Simply Business. techsme Index IT s role at the grassroots of British business

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1 techsme Index 2013 IT s role at the grassroots of British business

2 techsme index As part of a campaign to delve into the role technology plays at the grassroots of British business, the UK s largest business insurance provider,, has launched the techsme index - a national research study of over 4,000 companies to gain insight on the strategic use of IT by the nation s entrepreneurs, start-ups and smaller sized enterprises. The survey was completed by company founders, owners, CEOs, MDs and partners, with two thirds of the sample comprising sole traders and a third of businesses with up to ten employees. Results revealed the key role that technology plays in the innovation, competitive development and growth of a key catalyst for Britain s economic development small businesses in the zero-to-ten-staff category. UK Small Business in Limbo as IT Skills Poverty Stunts Growth Key findings: One in five respondents lack basic IT knowledge impacting business prospects Word-of-mouth still key but 40 per cent attempting to be more innovative Only half of respondents currently have a company website Over a third don t use for their business 11 per cent have made no investment in technology IT investment, as a proportion of revenue, decreases as businesses grow Increasing focus on social media strategy led by start-ups

3 Section 1: Attitudes and basic skills Innovation Vs. Personalisation as technology splits the small business landscape. Overview Nearly one in five UK SME owners (18%) believe they do not possess the basic IT skills needed for their business. While some are able to function effectively without any advanced technological ability, there is evidence that it can impact upon potential growth prospects for a significant minority, regardless of sector, with 40 per cent of those who lack the basics reporting that this has had a negative effect on their business. On the flipside, more than three quarters (78%) of those who view themselves as knowledgeable believe it gives them a competitive advantage in their market. Lacking IT knowledge for the business 30% 25% 20% 15% 10% Section 1 Attitudes and basic skills Lack of basic Industry variations Businesses operating in manual trades, such as construction, plumbing 5% IT hinders growth prospects and landscaping reported the lowest level of basic IT skills, with over a quarter (27%) of people saying they have little or no IT knowledge [see fig.1]. Perhaps more surprising was the large proportion of traditionally office based and admin-heavy professions featuring high amongst those with restricted knowledge. Over a fifth of respondents working in recruitment/hr (23%), property (21%) and medical (21%) businesses struggle with basic IT; at a higher rate than professionals in sectors such as health & beauty (19%), cleaning (17%) and entertainment & arts (12%). Construction / Tradesmen Recruitment / HR Property Medical Health / Beauty Cleaning Engineers Architects / Surveyors Management consultant Entertainment & Arts Financial / Legal / Insurance Education Marketing / communications / media Transport Advertising / Design Computer / IT 05

4 I find IT quite frightening I don t know where to start Physiotherapist Gill Huckett founded Physio23, based in St Albans: I am definitely not IT savvy. Last year I lost all the data on my laptop due to a corrupted hard drive. I did get it most of it back eventually but it took months. I ve paid somebody to develop our website but it doesn t work as well as it should because I don t have the time and knowledge to put into it. I ve been advised that I need to market myself on Facebook, Linkedin or a blog, as this will improve search results. However I don t know where to start and don t really have the time. We aren t computerised in the practice. I tend to hand-write reports then type them up in the evening. I m thinking of getting the consultants laptops but then I d need to pay them for additional admin time. It would also be good to have a computerised appointment system as we still use pen and paper diaries. I know there are benefits but I don t understand the networking required and find it quite frightening. I don t really know where to go to for help and I m put off by the extra expense. Techno fear prevents business owners making IT improvements Reviewing IT needs At nearly 80 per cent, the vast majority of businesses surveyed do not employ any external IT support, preferring instead to manage this in-house or personally. In spite of this, many are still relatively engaged with the company s technology use, with over a third (35%) constantly reviewing their IT needs. The largest of the companies surveyed, in terms of annual revenue, are the most engaged with IT. A third (33%) of those with a turnover of more than 250,000 have external IT support, and almost half (45%) have a policy to monitor it at all times. However, a significant number (17%) leave it at least two years to review their IT. This rose to nearly half (46%) for those claiming to lack basic knowledge, suggesting that a degree of techno fear is leading to apathy for some professionals preventing them from developing technological capabilities despite understanding the potential benefits it could have for the business. Half of SMEs have no online presence I ve definitely got a lot more to learn but my next step is to set up a Linkedin account to help with recommendations and referrals!

