The top technology concerns facing SMEs today
The Research
Leading research house the David Lewis Consultancy conducted this survey on behalf of extrasys. The survey looks at the main business challenges facing SMEs are over the next year. The survey was conducted during the first two months of 2006 and targeted owners, CEOs and MDs of UK based businesses ranging in size between five and five hundred employees. This report analyses both overall nationwide findings and then the results from companies separated by size and employee numbers.
Key findings
- The most pressing challenges for SMEs in the coming year are competition (35%) and rising costs (28%), followed by business continuity, risk and disaster recovery (25%).
- Nearly 70% of the respondents in this survey indicated cost was the main factor influencing their choice of technology.
- A large majority of respondents agree that technological innovation is a key component in developing a successful and competitive business.
- 80% of respondents agreed that technology innovation and new business solutions are changing the culture of the SME industry and are becoming strategically vital to the growth and competitive success of smaller enterprises.
- The main drivers of cultural change are accessibility, security and customer service.
- Over half of all respondents agreed their existing infrastructure is not secure enough, yet only 6% recognized that business continuity and investment in their IT infrastructure would be a key expense in 2006.
- The research highlights the disparity between the majority of companies who feel their existing IT infrastructure is not secure enough and yet still do not consider this one of their main challenges
Challenges in 2006
What do you expect your company's key challenge in 2006 will be?
| Number of employees in company | Cost increases | Competition | IT software and solutions | Business continuity and risk | other | No reply |
| Overall | 28.2% | 35.1% | 8.9% | 25.2% | 13.0% | 2.5% |
| 5-25 | 28.1% | 36.7% | 5.8% | 27.3% | 10.1% | 2.2% |
| 26-100 | 27.0% | 40.5% | 9.0% | 20.7% | 11.7% | 2.7% |
| 101-250 | 32.3% | 26.9% | 11.8% | 28.0% | 14.0% | 1.1% |
| 251-500 | 24.0% | 34.0% | 12.0% | 24.0% | 22.0% | 6.0% |
- Overall results from all respondents found that Competition (35%) and rising costs (28%) are the two main challenges for SMEs in 2006
- A quarter of respondents cite business continuity, risk and disaster recovery as the third most significant challenge
- The low IT percentages (8.9%) indicate that IT software and solutions are not considered a key challenge for SMEs in 2006. This could be down to the lack of understanding and knowledge of solutions available and that SMEs are choosing to place a greater emphasis on facing challenges such as competition.
- A quarter of respondents predicted that business continuity would be one of the main challenges facing their company in the coming year, yet 6% of respondents recognised that business continuity was going to be a key expense for 2006.
Technology innovation key to growth
How important is the issue of technology innovation to the future growth of your business?
| Number of employees in company | Very important | Quite important | Not that important |
| Overall | 42% | 32% | 27% |
| 5-25 | 37.4% | 29.5% | 33.1% |
| 26-100 | 37.9% | 31.5% | 30.6% |
| 101-250 | 55.9% | 24.7% | 19.4% |
| 251-500 | 36% | 52% | 12% |
- Over 70% of business owners recognise that the development of new business solutions is changing the culture of the SME market and is strategically important to the growth and competitive success of their enterprise
- It is clear that the larger the company, the greater the
importance of technology innovation is to the future growth of the
company;
- 80.6% of companies with 101-250 employees agreed technology is important for the future growth of the business
- 88% of companies with 251-500 employees agreed technology is important for future growth of the business
Factors influencing implementation of technology solutions
Which 2 factors influenced your choice of current office technology and business systems?
| Number of employees in company | Cost | Good Customer Service | Ability to upgrade | Access | Security | Other | Facilities | No reply |
| Overall | 68.2% | 30.8% | 29.8% | 22.4% | 19.3% | 9.7% | 17.6% | 2.2% |
| 5-25 | 69.1% | 33.1% | 30.2% | 29.5% | 11.5% | 9.4% | 14.4% | 2.8% |
| 26-100 | 73.9% | 28.8% | 33.3% | 15.3% | 21.6% | 3.7% | 21.6% | 1.9% |
| 101-250 | 64.5% | 34.4% | 25.8% | 20.4% | 24.7% | 10.8% | 15.1% | 4.3% |
| 251-500 | 60% | 22% | 28.0% | 22.0% | 26% | 22.0% | 20.0% | 0% |
- Overall factors influencing the choice and implementation of business solutions are cost (68%), customer service (31%) and the ability to upgrade (30%)
- Accessibility (29%) and customer service (33%) were the main factors influencing IT decisions by companies in the smallest segment of respondents - 5 to 25 employees
- Security (26%) was the main factor influencing IT decisions by companies in the largest segment - 251 to 500 employees
Security
In terms of security and protection, how secure do you believe your IT business infrastructure is?
