Computer Technology

Technology is an area where small businesses are moderately successful. Success in this area has grown slightly in the past year, though the changes are not statistically significant (see Figure 16). Small businesses have greater success making technology work effectively than in deploying it.

Figure 16

*Rated 8 to 10 on a 0 to 10 scale, where 10 = completely successful.

The SBSI tracks the adoption of 15 internet business solutions that help businesses market their brand, service their customers and run more efficiently and securely. As of December 2009 (see Figure 17), the most common technologies are a disaster recovery/backup system (61 percent), email customer service (60 percent) and a company website (46 percent). Other common internet business solutions, which are used by a quarter to a third of small businesses, involve marketing, service and internal information sharing and include: ads in online directories, internal email, shared networks, an ability to demonstrate products online, a social media presence (e.g., FaceBook or LinkedIn page), and online ordering of services.

In the past 12 months, the incidence of most technologies has not changed by more than 4 percentage points, with the exception of a social media presence, which doubled from 12 percent to 24 percent in just a year (a statistically significant change). Social media use by businesses is a major growth area that is discussed in greater detail later in this section.

For the remainder of technologies, there has been a slight retrenchment over the past year, with the incidence of use dropping slightly for eight technologies, and increasing slightly for three others. While the incidence of many technologies grew by summer and dropped by December, there have been no statistically significant changes over a year except for social media. The factor behind the drop for some technologies is most likely the economy and its effects on infrastructure. For example, many small businesses may have been forced to change locations or move from an external office to a home office, an explanation that is supported by an observed increase in home offices. Small businesses may also have been forced to cut back on technology expenses and discontinue some services, such as requiring customers to order in a store or by phone instead of at the website. Even so, small businesses did increase the use of advertising in online directories and internal email over the past year.

Figure 17

*Includes those who have now plus those planning to within 2 years.

Figure 17 above also shows the long range potential of the various technologies. After taking into account current ownership plus intentions over the next two years, it is likely that by the end of 2011, two-thirds of small businesses will have disaster recovery systems, online customer service and a website.

What are the fastest growing technologies among small businesses? Based on intention (see Figure 18), the fastest growing will be company websites, which may include companies that are putting sites back up as well as those who are putting up their first sites. After websites, the fastest growing internet business solutions will be those that help sell the small businesses’ products and services, including: online product demonstrations, online advertising, social media, ability to order online, ability to pay online, and online directories. The areas with the least growth, based on intentions, will be internal security features and company email.

Figure 18

Past reports for this study noted that there is a positive correlation between the number of technologies used by a business and the success of the business based on the SBSI. In-depth analysis showed that the relationship holds even for businesses with under 5 employees, meaning the correlation with success is not just an outcome of larger small businesses with bigger budgets owning more technology. The relationship between technology and competitive success moderated in the summer at the bottom of the recession, but strengthened by December. For example, 28 percent of “tech-powered” small businesses that have 6 or more technologies are “highly competitive,” while only 19 percent of businesses with 2 to 5 technologies and 18 percent of businesses with zero or one technology are “highly competitive”.

Social Media Use by Small Businesses
A fifth of small business owners (18 percent) actively use social media such as FaceBook, LinkedIn, Twitter and blogs for their business. These owners provided additional detail on how they use social media, how well it meets expectations, and whether it pays for itself financially. In sum, they report that social media is time consuming, but offers benefits in building customer relationships. Its use is marginally profitable, but owners expect a bigger payoff in the future.

Social media constitutes a range of applications (see Figure 19), but the most common ones are a company page on a social networking site like FaceBook (75 percent) and posting status updates or articles of interest on social networking sites (69 percent). Other applications include building a network on a site like LinkedIn, monitoring feedback about the organization on social media sites, and maintaining a blog. Only a quarter of those using social media use Twitter for external communications, and a sixth use Twitter as a service channel. The bulk of these applications would not cost a business much money, but as revealed later, they can be time consuming.

Figure 19

Most users of social media – 58 percent – find the medium just “met expectations” for success. For the remainder, twice as many feel the medium fell short of expectations (26 percent) than exceeded expectations (12 percent) for success.

The expectations small business owners have for social media are related to external marketing and engagement, and include identifying and attracting new customers, building brand awareness, and staying engaged with customers. Fewer small business owners expect social media to help them with collaborating with external suppliers, partners and colleagues or with staff internally. The external marketing is an obvious use of social media, but there may be a vast untapped potential for using the medium to link members of the supply network, colleagues and staff to gain advantages in creativity and productivity. Such internal uses are harder to imagine and in their infancy, but have the potential to unleash a vast reservoir of creativity and joint problem solving as social media users grow exponentially. Examples of such uses are developing a new product or service, finding low cost resources, teaming to pursue business opportunities, or leveraging an expert source to solve a special problem.

The areas that users have been successful in are generally the same as expectations. However, there is one notable gap: while 73 percent of users expect to identify and attract new customers with social media, only 61 percent have accomplished this successfully. Thus, social media performance is below expectations in bringing new business in the door, although it meets expectations for building brand awareness and staying engaged with customers.

Figure 20

Social media use is not without problems, the main one being the amount of time involved. Half (50 percent) of small business users of social media have found that it has taken up more time than they expected. A common concern about social media in a business context is that it gives people a chance to criticize the business on the internet, but only 17 percent cite this as a concern. Related to this, only 6 percent feel that social media use has hurt the image of the business more than helped it. Overall, these users are able to control the medium, but are finding that it takes a lot of effort to maintain and contribute content, interact, and monitor information on social media sites.

How do social media efforts affect the bottom line for small businesses? Looking back to the past year (see Figure 21), slightly more feel they made a profit (22 percent) than lost money as a result of using social media. The outlook for the next 12 months is more positive – 45 percent expect to make a profit from using social media, while only 9 percent expect to lose money. The cost benefit is hard to measure and is subjective, but by and large, small businesses feel the medium is breaking even now but will yield a positive return. It is likely that small business owners are continually learning to use the medium more effectively, while they have gotten over the initial costs of setting up and learning.

Figure 21