5 Section 2: Online presence, innovation & strategy Online presence: Websites Out of all the businesses participating in the techsme research, almost half (47%) do not have a company website. Property businesses, including professional landlords, had the lowest online presence (76% without a website), followed by tradesmen (57%), transport (53%), engineering and medical (both 51%) and legal organisations (46%). Those with the highest online presence were those in marketing, communications & media (84% with websites), recruitment/hr (81%), advertising/designers (80%), entertainment & Art (76%) and computer/it (70%). Direct interaction: Whilst some may not feel that a website is required, a significant proportion of UK SMEs are not reaching out at all online, either to give their company a wider reach or to interact with customers. Over a third of respondents (35%) don t use for the business, suggesting many still choose to rely on word-of-mouth as the best way to maintain relationships and attract new custom. The higher the revenue of the business, the greater the level of interaction and basic web presence, with 81 per cent of those above 250,000 operating with a company website, compared to only half (51%) of those with less than 50,000. This trend was reflected for use, with results showing 89 per cent and 62 per cent respectively for these two SME groups. Technology is the enabler and the facilitator for our business Kris Hewitt, CEO and founder of eightpointnine.com, an online retailer providing bespoke, fairtrade coffee: Having started the business less than two years ago I really appreciate the value of technology, and more importantly, the need to use it wisely. Technology is the enabler and the facilitator for our business but it doesn t need to cost a fortune; we try to use it in a smart way and have found a number of free or low-cost online tools that have proven invaluable to us. You can t overlook the importance of face to face relationships, but IT enables us to do a stronger job. As an online business, digital techniques are very important. Social media is one of our primary marketing channels. We see this as a transparent, always-on means of communicating and we ve incorporated this within our website and blog both of which we built ourselves internally. We also recently migrated the business to a cloud-based hosting solution that is affordable and covers our security needs. It might seem technical to some but storing data in the cloud helps simplify processes and improves efficiency. Using the cloud also means that everything is now accessible on the move, and we recently bought smartphones for our team. Through social media and mobile technology we are available 24-7, wherever we are. Innovation Despite many small businesses shunning the online space and other technology outlined in the research, there is evidence that many are looking to be more inventive in their use of IT in order to enhance productivity and engage with customers. The research revealed that a significant number are innovating in areas such as digital marketing, social media (see section 3), customised software, mobile apps and strategic use of smart phones. Nearly a quarter (23%) use cloud computing for a variety of tasks, from data storage and security to accounting. Those that embrace these different methods have gone to great lengths to make their efforts stand out from the crowd by introducing creative features and regularly developing content. This shows a strong demographic of techo-advocates to contrast technophobes in the UK small business landscape. A quarter of business (23%) now use cloud computing time company computing customers media social site work website systems software cloud clients cost services web creative CRM online marketing mobile Word cloud shows the key focus areas for IT creativity outlined by businesses in the techsme research Section 2 Online presence, innovation & Strategy 09

6 Section 3: Digital strategy Digital marketing UK SMEs are also divided on their use of digital marketing, with just over half (52%) adopting some form of strategy, in addition to websites, to promote their business. Online listings (16%) and advertising (17%), direct mailers (13%) and customer newsletters (12%) are among the tactics deployed, however social media is the key channel with over a third (34%) of those with digital marketing using this as part of their promotional strategy. Section 3 DIGITAL STRATEGY Start-ups racing Digital Marketing Tools 40% 30% 20% Social Media The social media channel most widely referenced by SMEs is Linkedin, but a large number also use twitter, facebook, blogs and video sharing sites such as YouTube, as promotional and interactive tools for the business. ahead on social 10% Direct mailers Consumer e-newsletter Social media Mobile apps Online advertising Pay per click advertising Group deal websites Online listings Online video, e.g YouTube SME marketing The research reveals a strong correlation between the age of businesses and their social media activity, with stark differences between start-ups and the more established organisations. Younger businesses are by far the most active with 45 per cent of those operating for up to two years using social media, compared to 29 per cent of those in business for more than five years which run the risk of being left behind in the current competitive landscape. media 11

7 Sectors using Social Media 90% 80% 70% 60% 50% 40% Despite reporting one of the lowest levels of basic IT knowledge, businesses in the recruitment/hr sector are among the most prolific users of social media, with over three quarters of respondents (77%) utilising social platforms in some capacity. Health & Beauty businesses are also among those proving the most active in social media, well above the national average at 45 per cent and ahead of industries including architecture/surveying, finance and professional services, suggesting that the sector is finding innovative ways to reach out to customers. Data security IT spend on the decline 30% There are positive signs that the UK s smaller businesses are exploiting technology 20% including advanced cloud computing processes, the latest devices and online platforms to enhance their business prospects. However, there is evidence to 10% suggest that some may be prematurely focusing a great deal of effort on channels such as Twitter whilst neglecting some basic measures to safeguard their products Marketing / communications Recruitment / HR Entertainment & Arts Advertising / Design Computer / IT Management consultant Health / Beauty Education Architects / Surveyors Financial / Legal / Insurance Cleaning Engineers Medical Transport Construction / General Property or services. Nearly three quarters (70%) of all businesses participating in the techsme survey had no IT/data security system in place. This increased to 77 per cent for start-up businesses (operating for less than one year), despite almost half of these respondents (43%) utilising social media. Half of start-up businesses (45%) use social media

