Convergence and Communications
Report 2: Take-up and Use of Communications by Small and Medium Enterprises
© Commonwealth of Australia 2009
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Contents
Summary 1
Introduction 3
Research objectives 3
1 Methodology 5
2 SME profile 6
3 Take-up and use of communications 10
SME use of voice communication technologies 11
SMEs and the Internet 12
Factors influencing the take-up of new and emerging communications 13
Activities performed on the internet 23
Impact of broadband 27
4 Attitudes to communication technologies 33
Importance of services 33
Looking forward: Critical services in the next 12 months 35
Conclusion 36
Australian Communications and Media Authority 35
SME take-up and use of communications
Summary
This is the second report in the Convergence and Communications series, which examines changing trends in the take-up and use of communications services by Australian consumers. This report draws on quantitative research examining the use of communications services by small and medium enterprises (SMEs).
SMEs are actively participating in the digital economy through the innovative application of communication technologies to their business operations and service delivery, and account for nearly 99per cent of all Australian businesses. SME innovation in the use of communications therefore has the potential for economy-wide benefits in the form of growth in productivity, and increased participation in the digital economy by Australians in general.
Continuing technological innovation, particularly in the areas of broadband internet and wireless communications, is providing SMEs with greater choice in communication. This in turn is providing SMEs with greater flexibility in meeting their operational and customer needs.
Approximately 95per cent of SMEs are connected to broadband internet, demonstrating a growing reliance on the internet as a channel for e-commerce.
SME use of communications innovations relates to increasing choice, increased business flexibility and reduced operating costs and is complementary to the use of the fixed-line telephone. While there has been significant substitution within specific types of communication technologies as a result of technological innovation, such as the shift from 2G to 3G and from dial-up to broadband internet, the fixed-line telephone continues to be an important feature of SME communications use. Fifty-twoper cent of SMEs in 2008 were estimated to use 3G mobiles, up from 37per cent in 2007, an increase of 41per cent. However, SMEs continue to value the fixed-line telephone, 85per cent identifying the fixed-line telephone as a very important communication technology, compared with 74per cent for broadband internet and 71per cent for mobiles.
Business characteristics, such as industry of operation and whether or not the business perceived itself to be innovative, affect the propensity of SMEs to adopt emerging communication technologies, such as VoIP. While VoIP was used by an estimated 16per cent of SMEs overall, its use was significantly higher for certain industry sectors, such as finance and insurance (29per cent) and communications, property and business services (26per cent). SMEs in the finance sector in general had the highest level of adoption of communication technologies such as 3G, voice over internet protocol (VoIP) and broadband internet.
SMEs in non-metropolitan areas were more likely to use 3G mobiles, at 65per cent compared with 45per cent of SMEs in metropolitan areas. This can be partly attributed to the closure of the CDMA network. A larger proportion of SMEs in metropolitan areas used or owned a VoIP service—18per cent, compared with 13per cent of SMEs in non-metropolitan areas.
SMEs that export or considered themselves innovative at the time of the survey were more likely than non-exporting or non-innovative SMEs to take up new and emerging communication technologies.
SMEs see the internet as a critical business tool for the purposes of dealing with customers, managing supply chains and undertaking activities such as banking and selling products or services. Communication is the largest single business activity undertaken via the internet by SMEs, with 98per cent having used the internet to communicate with customers and suppliers. Other significant activities undertaken online included:
● searching for information on products and services (89per cent)
● research (85per cent)
● banking (83per cent)
● accessing directories (81per cent)
● paying for products and services (76per cent).
However, factors such as industry of operation, business size, location and whether a SME exports or not affected the type and level of activities undertaken online.
The role of broadband internet in underpinning SME engagement with the digital economy is significant. SMEs have recognised the value of broadband internet in increasing the efficiency of their online operations, with approximately 95per cent of SMEs connected to some form of broadband service. Furthermore, broadband is seen by the majority of SMEs as having a positive impact on their business operations, with 78per cent of SMEs reporting a positive impact—usually in the form of increased efficiencies in the speed at which activities can be undertaken, such as banking online rather than in person.
Introduction
Continuous technological innovation and the widespread use of communication technologies have underpinned economic development, productivity growth and the emergence of the digital economy. This is manifested for example in the development of new content services, business models and alternatives to traditional voice services. Australian small and medium enterprises (SMEs) are increasingly participating in the digital economy through the application of communication technologies to their day-to-day business processes, which is also transforming traditional business operations, supply chains and interactions with customers. In turn, consumer participation in the digital economy is increasing through new and transformed digital services, customer service delivery channels and SME demand for relevant skills.
In Australia, SMEs account for nearly 99per cent of all businesses. They are therefore in a unique position to drive the digital economy through continuous innovative application of communication technologies to their business operations.
ACMA has a particular interest in SME take-up and attitudes towards communication technologies, as an indicator of the performance of the telecommunication sector in meeting community needs. ACMA also has an interest in understanding SME demand for communication technologies as part of its broader responsibilities to report and advise on matters affecting consumers of carriage services, including consumer satisfaction and benefits. ACMA also has responsibility to conduct research into issues relating to internet content and internet carriage services and conduct community education (section94, Schedule5 of the BroadcastingAct1992).
Research objectives
The main objectives of this report are to:
1. identify changes in the level of take-up and use of various communication technologies by SMEs, particularly emerging services such as voice over internet protocol (VoIP)
2. ascertain the essential communications tools used by SMEs
3. gain an understanding of the changing attitudes of SMEs to communication technologies in an environment of increasing choice and service convergence
4. ascertain how factors such as business size and industry sector influence SME
take-up and use of communications
5. gain insight into how SMEs are using communication technologies to participate in the digital economy.
