No money for tech - Canadian SMEs
Canadian small and medium enterprises are not investing in technology. That’s bad news for an economy built on the SME sector
By Ian Harvey
September 9, 2010
September 9, 2010
It has been said for many years that Canadian small and medium enterprises (SMEs) are underinvesting in information and communications technology (ICT). Industry groups, vendors and various levels of government have attempted to address the issue. It would be good to report that those efforts have increased ICT investment and narrowed our productivity gap with the U.S. The numbers, however, tell a different story: the amount Canadian SMEs expend for ICTs sits at 62.1 per cent compared to U.S. companies (Centre for the Study of Living Standards) and the OECD puts us 11th among 21 member countries in total ICT investment in 2007. That is down from 10th in 2005 and 9th in 2004.
Why are we underinvesting? According to Catherine Swift, president and CEO of the Canadian Federation of Independent Business and spokesperson for the sector, many small and medium businesses don’t really need much technology. “Why would a corner store operator in Newfoundland need digital technology beyond e-mails?”
She said anything other than basic e-mail and desktop computer programs are often overkill. A Web site, for example, may not be helpful, although she does know of at least one member who received overseas orders from a customer who stumbled across the member’s Web site.
Others disagree
But many heavy hitters point directly to meager ICT budgets as a significant issue for Canadian companies and the nation overall.
A November 2009 report from the Task Force on Competitiveness, Productivity and Economic Progress calculated that in 2008 the Ontario-U.S. gap in ICT investment per worker was $812 or 21 per cent, and it concluded that “At the most basic level…equipping staff with computers and software increases firm and national productivity. At the second level, connecting computers in networks and drawing on more technologies can drive productivity even higher. But the most significant benefit of ICT adoption can be that it enables profound transformation of businesses through changes in business processes or organizational design or both.”
A 2007 report from the Information and Communications Technology Council, which specifically examined SMEs, stated “The evidence indicates that [the] lower rate of investment is limiting productivity potential for SMEs.”
Factors limiting investment include:
> lack of understanding of the value of ICT systems
> lack of specialized technical staff
> lack of financial resources to implement technology.
Finally, the report includes OECD research that found productivity increases by 1.5 per cent for every 10 per cent increase in the number of employees using computers, and companies that incorporated a series of ICT systems saw a productivity jump of 12 per cent.
The report also lists a number of small Canadian firms—ranging from 1-800-Got-Junk to Compugen to Blue Falls Manufacturing—that saw significant benefit from the implementation of ICT systems beyond e-mail and Web sites.
The cost factor
The importance of SME investment in the digital economy is a message the federal government is also pushing. It recently asked Canadians for input on the issue and mapped out various priorities in a consultation paper called Improving Canada’s Digital Advantage: Strategies for Sustainable Prosperity. (See article in this issue on Backbone’s submission to the government.)
“It is important that Canadian industry sectors, and in particular small and medium-sized enterprises (SMEs), be more focused on adopting, using and continuously updating their use of digital technologies,” the government document states. “Underinvestment in ICT is linked to Canada’s slower productivity growth.”
Bernard A. Courtois, president and CEO of the Information Technology Association of Canada, noted that the federal government has worked to eliminate some of the barriers to investment, such as tax writeoff rates on equipment, though the net effect of this won’t be felt until 2012 when it fully kicks in.
Industry Canada also stated that the cost of integrating ICT into operations is often 10 times that of the technology itself, an issue echoed in a recent Angus Reid study conducted for Microsoft Canada. It found 63 per cent of SMEs are expecting growth this year and they see technology as an important tool; however, they also cited lack of capital (45 per cent) and qualified staff (28 per cent) as their top two barriers.
“It’s partly a mindset,” said Neil Tanner, vice-president, small business, midmarket solutions and partners at Microsoft Canada. “In a small business…sometimes you can’t get past the perception of the high cost.”
But the reality, he said, is that a properly planned and executed ICT implementation will drive production and enhance the bottom line.
An example of this, said Natalie Benitah, Hewlett Packard Canada’s director, enterprise servers and storage and SMB planning, is the launch of scaled-down networking hardware better suited and priced for SMEs.
