Internet hindering more than helping SMEs

Small firms in the UK have a love-hate relationship with the internet, according to research published by the Cranfield School of Management.

The research found that 97 per cent of UK SMEs now have email, 94 per cent have broadband and 84 per cent have a website, suggesting that they have embraced the internet for business.

However, while six out of 10 respondents said that the internet had increased their operational efficiency, 46 per cent believe that it has raised the complexity of running their business.

The rise of online services and prevalence of the internet has forced SME managers to raise their game, and has made their job more challenging.

Ironically this has occurred mainly because of the popularity of the internet among consumers and SMEs, which has created a more competitive market and more choosy customers.

Andrew Burke, co-author of the report, and a professor at Cranfield's Bettany Centre for Entrepreneurial Performance and Economics, said: "There is no question that the internet has enhanced the performance of SMEs.

"It has enabled them to be more innovative, more up to speed, to negotiate better with suppliers, make greater use of outsourcing and operate more flexible working hours.

"The sting in the tail is that this uptake in internet use has been so dramatic that most SMEs now share these same benefits and few can garner a competitive advantage as a result."

Professor Burke likened the situation to a game of golf where a new driver becomes available that can hit the ball an extra 30 yards. If everyone uses the driver eventually no player has an advantage.

"At the same time no player can afford not to use one or they would be 30 yards behind everyone else. It simply becomes necessary in order to compete," he said.

SMEs also feel that broadband suppliers use complicated technological language, and that the internet hinders direct contact with customers and other businesses.

Respondents also reported that the sheer volume of online information sources is frustrating and time-consuming.

The research was commissioned by Pipex, which was acquired by Tiscali in July last year.

In response to the research, Pipex has launched a portfolio of SME-focused broadband services and a bespoke SME business information portal.

"We are determined to deliver against the needs in the under-served small business market, and see Pipex Business as the ideal brand for delivering this, " said Mary Turner, chief executive at Tiscali UK.

Tiscali hopes that its new products will help wrestle some broadband market share from BT which, according to the report, holds 55 per cent of the SME market.

But analysts are sceptical about the potential success of the Pipex endeavour. "Pipex failed on its own to capture the small business user with a pioneering voice/broadband package," said Ovum analyst Pauline Trotter.

"Tiscali, with 10 years of consumer broadband access and portal development under its belt, is saying it can do better. However, it is walking a tightrope of its own.

"Ovum's survey among 1,000-plus SMEs shows they have greater needs than cross-border network services and Lan support than might be imagined, and the new research from Tiscali bears this out."

The Cranfield research suggests that 56 per cent of UK-based SMEs use the internet to sell products and services overseas. But Trotter believes that the situation is more complex.

"SMEs actually have offices and partner relationships abroad. Their needs extend to network service and customer support in other markets," she said.

"Portals can pretend to reach them, but BT Global Services and local operators are there on the ground."