Research Findings

Chapter 12 - E-Business Development Issues in UK SMEs
Managing IT in Government, Business & Communities
by Gerry Gingrich (ed)
Idea Group Publishing 2003

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The findings are divided into a series of headings based around the interview schedule.

E-Commerce Activity

The UK has experienced a proliferation of business use of the Internet in terms of the volume and variety of business processes supported via e-mail, Web, and other means of information distribution and dissemination (Duan, Mullins, and Hamblin, 2000). All three of the case studies have access to the Web, a hosted Web site, and external mail to communicate with customers, which means that a comparison of their operations is likely to provide interesting insights. All three Web sites are categorized as catalogue sites; however, although this would normally equate with a situation where the level of customer engagement is relatively low, two of the companies relied heavily on the use of the telephone to build customer relationships after the initial Web contact had been made. In terms of historical technological issues, only Company A actively sought the integration of legacy systems. Company C was operating as a "pure play," but still categorised itself as an SME as opposed to a dot.com. The reasoning behind this categorisation may lie in the negative press coverage dot.coms have received in the last year since the bursting of the dot.com bubble.

The findings to date suggest a lack of business to business (B2B) e-commerce supported by integrated networks through the supply chain. In terms of Company C, who deals with very large manufacturers down to the individual artisan who makes a piece of furniture from scratch in a little workshop, despite a stated wish for more supply chain integration, this is not likely to be possible in the near future. Other issues, such as that raised by Company A, where the customers did not want to see supply chain integration mean this is a goal for the future rather than an immediately achievable situation. Comments from those interviewed included the following: "Our suppliers are not geared up to extranet"; "We are not large enough to support that kind of system and we don't have large orders."

Amongst those reasons identified by the research were cost of development, infrequency of orders, and fear of being tied into to a stronger companies system. It is important to remember when dealing with SMEs, especially those with a small workforce, that it may not be possible to devote many resources to e-commerce development if the immediate effects cannot be seen. Issues such as the availability of grants and other monies to undertake development were also explored and it became apparent that this is problematic. Company A also did a considerable amount of trade with other companies that did not wish to be tied to a minimum order level or a minimum delivery period. There is obviously a niche in the market for the flexibility provided by the company and that may well be lost if supply chain integration continues.

E-Commerce Strategy and Managers Perceptions

E-business is now a permanent fixture within the new economy and it is no longer optional for UK businesses to have an e-strategy, but methodical development of sustainable strategies seems to be non-existent in many areas, and in particular within SMEs.

The research findings to date suggest that manager's perceptions of e-commerce differ significantly. The managers of the two click and mortar companies recognized a need for an alignment between business and e-commerce strategy, but both insisted that e-commerce strategy did not take precedence because e-commerce revenues remain relatively minor. The pure play manager answered that e-commerce and business strategy "are the same for us."

E-commerce drivers differed greatly. Company C, as the only pure play, has built its business model on e-commerce, and fundamentally their driver is survival. It is interesting to note that to pursue that aim of survival, they need to provide a quality service, build a good relationship with their customers, provide a quality product, and hope that the larger players in the field allow them to maintain their niche. Company A's key drivers were a combination of first mover advantage and competitor pressure. However, the need to have a successful operation is not so great for this company - it is doing fine with the brick and mortar operation and sees any business coming from the e-commerce operation as purely "extra" or "over and above." This is partly because they are driven very much by the seasonal nature of their sales ("Christmas is crazy for us") and the homogeneous nature of their product known and branded wines are available from a variety of sources. Company B's key drivers were competitor pressures. Although Company B gets regular queries and occasional orders from international customers, it has never pursued an aggressive e-commerce strategy. International orders via the Web, although occasionally significant in size, are considered an additional bonus and these clients are not considered core customers, the majority of which are local. This is interesting because whereas their competitors repackage solutions, they offer completely tailor-made solutions and as such the company believes itself to have a niche market a usually very successful model for a successful e-business.

Interestingly, although all of those interviewed believe that their e-commerce projects have met their business objectives, only Company C (who tracks customers' activities while on their Web site) conducts any formal evaluation or independent appraisal of the effectiveness of their e-commerce activities. All those interviewed maintained sales records, but one could not identify which sales were orchestrated via their Web site and e-mail as opposed to telephone orders. There is no evaluation of the customer Web interface.

It is also useful to note that the e-commerce activity is generally driven by the younger generation in the two click and mortar operations. There are perhaps some issues here, which need to be teased out about perceptions of e-commerce activity and the age profile of those running SMEs - this may actually be a factor in the regional variations!

Project Resources

All three businesses developed their e-commerce projects using strictly limited resources, with no dedicated e-commerce budget. The core applications behind the Web sites were developed by a single person, usually those interviewed: the CEO or MD. In the case of Company A the underlying database was developed by the CEO. The Web site and application integration was outsourced using 40% Business Link funding. The underlying architecture for Company B's Web site is their product catalogue. This catalogue was developed by the MD over a period of two to three months and turned into a Web site in a very short period of time by a personal friend. The MD was aware of potential funding claims, but did not seek any funding due to previous experiences. Even the development of Company C was initially small-scale, with the CEO the principal designer, supported by a friend within the IT business. The only form of investment came from private investors identified through local networks.

The following quotes from those interviewed help to illustrate these points:

• "we knew funding was available, but not how to get it"

• "government schemes are inaccessible generally"

• "there is very little information and the Business Link Web site is not helpful"

• "government schemes in our experience tend to be all talk and no money"

• "we have used Business Link and DTI, but I would not use these sources again. I would prefer a cheap loan from a bank"

Training and Support Needs

Interview evidence suggests that the businesses discussed are open to any support offered from the private sector, but have a great suspicion of local and government training schemes. It would be interesting to track how this came about. The main area of training is in the development of e-commerce applications and integration of back office systems. At least two of the three interviewed had their Web sites hosted by an external party, with very little integration of their own systems with another company's Web server.

One issue that was brought up was the fact that SMEs need more flexibility in the availability of training courses. As training time is limited (often as staff cannot be released for any significant period of time), there is a need for training programmes to be ready as and when the company wants to take advantage of them. Presently, this does not appear to be the case.

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