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Internet
use among small and medium enterprises (SMEs) |
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| Q1
June 2000
1.1 This report contains a summary of the findings on Internet use from Oftel’s first quarterly survey among small and medium enterprises (SMEs). The results from this first survey will provide a base for comparison with future quarters’ surveys. 1.2
The survey was conducted among some 719 SMEs comprising 411 small (1-50
employees) and 308 medium 1.3 Due to relatively small sample sizes, analysis by region and industry sector has not been included in this report though will be included from the next quarter onwards. 1.4 The report covers:
(Footnote 1) Some sources of data (including the DTI SME Statistics) define SMEs as employing between 1-249 staff though the definition of medium businesses is arbitrary, defined sometimes by number of employees, sometimes by turnover. The current survey included businesses with up to 500 employees in order that the survey was as inclusive as possible. It was felt that, from the point of view of telecoms purchasing, little difference existed between businesses with 249 employees and those with 500. Back (Footnote 2) The survey was conducted amongst a representative sample of small and medium enterprises (SMEs) in the UK, reflecting the UK profile in terms of business size, sector and region. As small businesses (1-50 employees) make up around 99% of businesses in the UK, medium businesses were oversampled in the survey to produce a sufficiently robust sample to allow analysis of the results among medium businesses. The combined results were re-weighted to be representative of UK SMEs as a whole (99% small businesses; 1% medium businesses). The error margin for this survey of 719 businesses is about 2-4%, though higher amongst small subgroups. Back
Internet penetration 2.1 Some 44% of SMEs overall were connected to the Internet with medium businesses (90% connected) twice as likely to be connected as small businesses (43%). 2.2 The main reason given for not being connected to the Internet was that businesses felt that they had no need/no real use for it. Another finding was that 33% of small businesses did not have a PC, which would appear likely to be a barrier to Internet connection. Connecting to the Internet 2.3 Medium businesses were making wider use than small business of a range of advanced services such as ISDN, leased lines and BT Highway to access the Internet. Around a quarter of SMEs said that they were likely to use DSL in the future. Internet Service Providers (ISPs) used 2.4 Approaching three-quarters of SMEs were using a single ISP. Small businesses (at 29%) were more likely to be using more than one ISP compared with medium businesses (23%). 2.5 The most popular ISPs among small businesses were AOL and BT followed by Freeserve, Demon Internet and Compuserve. Demon Internet was the most popular ISP among medium businesses followed by Freeserve, AOL, Compuserve and MSN. SMEs use of the Internet/Websites 2.6 The main uses of the Internet by SMEs were e-mail (46% of small businesses; 65% of medium businesses) and surfing and accessing information (43% of small businesses; 56% of medium businesses). E-mail was the second-most popular method of communication after phone for international business, and was also popular for business conducted nationally and locally, particularly among medium businesses. 2.7 With the exception of the higher proportion of small businesses using the Internet to order from suppliers, medium businesses were making more use than small businesses of the majority of Internet activities. They were also more to have a website (at 76%) compared with small businesses (46%).
Internet penetration among SMEs 3.1 Overall, 44% of SMEs were connected to the Internet, with a further 18% planning to/in the process of getting connected, and 4% that said they were likely to be connected at some point in the future. Some 34% of SMEs said that they were not likely to get connected. 3.2 As Figure 1 shows, over twice the proportion of medium businesses were connected to the Internet as were small businesses.
3.3 Some 90% of medium businesses had an Internet connection with a further 5% planning to or in the process of getting connected. In comparison, 43% of small businesses were connected to the Internet with 19% planning to or in the process of getting connected, and 4% likely to be connected in the future. 3.4 Businesses connected to the Internet were more likely to be more active telecoms users - Internet connection being more common among mobile phone users (54% against 26% of those without a mobile), businesses with higher telecoms bills (93% of the mainly medium businesses with a monthly telecoms bill of £500+), and among businesses using two or more fixed line suppliers (60% against 30% of those using a single supplier). 3.5 Internet penetration did not appear to be influenced by the age of businesses, with no clear pattern between use of the Internet and the number of years the business had been in operation. Ownership of PCs 3.6 SMEs were asked how many PCs their business had which were currently used by employees on a regular basis. A third of small businesses did not have a PC compared with just 1% of medium businesses. As lack of a PC would appear likely to be a barrier to Internet connection, future surveys will investigate this issue to find out for example if lack of a PC is due to cost, lack of technical knowledge or simply that some small businesses have no need of a PC or the Internet. Proportion of PCs connected to the Internet 3.7 Over half (55%) of SMEs had ninety per cent or more of their PCs connected to the Internet although the proportion connected tended to fall with increasing numbers of PCs. Small businesses, with fewer PCs, were more likely to have over 90% of their PCs connected to the Internet (57% of small businesses compared with a quarter of medium businesses). Reasons for not being connected to the Internet 3.8 The main reason given for not being connected to the Internet was that businesses thought that they had no need/no real use for it (mentioned by some 84% of SMEs, small and medium equally). Among small businesses, other reasons for not being connected included scepticism towards new technology/don’t believe in the Internet (8%) and that it was too expensive (5%). Connecting to the Internet 3.9 Around three-quarters (73%) of SMEs were accessing the Internet through an ordinary phone line/dial up, with a fifth using ISDN, 4% BT Highway and 2% leased lines. Ten per cent of SMEs were using more than one type of connection. (Figure 2)
