SMEs Missing Out on Benefits of the Digital Eco

24 June 2013

Too Many NZ SMEs Missing Out on Benefits of the Digital Economy

• SMEs using internet technology more likely to see rise in revenue
• Only 16% of NZ businesses using cloud computing

Local businesses are unknowingly missing out on the breadth of opportunities offered by the digital economy, according to new research into New Zealand SME's online technology usage. With the findings also clearly highlighting the breadth of opportunities it offers, MYOB is calling for vastly improved government education and support for the business community.

According to the latest MYOB Business Monitor, a survey of 1,000+ SMEs with anywhere between 0-200 employees, only 16% of New Zealand businesses used cloud computing and only 34% of SMEs operated a business website.

MYOB New Zealand general manager – business division, James Scollay, says there is tremendous scope for SMEs to increase revenue, strengthen customer relationships and improve productivity through using online technologies.

“There is an immense need in this country for government and business leaders to work together with our business community to share knowledge about the benefits of embracing online tools. And it must happen now. Even the simplest tips can make the world of difference to a business and every business is important – they provide the livelihood for hundreds of thousands of local families and contribute greatly to the domestic economy,” he says.

“Our research found that business owners using cloud technology say it enhances their data security and improves their productivity, while those with a website earn more, sell more and have better relationships with their clients. Activities such as building an online presence, enabling teleworkers, using online accounting software, building a social media presence and so on really should be easy to implement for businesses of all shapes and sizes.

“The majority of local businesses are missing out on these benefits. Clearly we need to think about how to better support business operators in taking up these technologies.”

Tech-savvy businesses doing better
According to the MYOB Business Monitor, which was commissioned to Colmar Brunton, businesses using internet technology are much more likely to report a rise in annual revenue than non-users. They are also more optimistic about their own performance and that of the wider economy.

“SMEs that have a business website are almost 10% more likely to have reported a revenue increase in the last year than those without, while those that have embraced cloud computing are 16% more likely to have seen a rise. Both groups are anticipating further revenue increases throughout 2013. This is the sort of knowledge that local business operators will benefit from when working on their growth plans,” says Mr Scollay.

“Interestingly, businesses using the cloud are also more likely to be investing in growth strategies and expanding their range of products and services. At MYOB, we’ve experienced firsthand the benefits of cloud technology and around one third of our new product registrations are for cloud based solutions.

“I believe this technology offers SMEs a transformative advantage – making it easier to work whenever and wherever they want, as well as share and collaborate more effectively.”

The power of the cloud
Internet usage among consumers is well established, with 86% of New Zealanders using the internet daily and 80% searching online before buying a product or service .

“This really highlights the stark difference between businesses’ adoption of the internet and the demands of their customers,” says Mr Scollay.

“Although online technology is ubiquitous in the workplace, the Business Monitor research suggests SMEs are still uncertain about the cloud. More work needs to be done in ensuring owners and managers understand the specific gains to be had from embracing cloud innovation and exactly how the technology will help produce improved business results.”

According to the MYOB Business Monitor, the top five reasons why SMEs use cloud computing are:
1. Ability to work from whatever locations they want, or need, to work from (68%)
2. Data is better protected and safer online rather than on their own server (49%)
3. Enables one or more staff members to work remotely (42%)
4. Enables accounting software to receive direct feeds of bank transactions (36%)
5. Enables employees and the business owner/manager to be more productive (29%)

“The cloud provides a highly secure means of storing and sharing data, and supports improved productivity. It also allows business teams the freedom to work from locations other than the office. Given that our research has found businesses with remote workers are more productive and profitable, this is a significant benefit,” says Mr Scollay.

The Business Monitor found SMEs with remote workers were 43% more likely to see a revenue rise in the past year.

Why SMEs resist cloud technology
Despite the growing range of cloud computing options available for business, New Zealand SMEs remained unsure of the technology. 84% of the country’s businesses were either still not using it or unsure if they were using it.

SMEs said the top three reasons for not implementing cloud computing were:
1. Not knowing enough to make the right business decisions about it (33%)
2. Not tech-savvy enough and don’t feel confident about starting to look at it for their business (22%)
3. Unsure of data safety when using overseas servers (19%)

“It is clear that business owners and managers do not feel confident enough to take up the technology, with over half needing more support or information to make the change,” Mr Scollay says.

“Understandably, the issue of security is top of mind for many local business operators. In reality, the systems and processes available from leading cloud providers are likely to be significantly more secure than SMEs’ own systems. However, a number of providers use ‘quick and dirty’ methods of sharing data – like the practice of ‘screen-scraping’ for bank feeds. This could put the credibility of the technology at risk.”

Use of the cloud around the country
Of the three main centres, Auckland SMEs were most likely to use the cloud (19%). However, a higher proportion of businesses in the Manawatu-Wanganui and Bay of Plenty region were using the cloud than in Auckland. 21% of the Manawatu-Wanganui businesses and 20% of Bay of Plenty businesses were doing so.

Results were not as promising in Otago and Southland, Hawkes Bay, and Waikato, with the regions posting the lowest results for cloud usage.

Region % of SMEs using the cloud Region % of SMEs with a website
Main centres Main centres
Auckland 19% Auckland 43%
Christchurch 17% Christchurch 34%
Wellington 12% Wellington 33%
Regions Regions
Manawatu-Wanganui 21% Hawkes Bay 36%
Bay of Plenty 20% Manawatu-Wanganui 28%
Northland 19% Bay of Plenty 32%
Otago & Southland 16% Waikato 26%
Hawkes Bay 11% Northland 25%
Waikato 10% Otago & Southland 20%

Business types benefiting from internet technology
The finance and insurance sector (29%) had the largest number of SMEs that have embraced the cloud, while the transport, postal and warehousing industry (7%) had the fewest. The primary (10%) and construction and trades (10%) sectors also reported low usage of cloud technology.

“Businesses owned by the oldest generation, Traditionalists, have the lowest uptake of both the cloud and business websites, while those owned by Generation X were the most technology savvy,” says Mr Scollay. “Interestingly, Generation Y are described as ‘digital natives’, and you would expect that they would be ahead of their older peers when it comes to use of the cloud and ownership of a business website. In reality they are behind Gen X in cloud usage and on par with their peers for using business websites.“

Age of owner % of SMEs using the cloud Age of owner % of SMEs with a website
Generation X 19% Generation X 36%
Baby boomers 16% Baby boomers 36%
Generation Y 16% Generation Y 35%
Traditionalists 11% Traditionalists 16%

“Cloud computing supports improved productivity and security, while opening up a range of accessible tools for better business management and geographical freedom. Having a website increases your chances of attracting new clients, giving access to both the local and international market. Most importantly, it gives businesses a dynamic presence online – where most of their customers are shopping,” says Mr Scollay.

“As part of a small economy that’s geographically distant from the rest of the world, it’s vitally important that local businesses look to gain every possible advantage. Few opportunities are as potentially transformational as the internet. It’s clear there is still considerable scope for developers, business advisors and the government to invest more time and energy in ensuring New Zealand business operators understand all the potential benefits of this technology.”
-ends-

© Scoop Media