Smaller firms are turning to third-party ‘cloud-based’ providers to run ‘back office’ services like invoicing, business planning and customer relationship management.
The Quarterly Survey of Small Business in Britain produced by The Open University Business School, examined the use of mobile and web-based services and found that more than 21% of respondents are now using ‘cloud-based’ providers to run their back office services, compared with two years ago when just 8% of respondents reported using them.
SMEs are also showing the way by embracing mobile internet technologies but security, privacy and technology are still major challenges in moving a higher proportion of business activity online.
The report, sponsored by Barclays Bank and ACCA (Association of Chartered Certified Accountants) found that the most popular business activities conducted via static internet are ‘general communication’ with existing customers and suppliers (85%) and checking bank account balances (85%). It also showed the highest reported usage of mobile internet technologies is among relatively small firms (in the £100,000 to £250,000 band).
The Quarterly Survey of Small Business in Britain researchers conducted more detailed interviews with a small group of respondents. These case studies support the overall finding that while many SME owners and managers are keen to exploit the new opportunities presented by these technologies, they also have reservations about moving all of their business activities onto web-based or mobile platforms:
Electric Marketing was set up in 1991 by Melissa Mackey in the spare bedroom of her flat on Electric Avenue, Brixton, which is where the company got its name. The business information company has been trading online since 1999. It was a small start, selling a few lists initially, but Melissa recalls how, as one of the first companies to use Google AdWords in 2002, they saw their online traffic increase. Melissa sees the internet as having created real opportunities: “On my desk at work I've got a little mouse mat … it says ‘God bless the internet’ because it completely transformed business, I think, in a good way.”
Activity Chest, in Chalfont St Peter, Buckinghamshire, is a toys and games retailer that combines a physical shop with a web presence. Managing director Michael Warner says they began retailing online in 2009, first with an eBay shop and subsequently setting up their own website. Activity Chest carries out its own search engine optimization (SEO) by understanding the keywords used in Google: “We’ve got two hundred and something products and we look at keywords in rotation every two weeks”. Their order processing system includes a cloud-based Actinic-shopping cart maintained by a third-party. Michael adds that: “It is an automated process but it still requires us to make sure it's working, I don't trust automation”.
Keith Appleyard, an honorary trustee of Fiveways Playcentre in Brighton and a former American Express IT director, says he does not yet entirely ‘trust the cloud’. Though Fiveways has outsourced its payroll via a cloud-based system, he does not think the social enterprise would, for example, “put children's records, ‘in the cloud’.” Fiveways has embraced the internet in other ways and now does most of its banking online, with only around four cheques written each year. It also communicates with parents via social media and email, something that was particularly useful during the snowy weather earlier this year: “We knew that parents would be online before 8 o’clock in the morning themselves … so we had announcements on Twitter, on Facebook, and we also emailed.”
XYZ Maps Ltd is a small map making company based in Dalkeith Scotland. Founded in 1998 by Dr Tim Rideout and Mark Fairbairn, it specialises in geographical information systems (GIS) and cartography. XYZ Maps use a cloud-based system to share files with customers. Tim said: “A lot of the things we sell are digital products, so we simply put the files onto Dropbox and then send the customer a link to download it.” They see the main obstacles as finding time in a small team to keep the website updated and the loss of broadband connections. As Tim says: “When this happens, you’re completely disconnected from everything [and] effectively can lose a considerable amount of business”
Other Special Topic findings include:
Dr Richard Blundel, of The Open University Business School, said: “These new communications technologies are enabling SME owners and managers to make radical changes to the way they do business. “One of the most striking findings in our report is that the smallest firms are often among the most innovative in this arena, particularly in their willingness to adopt mobile internet and cloud computing.”
He added: “Our research also highlights some fairly major obstacles, most notably privacy and security concerns, that service providers will need to overcome before firms in the UK are going to feel confident enough to move a much larger proportion of their business activity onto these new mobile and web-based platforms.”
Sue Hayes, Managing Director of Barclays Business Banking said: “The research and our experience show us that the way businesses interact with their bank is evolving. Improvements in technology will enable small firms to spend less time worrying about their finances and more time focused on their business.
“Innovations like Mobile Banking and faster payments are not replacements but additions to a typical business’s resources, designed to make it easier for them to access information about their finances. The rapid rate of take-up shows how many are seizing these opportunities,” she said.
Commenting on the report findings, Manos Schizas, Senior Economic Analyst at ACCA said: "Entrepreneurs need to keep in mind what level of responsiveness and inter-operability their clients expect. The Open University findings suggest that larger businesses, as well as those in B2B sectors, take such technologies for granted."
Meanwhile the responses to the regular questions in the Quarterly Survey of Small Business in Britain showed there are some signs of optimism in the UK economy.
Stronger sales in manufacturing and hotel and restaurant sectors and improved employment performance were reported, while SMEs in construction, manufacturing, health, education, leisure and retailing were more upbeat about future sales.
SMEs anticipate a stronger overall improvement in sales performance in the first quarter of 2013, as compared to a more stable picture over the previous two quarters, while firms in London, the North East of England, the East Midlands and Yorkshire and the Humber were the most optimistic about sales in the first quarter.
However the state of the economy and the associated negative impact on demand remained by far the most commonly reported problem for SMEs, irrespective of size or sector, ahead of cash flow, payment and debtors. Government regulations retains its third place overall.
Retail firms report negative sales and employment balances while agriculture, forestry and fisheries saw the weakest sales performance. Construction performed worst in employment terms and two thirds of SMEs reported no overall change in the number of people they employ.
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