT is set to increase. Only one in five small firms see no need for further spending. Moreover, today's IT purchasers are increasingly clued up. They know what IT they need and what they want and won't be buying anything just for the sake of it. SMEs are now less likely to delay purchasing because of lack of product knowledge.
It's insufficient cash-flow that usually prevents them from making a purchase.
According to Sally Cackett, small business market development manager for Hewlett-Packard, the survey aimed to give an insight into 'the psychology' behind the buying behaviour of small business. Jim McLaughlin, director of cheese-makers Highland Fine Cheeses in Tain in the north of Scotland, is looking to buy another standalone PC in the spring but he emphasises that it will be cheap model and adds that he has found no need to invest in a network as yet.
Wood, too, says she is happy with her network capacity. This year she plans to upgrade to Office '97 on the PC base, as well as expanding the network, but she sees no need to upgrade the operating system yet. Theo Fennell's Thornhill is planning a fully integrated system in the medium term but he is in no hurry. His investment is planned in a very controlled way. First, he will explore a new system to deal with stock control, better buying information and sales; then the firm will integrate its databases; and finally it will integrate its accounting functions. But each investment will only be made as and when needed.
The same pragmatic approach applies to spending on IT training. Almost three-quarters of small enterprises spend less than £10,000 a year on training (not including in-house training). Some companies manage to provide all their training in-house. Russell Thornhill at Theo Fennell, for example, has not yet needed to employ any outside trainers. Any training to date has been carried out by existing staff members. But, when the firm upgrades its IT capacity, it will need to introduce formal external training.
One area where outside training may be required is the Internet. This is becoming essential for all companies which trade internationally. But even for those that are not, the use of e-mail and intranets is slowly becoming the norm. E-mails and intranets are used by around 41% of companies to communicate internally and by almost 60% to communicate externally.
Tun at Fortress Interlocks is a convert. He now uses e-mail internally and externally as well as with his suppliers. It's essential, he says, because 'we sell across the world'.
Wood tells a similar story. Last September, she set up an Internet cafe for the benefit of her 400-plus international students, who need access to the world wide web for research projects and to stay in touch with family or friends. After looking into the various commercial possibilities, she decided, for reasons of cost and quality, to put up the site herself with the help of a student. But Wood is not happy with the quality or the speed of her connection. She plans to change Internet provider in the spring.
The survey shows that half of the SMEs without a web site plan to have one in the near future. Theo Fennell, for example, already has a site registered, preferring to keep it, as Thornhill says, 'under construction' until it can be properly activated. At present, however, only a quarter of small enterprises have their own web site. And many SMEs have yet to be convinced of the value of the Internet. McClaughlin, for example, is typical of many SME owners. Although he invested in a modem last year, he has yet to be persuaded of the relevance of the Internet to his business.
His soft cheeses do not travel well. 'So there's not much point using the Internet for overseas orders because the product simply won't travel,' he explains.
What this survey does show, however, is that SME faith in the value of IT is growing. Investment in IT is on the up and up. Compared to a few years ago, companies are very much aware of exactly what IT they need and, unlike a few years ago, are less likely to make poor investment decisions.
The scope for growth for all concerned within the industry is immense.
For more information contact Tina Green at Hewlett-Packard on 01344 362126.
IT and SME investment: the vital statistics
The results of the Hewlett-Packard/Mori survey on IT use among 300 British SMEs
HOW MUCH IN TOTAL DO YOU SPEND ANNUALLY ON IT STAFF COSTS, IT TRAINING
Up to £10,000 pa 63
£11,000 to £20,000 5
£21,000 to £50,000 8
£51,000 to £100,00 4]
£101,000 to £250,000 3
Over £250,000 pa 3
Don't know 14
DO YOU EXPECT THE TOTAL IT SPEND IN YOUR COMPANY TO INCREASE OR DECREASE
IN THE NEXT THREE YEARS?
Stay the same 19
Don't know 1
IN THE NEXT FEW YEARS, WHICH OF THE FOLLOWING IS YOUR COMPANY LIKELY TO
% yes % no % D/K
Mainframe computers 9 90 1
Network servers 62 35 3
Desktop PCs 83 15 2
Notebook/portable PCs 53 45 2
Palmtop PCs/PDMS 13 84 3
Printers 84 15 1
Scanners 53 44 3
Information storage 64 30 6
Networking generally 75 23 2
WHAT WOULD YOU DESCRIBE AS THE BARRIERS TO YOUR COMPANY SPENDING
MORE ON IT
Financial constraints/cash-flow 42
No need 13
Concern over making wrong decision 6
Lack of knowledgeable advice 9
Lack of skills/trained personnel 4
Investment out-of-date too quickly 3
Cost of service/support 3
Return on investment/covering costs 2
Cost of hardware 1
Cost of software 1
Don't know 8
HOW IMPORTANT IS THE CONTRIBUTION TO QUALITY, OR TIME AND COST SAVINGS,
AND/OR EFFICIENCY MADE BY IT. (SCALE: 1 MEANS IT HAS NOT BEEN AT ALL
IMPORTANT, 10 MEANS OF CRUCIAL IMPORTANCE)
Customer service 6.5
Supplier relationships 5.0
Stock control 5.8
Customer service orders 6.2
Sales database 6.1
Management information 7.1
Computer aided design 4.9
IT OPINIONS % % %
AGREE DISAGREE NO OPINION
Our company has got value for
money from our IT investment 89 8 3
Money invested in IT training and
support is money well spent 77 11 12
In our company, IT has been
successfully harnessed to meet
the objectives of the company 77 19 4
Our company's management
appreciates what IT can do to
improve business performance 81 15 4