Ultimately, Tanner said, educating Canadians on the value and relative cost of business ICTs will loosen budgetary purse strings. According to every study reviewed for this article, it would be good for Canada if his opinion is correct.
1) Video conferencing: Forget fuzzy and jerky images: modern video conferencing technologies are crisp and clear. The payback is in travel savings and increased collaboration. You can start small with desktop systems and go right up to dedicated rooms, and the approach is ideally suited for dispersed project teams or for contacting far-flung clients.
2) Unified communications (UC): Tying all your communication channels into a single bundle makes sense if you’re working in a dynamic environment. UC allows your workforce to know who is available and which contact method—e-mail, instant message, phone—is preferable from minute to minute. UC also ties in video conferencing, voicemail and fax, and that was just the ticket for Toronto’s Steam Whistle Brewing. It wanted to focus on making beer, but with offices in Ontario, Alberta and British Columbia, communication was important.
“We looked at setting up an in-house e-mail server but it was going to be $50,000,” said communications director Sybil Taylor. The alternative was to go to the cloud, where services are outsourced and hosted on the network but controlled in-house. “It’s $5,000 a year, so we’re way ahead. Network speeds are faster and we get e-mails instantly. We’ve introduced standardized BlackBerrys for everyone and with the (Unified Communication system) we can see who is online and send an e-mail rather than make a phone call, so it saves money.”
3) Software as a Service: Why buy when you can rent? Software as a Service (SaaS) can boost sales, trim operating expenses and streamline operations.
With SaaS—which includes offerings from NetSuite, Salesforce.com and WebEx—you pay for what you need and they worry about upgrades and patches, while providing support.
It’s a no-money-down scalable option with applications ranging from office productivity, e-commerce, supply chain management and HR packages to bookkeeping and business analytics; there are also industry-specific applications for resorts, construction and insurance. There’s no hardware to buy or maintain.
4) Voice over Internet Protocol: VoIP telephony should already be part of your business. Even using Skype is a plus if you do any kind of long-distance calling. More sophisticated VoIP systems can automatically route incoming calls to the most appropriate available person.
Sutus, a Burnaby, B.C., company, offers Business Central 200, a black box the size of a video game console that handles VoIP and copper line phones, and combines file server, e-mail server, router, firewall, wireless access point, VPN remote access server and automated backup functionality. It’s intended as a plug-and-play system designed for fewer than 50 employees.
Illustration FredRix.com
Why are we underinvesting? According to Catherine Swift, president and CEO of the Canadian Federation of Independent Business and spokesperson for the sector, many small and medium businesses don’t really need much technology. “Why would a corner store operator in Newfoundland need digital technology beyond e-mails?”
She said anything other than basic e-mail and desktop computer programs are often overkill. A Web site, for example, may not be helpful, although she does know of at least one member who received overseas orders from a customer who stumbled across the member’s Web site.
Others disagree
But many heavy hitters point directly to meager ICT budgets as a significant issue for Canadian companies and the nation overall.
A November 2009 report from the Task Force on Competitiveness, Productivity and Economic Progress calculated that in 2008 the Ontario-U.S. gap in ICT investment per worker was $812 or 21 per cent, and it concluded that “At the most basic level…equipping staff with computers and software increases firm and national productivity. At the second level, connecting computers in networks and drawing on more technologies can drive productivity even higher. But the most significant benefit of ICT adoption can be that it enables profound transformation of businesses through changes in business processes or organizational design or both.”
A 2007 report from the Information and Communications Technology Council, which specifically examined SMEs, stated “The evidence indicates that [the] lower rate of investment is limiting productivity potential for SMEs.”
Factors limiting investment include:
> lack of understanding of the value of ICT systems
> lack of specialized technical staff
> lack of financial resources to implement technology.
Finally, the report includes OECD research that found productivity increases by 1.5 per cent for every 10 per cent increase in the number of employees using computers, and companies that incorporated a series of ICT systems saw a productivity jump of 12 per cent.
The report also lists a number of small Canadian firms—ranging from 1-800-Got-Junk to Compugen to Blue Falls Manufacturing—that saw significant benefit from the implementation of ICT systems beyond e-mail and Web sites.
