Small business falling behind on IT and innovation

Australia’s small businesses are falling behind their larger counterparts in the uptake of information technology and in implementing innovation, a new study reveals.

Businesses with less than four employees were much less likely to use computers, have an internet connection or a web presence than larger businesses, according to the study of more than 500 businesses in 2005-06 by the Australian Bureau of Statistics.

Just under 80% of micro-businesses said they use the internet, compared to 86.3% of businesses with five to 19 employees and 94.9% of business with 20 to 199 employees. The gap is even bigger when it comes to having a website: just 21.5% of micro-businesses had established a web presence compared to 40.7% in the five to 19 employee group, and 59.8% in the 20 to 199 employee group.

The report suggests that while Australian business in general is rapidly adapting to take advantage of the rise of the internet commerce environment, small businesses are trailing the pack.

The proportion of businesses that took orders for their products via the internet increased from 12% in 2004-05 to 21% in 2005-06, resulting in a 40% increase in online derived income from $40 billion to $57 billion.

But in 2005-06 just 18.6% of micro-businesses received orders for their products on the internet, compared to 24.3% of businesses with five to 19 employees and 28.5% of businesses with 20 to 199 employees.

The industries with the highest proportions of businesses that received orders via the web were wholesale trade and manufacturing at 39% and 35%, respectively. Health and community services had the lowest at 2%.

The ABS snapshot of the innovation practices of Australian businesses also suggests bad news for micro-businesses. Just 35.4% of businesses with four employees or less said they were innovating by introducing new goods or services, updating operational or managerial processes or new marketing strategies.

By contrast, 51.6% of businesses with five to 19 employees and 67.7%% of businesses with 20 to 199 employees reported they were currently engaged in innovative activity.