| Number of employees in company | Very secure | Quite secure | Not secure |
| Overall | 43.3% | 50.4% | 6.4% |
| 5-25 | 36.7% | 54.7% | 8.6% |
| 26-100 | 39.6% | 56.8% | 3.6% |
| 101-250 | 53.8% | 38.7% | 7.5% |
| 251-500 | 50.0% | 46.0% | 4.0% |
- Small business owners across the UK are concerned about the security of their IT infrastructure with around 60% believing their existing infrastructure is not very secure.
What will be the 2 main expenses your company will face in 2006?
| Number of employees in company | Staffing | Premises | IT Systems | Sales & Business Devel. | Contingency Planning | Machinery | Other |
| Overall | 74% | 42% | 25% | 21% | 6% | 18% | 21.1% |
| 5-25 | 71.2% | 48% | 20% | 24% | 6.5% | 18.0% | 20.1% |
| 26-100 | 79.3% | 45.0% | 21% | 21.6% | 3.6% | 15.3% | 19.8% |
| 101-250 | 68% | 34.4% | 31.2% | 20.4% | 9.7% | 19.4% | 28% |
| 251-500 | 80% | 30% | 38% | 10% | 4.0% | 22.0% | 14% |
Per the table above, 6% of respondents recognised that business continuity was going to be a key expense for 2006, yet a quarter of respondents predicted that business continuity would be one of the main challenges facing their company in the coming year.
Technology as a competitive advantage
By investing in new business solutions and technologies, do you expect your competitive market position will improve?
| Number of employees in company | Yes | No | Unlikely to change |
| Overall | 49.4% | 21.6% | 29% |
| 5-25 | 43.2% | 25.2% | 31.7% |
| 26-100 | 44.1% | 22.5% | 33.3% |
| 101-250 | 62.4% | 18.3% | 19.4% |
| 251-500 | 54.0% | 16.0% | 30.0% |
- Overall almost 50% of SMEs questioned agreed that by investing in new technology their competitive market position would improve.
- There is a clear pattern indicating that the larger the company (in terms of employees) the greater the percentage of those in agreement that investment in new technology does improve competitive market position.
How much of your 2006 budget do you plan on spending or upgrading your technology/business systems?
| Number of employees in company | 1-10% | 11-25% | 26-50% | 51-75% | 75%+ |
| Overall | 80.9% | 13.7% | 2.3% | 1.3% | 1.8% |
| 5-25 | 86.3% | 10.8% | 1.4% | 0.7% | 0.7% |
| 26-100 | 83.8% | 10.8% | 3.6% | 0.9% | 0.9% |
| 101-250 | 78.5% | 16.1% | 2.2% | 2.2% | 1.1% |
| 251-500 | 64% | 24% | 2.0% | 2.0% | 7.0% |
- 80.9% of SMEs questioned confirmed that fewer than 10% of the 2006 budget would be spent on purchasing or upgrading their technology and business systems.
- Yet almost half (49.4%) confirmed that by investing in new technology, competitive market positions would improve.
