South Africa`s small and medium enterprise (SME) market is burgeoning, but many of these companies are still trapped in the technological dark age.
Only 40% of SMEs will be using some form of e-commerce by the end of 2000, one-third do not yet see the Internet as a strategic imperative, just 44% have company Web sites and a mere 2% of SME companies use the Internet to buy products and services.
Some 11% of firms in this sector have no PCs at all, while 20% have one to two PCs and 69% have three or more.
These statistics, from BMI-TechKnowledge`s "SME Technology Barometer, 1999 to 2000", seem to indicate that SMEs still need to find their place in the high-tech world.
"The SME sector is still a sleeping giant in terms of Internet access and IT in general," says BMI-TechKnowledge (BMI-T) analyst Althea Bacchialoni.
"Three-quarters of respondents admit they have yet to really start exploiting the opportunities created by technologies like the Internet, e-commerce and IT usage."
However, the research company believes that the R11 billion SMEs spent on IT last year will boom in the next few years as the sector latches onto the massive business possibilities offered by the Internet and e-commerce.
Bacchialoni says that not all levels of technology awareness are low, as 60% of SMEs have large area networks (LANs) in place and 18% have wide area networks (WANs), although this does not compare well with the corporate sector, where 95% have LANs and 95% have WANs.
SMEs are also slowly seeing the advantages of company Web sites, although the general rule is that the bigger the firm, the more likely it is to have a Web site. Only 44% of SMEs have sites, while 83% of the corporate sector boasts a corporate Web site identity, says BMI-T.
E-commerce is still largely foreign ground for SMEs although those companies in the sector that are using e-commerce are reaping rewards.
According to BMI-T, only 2% of SME companies use the Internet to buy products and services for their company (business-to-business e-commerce) and just 16% are conducting some form of e-commerce, leaving this market largely untapped.
Despite the global e-commerce boom, 31% of South African SMEs believe they will never use the Internet to conduct e-commerce between themselves and their customers.
"The major obstacle to using e-commerce for many smaller companies is simply that they do not yet see it as a strategic move for the company," says Bacchialoni. Other factors hampering e-commerce functionality include security concerns, complexity of implementation, high cost of deployment, lack of internal skills, funding and infrastructure.
However, 16% of those SMEs that have taken the leap into e-commerce are already enjoying some return on their investment and more than half expect to see returns after a year. The top reasons cited for braving unknown e-commerce territory are to improve customer communication (55%), improve service (54%), reach new customers (51%), and to increase revenue and customers (50%). Cutting costs and improving margins is only rated fifth (45%).
However, SMEs have discovered the delights of Internet access, with 73% online and another 13% going online this year, while 37% say that the Internet is a strategic business imperative for their companies.
Indications are good that the SME sector is slowly waking up to the benefits of technology as 74% of respondents agree strongly that IT usage provides future possibilities that have yet to be exploited.
"Nearly 42% of companies in this group are going to be spending significantly more on their IT budgets this year," notes Bacchialoni.
Their high-tech status notwithstanding, the future appears bright for SMEs, with 68% of respondents to the BMI-T survey stating that they are extremely confident about the future of their business in the next two to three years.
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