A new survey reveals that such technologies as business management software, business analytics software, mobile technologies, and social media are helping small and medium-sized companies compete successfully on the international stage. Associated Press
A new report from Oxford Economics reveals that small and medium-sized companies are using sophisticated technologies to successfully branch out into overseas markets.
July 9, 2013—In recent decades, advances in technology have opened a new window on the world, and a new survey reveals that small and medium-sized enterprises (SMEs) around the globe are taking advantage of the opportunities this affords them. SMEs: Equipped to Compete, a new study published by Oxford Economics—a commercial research firm formed in collaboration with Oxford University—reveals that 75 percent of SMEs generate at least some revenue from outside their home countries’ borders, and that percentage is expected to continue to rise.
Oxford Economics, along with the international technology firm SAP, surveyed 2,100 SMEs in 21 countries and followed up with a dozen in-depth interviews of executives from small and midsized firms. Their study reveals that one-third of SMEs now generate 20 percent of their revenues internationally, and within three years that percentage is expected to increase to 47 percent. “This thinking defies some entrenched stereotypes of smaller companies, which often are perceived as local or regional entities that are largely technophobic, and have at best only a supporting role in international trade,” the report states. In fact, the number of SMEs that conduct business in six or more countries is expected to more than double—from 15 percent to 35 percent—within the next three years, according to the survey.
The reasons for this growing success on the global stage are varied. The increasing globalization of large-firm competitors, domestic labor shortages, and the ease with which new technologies can connect even the smallest firms with business entities beyond their borders are chief among them. More than 25 percent of those surveyed said that rising labor costs within their own countries are forcing them to seek employees elsewhere, and this can often lead to business opportunities in those other countries.
Clearly, technologies that allow 24-hour communication and business transactions have influenced this trend as well. “SMEs are confident in their technology prowess, and highly focused on adopting enterprise-wide business management software (BMS) and business analytics software, which have become more accessible to smaller firms,” the survey states. “They also look to mobile technology to transform their businesses, and are investing in social and cloud platforms as well—although their relatively tepid embrace of the cloud . . . remains a significant opportunity yet to be realized.” In fact, roughly one-third of the survey respondents identified themselves as “early adopters” of technology; within North America that percentage jumps to 46.5. Only 13 percent of those surveyed said they were reluctant to adopt new technologies.
And most see those technologies as key to their futures. Nearly two-thirds strongly believe that these technologies will help them achieve longevity and sustainable growth; in North America 75 percent say this. And mobile technologies are seen as offering the greatest potential; 60 percent of all of those surveyed and 70 percent of the most profitable respondents cite mobile technologies as “transformational” to their businesses.
While BMS is the most commonly used technology, by nearly 48 percent of SMEs, mobile technologies, at nearly 46 percent, are not far behind. The use of both types of software is expected to grow to respectively 57 percent and nearly 54 percent within three years. Business analytics tools also are on the rise, from 44 percent of SMEs using them now to 58 percent expecting to do so by 2016. “Smaller firms are expanding their use of analytics; more than half of those with sales under $100 million will use these tools in three years, a jump of 43 [percent],” the report states. “North American companies are markedly more focused on business analytics (58 [percent]) than other regions.”
Interestingly, it is not the size but the age of the business that tends to influence technology adoption. “The longer a firm has been in business, the more likely it is to have deployed all the key technologies,” the report states. That gap is narrowest in social media, however, and nothing in the findings indicates a change in that trend within the next three years.
Indeed, social media and cloud computing are the technologies that are being used the least by SMEs right now, but many of the firms expect to adopt these technologies soon. Just 41.6 percent of SMEs reported using social media today, but 51 percent expect to within three years. Just over one-third use cloud computing today, but 47.5 percent expect to by 2016.
“Social media is by definition a people-oriented technology, although its benefits transcend any single category,” the report states. “It is seen as a way to provide better customer service . . . and improved product and service development.” Companies in North America are more likely than those in other regions to see social media as a driver of customer service.
But for all SMEs, the use of social media for business purposes presents challenges, including the considerable effort required to establish a viable social media strategy, finding ways to calculate a return on that investment, and encouraging employees to actually use social media—and to use it appropriately. “Companies almost across the board . . . say they are finding cost efficiencies from social media,” the report states. By adopting the process slowly, “SMEs may be missing an opportunity to better leverage it for internal collaboration and communication.”
Cloud computing is the remaining type of technological advance that SMEs are adopting more cautiously. While 30 percent of those surveyed believe cloud computing would bring cost efficiencies and 25 percent say it would improve product and service development, only about 34 percent say that cloud computing will be a high priority in their upcoming budgets. All other types of technology received higher rankings, with BMS ranking highest, at 50 percent.
Respondents noted a number of challenges to the concept of cloud computing, including security (cited by 38 percent), a lack of understanding of the benefits of the technology (35 percent), a lack of skills (34 percent) in the technology, and, once again, uncertainty about how to measure a return on investment (31 percent). “This broad range of concerns helps explain why SMEs are slow to leverage the obvious benefits of cloud computing,” the report states. “As long as those benefits—including simpler and less expensive implementation of BMS and analytics software—remain untapped, SMEs risk operating at less than full potential.”