The cost factor
The importance of SME investment in the digital economy is a message the federal government is also pushing. It recently asked Canadians for input on the issue and mapped out various priorities in a consultation paper called Improving Canada’s Digital Advantage: Strategies for Sustainable Prosperity. (See article in this issue on Backbone’s submission to the government.)
“It is important that Canadian industry sectors, and in particular small and medium-sized enterprises (SMEs), be more focused on adopting, using and continuously updating their use of digital technologies,” the government document states. “Underinvestment in ICT is linked to Canada’s slower productivity growth.”
Bernard A. Courtois, president and CEO of the Information Technology Association of Canada, noted that the federal government has worked to eliminate some of the barriers to investment, such as tax writeoff rates on equipment, though the net effect of this won’t be felt until 2012 when it fully kicks in.
Industry Canada also stated that the cost of integrating ICT into operations is often 10 times that of the technology itself, an issue echoed in a recent Angus Reid study conducted for Microsoft Canada. It found 63 per cent of SMEs are expecting growth this year and they see technology as an important tool; however, they also cited lack of capital (45 per cent) and qualified staff (28 per cent) as their top two barriers.
“It’s partly a mindset,” said Neil Tanner, vice-president, small business, midmarket solutions and partners at Microsoft Canada. “In a small business…sometimes you can’t get past the perception of the high cost.”
But the reality, he said, is that a properly planned and executed ICT implementation will drive production and enhance the bottom line.
An example of this, said Natalie Benitah, Hewlett Packard Canada’s director, enterprise servers and storage and SMB planning, is the launch of scaled-down networking hardware better suited and priced for SMEs.
Ultimately, Tanner said, educating Canadians on the value and relative cost of business ICTs will loosen budgetary purse strings. According to every study reviewed for this article, it would be good for Canada if his opinion is correct.
Four best bets
Wondering if an IT investment could boost your small business’ bottom line? The following four technologies are good places to start your investigation.1) Video conferencing: Forget fuzzy and jerky images: modern video conferencing technologies are crisp and clear. The payback is in travel savings and increased collaboration. You can start small with desktop systems and go right up to dedicated rooms, and the approach is ideally suited for dispersed project teams or for contacting far-flung clients.
2) Unified communications (UC): Tying all your communication channels into a single bundle makes sense if you’re working in a dynamic environment. UC allows your workforce to know who is available and which contact method—e-mail, instant message, phone—is preferable from minute to minute. UC also ties in video conferencing, voicemail and fax, and that was just the ticket for Toronto’s Steam Whistle Brewing. It wanted to focus on making beer, but with offices in Ontario, Alberta and British Columbia, communication was important.
“We looked at setting up an in-house e-mail server but it was going to be $50,000,” said communications director Sybil Taylor. The alternative was to go to the cloud, where services are outsourced and hosted on the network but controlled in-house. “It’s $5,000 a year, so we’re way ahead. Network speeds are faster and we get e-mails instantly. We’ve introduced standardized BlackBerrys for everyone and with the (Unified Communication system) we can see who is online and send an e-mail rather than make a phone call, so it saves money.”
3) Software as a Service: Why buy when you can rent? Software as a Service (SaaS) can boost sales, trim operating expenses and streamline operations.
With SaaS—which includes offerings from NetSuite, Salesforce.com and WebEx—you pay for what you need and they worry about upgrades and patches, while providing support.
It’s a no-money-down scalable option with applications ranging from office productivity, e-commerce, supply chain management and HR packages to bookkeeping and business analytics; there are also industry-specific applications for resorts, construction and insurance. There’s no hardware to buy or maintain.
4) Voice over Internet Protocol: VoIP telephony should already be part of your business. Even using Skype is a plus if you do any kind of long-distance calling. More sophisticated VoIP systems can automatically route incoming calls to the most appropriate available person.
Sutus, a Burnaby, B.C., company, offers Business Central 200, a black box the size of a video game console that handles VoIP and copper line phones, and combines file server, e-mail server, router, firewall, wireless access point, VPN remote access server and automated backup functionality. It’s intended as a plug-and-play system designed for fewer than 50 employees.
Illustration FredRix.com
