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Tech Industry

Study: Small businesses not embracing Net

Small and medium-sized companies have yet to take advantage of the new medium as their larger counterparts have, a new study says.

Although the Internet is becoming more and more of a business necessity for large corporations, small and medium-sized companies have yet to take advantage of the new medium, a new study has found.

According to the study, released today by the Yankee Group, the majority of small and medium-sized businesses (SMBs) have not strategically embraced the Internet as a business tool, nor do they grasp the unprecedented opportunity the Internet offers to level the playing field.

The study concluded that, as a result, Internet service providers need to revise their product offerings to reflect a staged approach to Internet commerce that first builds a foundation before attempting to migrate SMBs to higher-value services. The study considered small companies to be those with between 2 and 99 employees and medium companies to be those with between 100 and 499.

The study identified a three-phase process that firms undergo as their Internet commitment strengthens--connectivity, customer connections, and commerce. More than two-thirds of the companies surveyed have yet to move into the customer connection phase.

"Small and medium-[sized] businesses are concerned about security and loss of productivity issues," said Chris Gwynn, a Yankee Group analyst. "But these are things that can be cured. ISPs can offer firewalls" and other security features "to address these concerns."

Promoting the Internet as a tool to transform the way companies buy and sell products will not connect with the SMB market, the study concluded. SMB needs now are focused on improving communication, with e-commerce coming later.

"Small and medium-[sized] businesses are falling behind," said Gwynn. "They need the basic things. After that, they can start with the more sophisticated e-commerce tools. Internet solution providers have been hitting the other side of the market rather than providing the basics for these companies."

Among the small and medium-sized businesses surveyed, only an average of 30 percent stated that the Internet was important to achieving business goals. In fact, although 61 percent of small businesses and 82 percent of medium-sized businesses report that they have some form of Internet access, only 50 percent of all PCs within small businesses and 31 percent of all PCs within medium-sized businesses have Internet access, the study found.

According to the Yankee Group, SMBs account for 98 percent of U.S. business, represent about 50 percent of the gross national product, and spend approximately $445 billion annually on information technology products and services.

Based on the study, the Yankee Group believes that Internet systems providers and technology vendors have substantial opportunity to turn these small and medium-sized businesses into "Internet believers" through education efforts and long-term relationship building.

The study was conducted by the Yankee Group subsidiary Primark .