Green for Go

According to the “Mittelstandsmonitor 2003” (annual report on cyclical and structural issues relating to small and midsize businesses), around 99 per cent of companies in Germany are classed as small and midsize businesses. Thorsten Wichmann, Managing Director of Berlecon Research, states that even small businesses with 10 to 49 employees use e-business technologies. However, many small and midsize businesses are still using the solutions they implemented years ago. This means that SMBs have a lot of catching up to do, especially in the field of e-business.

E-business and ROI

E-business, i.e. commercial use of the Internet, means support of processes and relationships between business partners, employees and customers using electronic media and forms part of a company’s IT strategy. This strategy comprises several components e.g. ERP and e-procurement systems, intranet/office applications and e-commerce systems.
According to Professor Arnold Picot from the Institute for Information, Organization and Management at the University of Munich, companies need to regard the “digitization of added value as a strategic challenge”. The US market research company Gartner states that e-business will increase added value, thereby also increasing the opportunities on the market. Investments in e-business should therefore always be assessed strictly from the point of view of their ROI (return on investment).
For small and midsize businesses, this balancing of costs and benefits is an important decision-making criterion. If a small or midsize company invests in an e-business project, this involves an important strategic decision. E-business requires the adaptation, development and modification of business processes involving all departments or business units including sales, marketing, HR, development and technical departments. Mr. Wichmann therefore calls on software manufacturers to provide “user-friendly, reasonably priced solutions”.

Overcoming obstacles

According to surveys by the market research company Market Research & Services (MR & S), uncertainty about the success and ROI of e-business investments and the fear of operational disruptions during the introductory phase have so far prevented “widespread use of e-business among small and midsize companies”. However, the MR&S experts believe that these obstacles could be overcome if SMB initiatives of industry associations such as BITKOM and Eco and the Bundesministerium für Wirtschaft und Arbeit (BMWA) (German Federal Ministry for Economic Affairs and Labor) were to bring SMBs and providers of SMB-specific e-business solutions together.
The investigation carried out by the Berlin market research company Berlecon Research, commissioned by the BMWA and entitled “E-business standards in Germany” goes one step further. With the spread of e-business and the continuing networking of the business world, it is becoming a simple necessity for SMBs to deal with this issue, say the authors of the report. The obstacles highlighted by the authors include lack of knowledge of e-business standards on the one hand and a lack of agreement on common conventions or standards (e.g. UN/SPSC, XML, WebEDI) on the other. They also request that important standards such as eClass or BMEcat be internationalized. They regard these as important conditions for the success of e-business.

A systematic approach to e-business

The key reasons for SMBs to introduce and use e-business lie in the possibility of accelerating processes and improving their flexibility, responding more effectively to customer needs, and cutting costs. Objectives commonly cited in earlier days included increasing sales and opening up new markets. However, these are not the primary goals that most companies today hope to achieve with e-business. This was the finding of “eBusiness-Konjunkturbarometer” (“E-business economic barometer“) published by industry association BITKOM, Bundesverband der deutschen Industrie (Federation of German Industries, BDI) and the Fraunhofer Institut für Arbeitswirtschaft und Organisation (Fraunhofer Institute for International Engineering, IAO).
A successful e-business project must be systematically planned and prepared from the outset. As early as the conception phase, all the necessary components and processes must be carefully coordinated. For the Institut für angewandte Betriebsökonomie (Institute for Business Economics, IAB) at the University of Applied Sciences in Basel, an e-business concept must also be “future-focussed and capable of development” and must be accepted by the target group. “A good concept”, state the researchers in defining a key success factor in e-business projects, “is developed with an open mind and not subject to conceptual limitations from the outset”, for example through being restricted to a specific software package.
With regards to the business strategy, they stress the importance of intermeshing e-business with all aspects of the company, keeping budgets under strict control, and proceeding in small stages. In addition to these organizational developments, Professor Picot believes that one of the major success factors in electronic business is “the increasing importance of knowledge” and the changing role of the customer, an aspect that companies will need to take into account in future when defining their internal information and organizational structures.

SMBs set their sights on e-business

According to a study tailored to the European market and conducted by market research and business consultants IDC, SMBs with between 100 and 499 employees in Western Europe are primarily looking to invest in IT over the period 2003 to 2007. Guilana Folco from IDC believes that SMBs “must make long-term successful investments in IT solutions if they to have any chance of remaining competitive”. The “IT und Mittelstand” (IT and SMBs) study published by B2B information service Silicon has identified that SMBs are holding back with their investments. This “jam” can only be cleared by “restructuring business activities through the use of information technology”. This would involve many SMBs redefining their business procedures in order to integrate partners, customers and suppliers by electronic means. In addition, SMBs are looking to invest in new merchandise management systems, ERP systems and fail-safe IT systems, or to improve relationships to customers by means of a CRM system.
According to IDC, software providers face the challenge of striking the right balance between standardized and customized solutions which are also user-friendly and inexpensive. Folco is convinced that companies achieving this balance will be successful on the SMB market in future.

Further information:

University of Applied Sciences in Basel:

Dr. Andreas Schaffry
Dr. Andreas Schaffry