The secret weapon every small business needs

The performance gap between businesses that leverage ICT and those that don't is staggering, but with cloud computing it's easier than ever for SMEs to bridge the gap.

Many Australian businesses, particularly smaller businesses, are not big users of information and communications technology.

Australian Bureau of Statistics figures show that fewer than half of all small and medium businesses have an online presence, compared with 97 per cent of large businesses.

According to a recent Sensis e-Business report, 77 per cent of small to medium businesses do not have a digital business strategy.

If we can change this, the benefits to individual businesses can be powerful: reaching more potential customers, reducing the cost to serve customers, making production processes more efficient and making it quicker and easier to monitor and report business performance.

The economy-wide productiv­ity and efficiency benefits would be even more profound.

Deloitte Access Economics found that small and medium businesses with high levels of digit­al engagement are twice as likely to be growing, earn twice as much revenue per employee, and are four times more likely to be hiring when compared with businesses with lower digital engagement.

Similarly, Boston Consulting Group’s Ahead of the Curve report found that SMEs using ICT services such as productivity software and cloud computing created jobs twice as quickly as their peers and increased their annual revenue by 15 per cent more than those that didn’t.

To get small and medium businesses using ICT services more extensively, there are four blockers to overcome: complexity, cost, connectivity and a compelling reason.

It is a complex task to find the ICT application to meet your business’ needs, particularly when there is no dedicated chief inform­ation officer to sort through the products and services on the market.

The rise of cloud computing is helping to solve this problem. Instead of needing to buy and maintain a program on your own server, you can access it online and store the required data in the cloud.

Cost is another obvious blocker -- but again cloud computing is changing the equation. Instead of investing big sums upfront on hardware and software, today businesses can buy cloud services based on monthly or usage payments -- and they can increase capability over time, buying additional storage, compute power, or software user licenses only as they are needed.

Connectivity -- or the lack of it -- is an increasingly important factor. Without a reliable and speedy broadband connection, you are constrained in your capac­ity to use cloud services.

At a forum I attended recently in Coonabarabran, 450km northwest of Sydney, a participant spoke of the problem that local businesses face in using cloud-based accounting services such as MYOB and Xero. The local fixed-line broadband services are poor, and 3G mobile is the best broadband option: but it is expensive and speeds drop sharply at peak times of the day.

The Abbott government is working to get the NBN rollout back on track -- after it fell well behind schedule under the previous government -- and that will help make cloud-based computing applic­ations available in an ever wider geographical footprint.

In addition, we are spending $100 million of public money -- and expecting to leverage another $100m from the mobile operators -- to extend mobile coverage into areas of regional and remote Australia that do not have it today. This will give an expanded mobile-broadband footprint to comple­ment the NBN’s fixed-broadband footprint.

As the barriers of complexity, cost and connectivity break down, the use of ICT by small and medium businesses will increase. But a final barrier stops many such businesses making effective use of ICT: they simply do not see a compelling reason to do so.

Key market trends are helping to overcome this barrier too. The revolution in consumer-friendly devices such as smartphones and tablets -- and the fast-growing ecosystem of applications that are quick to download and easy to use -- are changing things for small and medium business as much as for consumers.

The explosion in social media is offering new opportunities for small businesses to market themselves and build richer relationships with customers.

And customers who are used to the slick, ICT-based customer engagement tools of big businesses -- be it online banking, booking travel on the web, or purchasing clothes, books or myriad other cate­gories of products and services online -- soon come to expect the same from the small and medium businesses they deal with.

In the competitive marketplace, businesses that capture the efficiencies and opportunities that ICT offers will prevail over those that do not. Increasingly, cloud-based services make it easier for small and medium businesses to capture the same efficiencies larger businesses have long enjoyed.

Greater ICT adoption, particularly by those small and medium businesses which have tended to under-use ICT, means benefits for those businesses -- and produc­tivity and efficiency benefits for the economy as a whole.

That is why it is an objective the Abbott government is keen to support.

Paul Fletcher is Parliamentary Secretary to the federal Minister for Communications.