3.10 Medium businesses were using more advanced services than small businesses to access the Internet. Over half (52%) of medium businesses were using ISDN, followed by 46% using an ordinary phone line. In contrast, around three-quarters (74%) of small businesses were accessing the Internet using an ordinary phone line/dial up. 3.11 Connection via ordinary phone line/dial up was higher among newer businesses, perhaps due to newer businesses being more likely to be small businesses and therefore more likely to be using an ordinary phone line/dial up. 3.12 Some 27% of SMEs connected/intending to connect to the Internet said that they were likely to start using DSL (Digital Subscriber Line), ranging from 22% of medium businesses to 27% of small businesses. 3.13 Ten per cent of small businesses and 4% of medium businesses connected or intending to be connected to the Internet also claimed to be using DSL, however this would appear unlikely with DSL on trial among a few thousand customers only at the time of the survey. Therefore, the usage figures may be due to misunderstanding among businesses in the survey. 3.14 As to how much businesses would be prepared to pay for the DSL service, 80% of small and medium businesses said that they did not know. Of businesses mentioning an amount, the average they were prepared to pay monthly for DSL was £43. Internet Service Providers (ISPs) Used 3.15 Approaching three-quarters (71%) of SMEs were using a single ISP and 29% two or more suppliers. Small businesses (29% using two or more ISPs) were slightly more likely to be using more than one ISP compared with medium businesses (23%). 3.16 Use of more than one ISP was more common among businesses with two or more sites (50%) and to a lesser extent (at 33%) among businesses using more than one fixed line supplier. 3.17 At least 30 ISPs were being used by the businesses surveyed, the most popular among small and medium businesses are shown in Figure 3:-
SMEs’ use of the Internet 3.18 The main uses for Internet among SMEs were sending and receiving e-mail (46% of small businesses; 65% of medium businesses) and surfing and accessing information generally (43% of small businesses; 56% of medium businesses). 3.19 Figure 4 shows that medium businesses were making more use than small businesses of the majority of Internet activities. For example, medium businesses were making more use of the Internet for advertising/marketing purposes which ties in with the higher proportion of medium businesses having a website (see below). However, small businesses were slightly more active in ordering from suppliers over the Internet.
Business use of e-mail (Figure 5) 3.20 E-mail was the second-most popular method of communication among small and medium businesses for international business, almost equalling the most popular, fax, among medium businesses. However, e-mail fell behind traditional communications for nationwide and local business, particularly among small businesses. 3.21 The generally higher use of e-mail by medium businesses is probably reflective of the higher proportion of medium businesses with Internet connection. Future surveys will track the use of e-mail as Internet connection spreads among small businesses.
Proportion of businesses with their own websites 3.22 Approaching half (48%) of SMEs connected to the Internet had their own website, ranging from 46% of small businesses up to 76% of medium businesses. 3.23 The proportion of businesses with a website increased with heavier telecoms use. By bill size, the proportion of businesses with a website rose from 6% of businesses spending up to £150 monthly to 87% of those spending over £3,000 monthly. This pattern could also be seen among small and medium businesses separately. 3.24 Some 32% of businesses with a website had their site hosted by their ISP, with 5% using their own server, 4% another ISP, 4% a dedicated hosting provider and 5% another host. However, half (51%) of businesses did not know who was providing the hosting facility for their website.
Lower Internet use among small businesses 4.1 The main finding of the survey was the lower use of the Internet among small business in comparison with medium businesses. Small businesses were half as likely to have an Internet connection as medium businesses and a third as likely to have their own website and, once connected, tended to make less use of the range of Internet activities available than medium businesses. 4.2 Another finding was that a high proportion of the mainly small businesses not connected to the Internet felt that they had ‘no need/no real use for it’, which may result from a lack of understanding on what the Internet can do. This is of concern to Oftel to ensure that businesses that could benefit from the Internet are aware of how they could benefit and are not held back by insufficient information. 4.3 To establish
whether barriers exist to the spread of Internet among small businesses,
as part of the work of its 4.4 To find out if lack of a PC is a barrier to Internet connection among the relatively high proportion (33%) of small businesses without a PC, future surveys will investigate possible reasons why businesses do not have PCs, for example prohibitive cost, lack of knowledge of computer equipment or simply that some small businesses may have no need of a PC or the Internet. 4.5 The Small Business Task Force has also been involved in setting up a website to advise small businesses on their telecoms use. The site, TelecomsAdvice (www.telecomsadvice.org.uk), contains advice on telecoms equipment and services (including Internet) and includes case studies of small businesses and their telecoms problems. Visitors to the site are encouraged to share their own telecoms experiences which should help identify any problems which may be limiting Internet use. Future research 4.6 Oftel will continue to track Internet use in future quarters. This will include differences in Internet use by region and industry sector. This is of interest as it may emerge that Internet connection is not relevant to some types of business and also, by region, it is possible that some different types of business are clustered in particular areas of the country, for example, the findings suggested that Internet penetration was higher in East Anglia, London and the South East which might be explained by the type of businesses found in these regions. Small businesses will be further classified in those set up to expand/maximise profits and ‘lifestyle’ businesses (eg developed from a hobby, providing a vital service to the community etc) and not aiming to expand, to find out if this influences their attitudes towards the Internet and e-commerce. 4.7 With a small proportion of businesses mentioning cost as a barrier to being connected to the Internet, the type of Internet packages used by businesses will also be investigated, for example whether businesses are making use of unmetered packages and if this has increased their use of the Internet. 4.8 Future quarterly surveys will also track use and uptake of newer technologies for connecting to the Internet including cable modems and DSL (digital subscriber line) services. (Footnote 3) Oftel’s Small Business Task Force was established to assist small businesses to make better use of telecoms and the Internet to help them grow. The Task Force - comprising small business organisations, telecoms industry suppliers, and government agencies and departments - is working on a number of initiatives to improve the information and guidance on telecoms and the Internet available to small businesses and small business advisers. Back
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