Through this research, ACMA is seeking specifically to:
● quantify the take-up and use of communications by Australian SMEs
● identify the drivers of communication service use by SMEs
● identify future communication technology needs of SMEs.
This is the second report in the Convergence and Communications series and builds on earlier research undertaken in 2007 by ACMA and published in the report, Telecommunications Today Report2: Take-upandUse by Small and Medium Enterprises.
1 Methodology
Sensis® Business Index survey data has been used as a primary data source for this research report. In addition to the standard business survey, ACMA commissioned Sensis to field additional questions about telecommunication use, take-up and attitudes. Sensis conducted telephone interviews with 1,800 small and medium enterprises (SMEs) between 28April and 30May 2008.
Businesses interviewed were drawn from all metropolitan and major non-metropolitan regions within Australia; however, the sample excludes businesses in the agricultural sector.
Survey results were weighted by selected ANZSIC[1] divisions within the metropolitan and non-metropolitan region of each state and territory to help ensure the sample reflected the actual SME population distribution. The Australian Bureau of Statistics Business Register, as at June1998, was used to help weight the sample to be representative of the total business population.
Data from Sensis® Business Index May2007 was used to produce time-series comparisons throughout the report.
Rounding
Discrepancies may occur between the sums of the component items and totals due to the effects of rounding.
Definitions
For the purposes of this research, a ‘small enterprise’ is a business employing between 1and 19people, and a ‘medium enterprise’ is a business employing between 20and 200people.
The term ‘communications’ includes all voice—fixed-line and mobile telephone, and voice over internet protocol (VoIP) and data services—and dial-up and broadband internet services including ADSL, cable, satellite and wireless.
A ‘standard mobile telephone (not able to access the internet)’ refers to a 2G mobile telephone throughout the report.
2 SME profile
According to the Australian Bureau of Statistics, there were 2.01million small to medium enterprises (SMEs) in Australia at June2007, making up nearly all actively trading businesses in Australia.[2] SMEs make a large contribution to the Australian economy, with three quarters of a million small businesses employing 4.1million people and a further 1.1million non-employing small businesses.[3] Significant changes in the business practices of SMEs as a result of using communications services have an economy-wide impact on general growth in productivity. Therefore ACMA has a particular interest in SME take-up and attitudes towards communication technologies as an indicator of the performance of the telecommunication sector in meeting community needs.
Figure 1 shows that 96per cent of SMEs are classed as ‘small’, with less than 20employees. The remaining five percent have between 20 and 200employees and are classed as ‘medium-sized’ enterprises.[4] Figure 2 shows the distribution of annual turnover for SMEs in 2008.
Figure 1: SMEs, by number of employees
Source: Sensis® Business Index, May 2008 (n = 1,769).
Figure 2: SMEs, by distribution of annual turnover
Source: Sensis® Business Index, May 2008 (N = 1,800).
A large proportion of SMEs are family-run businesses (66per cent). The majority of businesses reported operating from business premises (70per cent), with a further 28per cent operating from home offices.
SMEs are predominantly located in metropolitan areas (66per cent, compared with 34per cent in non-metropolitan areas).
SMEs operate in various industries, with the largest proportion in the communications, property and business services sector (24per cent), followed by the retail trade sector (19per cent) and building or construction (13per cent).
Figure 3: SMEs, by industry of operation
Source: Sensis® Business Index, May 2008 (n = 1,769).
According to the Sensis Business Index 2008, 14per cent of SMEs exported goods or services in the last year.
At the time of the survey, the majority of Australian SMEs considered themselves innovative, with 18per cent self-assessing as highly innovative, 34per cent somewhat innovative, 31per cent slightly innovative, and the remaining 17per cent as not innovative at all.
On average, medium-sized businesses generally operate for longer than small businesses. Approximately 71per cent of medium-sized businesses are estimated to have been in operation for 20or more years, compared with 36per cent of small businesses.
Figure 4: SMEs, by size and age of business
Source: Sensis® Business Index, May 2008 (n = 1,769).
3 Take-up and use of communications
The ubiquitous use of communication technologies is transforming the way small and medium enterprises (SMEs) do business. For example, the adoption of the internet has underpinned the growth of electronic commerce (e-commerce). Consumers are also driving SME participation in the digital economy by increasingly seeking information and purchasing goods and services online—and SMEs have responded to this demand. A new generation of broadband-capable communication technologies are facilitating integrated electronic supply chains, flexible work arrangements in the form of teleworking, and new customer service delivery channels for content-rich applications and services.
This section of the report examines the take-up and use of communication tools by SMEs and the adoption of more advanced technologies such as 3G and voice over internet protocol (VoIP). It also explores the factors that influence SME take-up and use of these technologies.
SME use of voice communication technologies
High levels of fixed-line and mobile phone use continued to be recorded by SMEs. The take-up and use of these services has remained at a fairly similar level since 2007, reflecting the fact that SMEs largely consider these services to be complementary.
Figure 5: Voice communication technologies currently used or owned by business
Source: Sensis® Business Index, May 2007 (n=1,668) and May 2008 (n = 1,769).
The similar level of fixed-line and mobile telephone take-up since 2007 indicates that SMEs are less inclined to substitute their fixed-line than household consumers, with subscription rates for household fixed-line services peaking in 2004.[5] This affiliation of SMEs with their fixed-line telephone may be explained by the nature of particular businesses and by concerns over retaining customers.