8 Section 4: Tech Investment Investment overview The research revealed that investment in technology is relatively low on the agenda for UK SMEs. Over one in ten (11%) spent nothing on IT over the past year, with an average outlay of just 2,251 across all respondents. Rather than being spurred on by technological advancements, IT spend over the coming years shows signs of falling back still further with a nine per cent decrease in planned investment for Accessing free tools The number of businesses expecting to spend nothing next year has also risen to 17 per cent, indicating that many are finding other means of developing and managing their technology use. The reluctance to invest in IT can be explained in part by the large number of SMEs and start-ups that are making the most of the wide variety of free resources available online. As well as using the internet for and social media, the techsme research found that enterprising business owners are capitalising on free web-based software, such as WordPress, in order to create their own websites, build apps and implement cloud computing for many, or all, aspects of the business. Free online resources prove key as IT investment decreases Graham Mclellan, builder and joiner from Glasgow: I don t avoid technology but I think a lot of people are too reliant on it. I recently got an iphone and have found this really helpful for running my business. I can use it to check trade websites for potential contacts, scan timesheets and take photographs of jobs. I struggle to keep my personal and business contacts/information separate though so I need to think of a solution to this. I have thought about getting a website but I m not sure whether it will be worth the cost, although I can see the benefit for selling your business to customers. Having said that I don t know anybody who searches online for a builder or plumber! Word of mouth is brilliant because people trust recommendations. I think social media is a waste of time but I might get involved eventually. Maintaining it would be hard I would need a secretary! Investment areas SMEs are investing the most on hardware, with staff computers generating the highest costs for 45 per cent of respondents. Alongside broadband, computers were also referenced as the most worthwhile investment, outstripping other tools including security, systems/servers and digital marketing. Investment priorities appear to have shifted in planning for Whilst computers remain highest on the list, among the other areas for expenditure are the introduction of smartphones for staff, digital marketing and social media, all proving to be more of a priority than areas including internet, and data security. The research showed that many of those who are actively spending to improve the business s IT and strategic tech solutions, are also engaged in assessing the true value of their investment. Over three quarters (78%) of SMEs who spent upwards of 5,000 over the past year monitor return on investment, using measurements including search engine optimization, clickthrough rates, customer feedback and social media monitoring. Business size and investment The research showed a clear correlation on the level of IT expenditure relative to the size of organisations, indicating that the smaller the business in terms of revenue, the higher the level of investment as a percentage of their turnover. Those with an annual turnover of less than 50,000 averaged 3.6 per cent over the past year, compared to 1.1 per cent for those with revenue between 500k and 1m. The same pattern was recorded in plans for the coming year, with businesses of all sizes planning to cut IT investment in 2013, by an average of 200. Investment by Company Size (revenue) 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% Less than 50,000 50,000 to 100, ,000 to 250, ,000 to 500, ,000 to 1m Section 4 Tech Investment Investment in last year (% of revenue) Investment of coming year (% of revenue) 15

9 The techsme future is the UK s largest business insurance provider, and maintains a constant dialogue with its expanding community of customers, largely made up of start-ups/sole traders and companies with up to ten employees the starter category crucial to the ongoing growth of the UK economy. The techsme campaign is part of ongoing commitment to design and deliver customer focused insurance products, that use the latest technology, to match the needs of Britain s smaller businesses. is an example and advocate of how technology can fuel innovation and business growth in any sector. It now seeks to support and foster the benefits of IT innovation as a core attribute of success. As part of this ongoing campaign, it is launching a programme of activity, including a series of useful guides, based on sharing its customers experiences, aspirations and concerns, on how to navigate the tech landscape for future business benefit. A taster of the techsme guides can be found online: Methodology: information and research data outlined in the techsme report is based on a research questionnaire issued to a database of customers throughout the UK, as well as a series of customer interviews. The national survey was answered by a sample of 4,088 individual business decision makers, comprised largely of founders, owners, CEOs, MDs and partners. Two thirds of the sample was made up of sole traders and a third of businesses with up to ten employees. About is the UK s largest business insurance broker. Launched in 2005, provides an online brokerage service delivering policies tailored to individual business requirements. It has a team of UK based insurance specialists and employs over 180 people across offices in London and Northampton. insures over 200,000 UK SMEs and owing to its internal underwriting capability can cover over 1,000 trade types. It has been a Sunday Times Tech Track 100 company for the past three years and was recently named in the Deloitte Technology Fast 500 EMEA. Revenues have grown 44% a year from 4.2 million in 2006, to 19.5 million in 2011.