Economic environment
As an SME, how favourable do you find the current economic environment compared to 2005?
| Number of employees in company | Better than 2005 | Worse than 2005 | The same as 2005 |
| Overall | 21% | 30% | 49% |
| 5-25 | 23% | 33.1% | 43.9% |
| 26-100 | 20.7% | 27.9% | 51.4% |
| 101-250 | 17.2% | 32.3% | 50.5% |
| 251-500 | 22.0% | 24.0% | 54.0% |
- Nearly half of all respondents agreed the economic climate in 2006 has not changed since last year
- A third of mid size SMEs (101 - 250 employees) believe the economic environment is worse than 2005
Competition
Compared to your competitors, do you think your IT business system is?
| Number of employees in company | More advanced | The same | Less advanced |
| Overall | 29.5% | 50.1% | 20.4% |
| 5-25 | 21.6% | 50.4% | 28.1% |
| 26-100 | 22.5% | 56.8% | 20.7% |
| 101-250 | 44.1% | 43% | 12.9% |
| 251-500 | 40.0% | 48.0% | 12% |
- Half of all respondents (50.1%) felt their IT system was the same as their competitor, yet half (49.4%) of respondents agreed that their competitive market position would change if they invested in new technology & business solutions.
- The majority (44.1%) of mid sized SMEs with 101-250 employees felt their IT system was more advanced.
Remote Working
Do you think your company will still require the facilities of an office and that your workforce will have the ability and technology to work remotely in five years time? (eg video conferencing, access to entire IT networks etc.
| Number of employees in company | Yes | No |
| Overall | 60.1% | 39.9% |
| 5-25 | 49.6% | 50.4% |
| 26-100 | 64.0% | 36.0% |
| 101-250 | 72% | 28% |
| 251-500 | 58.0% | 42.0% |
- Despite technology advancement in remote working and increasing number of companies introducing flexible working hours, 60% of SMEs questioned stated they believe their business will still require the facilities of an office despite remote working technology advancing allowing for work to be conducted anywhere
- Half of all SMEs questioned with fewer than 25 employees, agreed that the facilities of an office wouldn't be required in five years time. This would suggest that smaller companies have the flexibility to give employees choice in terms of location of work, due to the potential cost saving implications (ie encouraging all employees to work from home, thus saving on office costs)
Culture of the SME market today
Do you believe that the development of new business solutions is changing the culture of the SME market in the UK?
| Number of employees in company | Yes | No |
| Overall | 82.7% | 17.3% |
| 5-25 | 84.9% | 15.1% |
| 26-100 | 82.0% | 18.0% |
| 101-250 | 77.4% | 22.6% |
| 251-500 | 88% | 12% |
- A very large majority (82.7%) agreed that the development of new business solutions is changing the culture of the SME market in the UK
- Again, apart from mid sized SMEs questioned (with 101-250 employees), 82% or higher of SMEs agreed that the culture of the SME market is changing because of new business solutions. One explanation for the lower percentage (77.4%) from SMEs with 101-250 employees could be the type industry sector the smes operate in.
Education
In terms of gaining a greater understanding of business and technological solutions available, do you rely on information from: (Note: more than one response was permitted)
| Number of employees in company | Trade Media | National Media | Internet | Word of mouth | Advertising | Sales calls | Industry events | Other |
| Overall | 46.1% | 26.7% | 52.9% | 56.7% | 28.5% | 21.1% | 26.5% | 7.9% |
| 5-25 | 42.4% | 18.7% | 46% | 56.1% | 22.3% | 12.8% | 17.3% | 4.3% |
| 26-100 | 47.7% | 32.4% | 57.7% | 58.6% | 32.4% | 23.4% | 25.2% | 9.0% |
| 101-250 | 52.7% | 33.3% | 59.1% | 54.8% | 36.6% | 29% | 31.2% | 9.7% |
| 251-500 | 40% | 24.0% | 50.0% | 58.0% | 22.0% | 24.0% | 46% | 12.0% |
- Over half of respondents (56.7%) said they rely on word of mouth in terms of gaining a greater understanding of new business and technological solutions available.
- The internet (52.9%) followed by information in the trade media (46.1%) were also key sources that SMEs refer to regarding business and technological solutions.
- 46.1% of SMEs referred to the trade media compared to 26.7% who rely on the national media to gain a greater understanding of business and technological solutions available.
Summary of respondents
How many employees are there in your company?
| Number of employees | 5-25 | 26-100 | 101- 250 | 251-500 | Total |
| % | 35% | 28% | 24% | 13% | 100% |
Occupations of respondents
Respondents described themselves as:
- Managing director
- Business director
- Proprietor (including owner)
- Chief executive
- Commercial director
- General Manager
- Director
- Financial director
- Operations director
- Associate director
- Finance manager
- Financial controller
- Chief financial officer
- Business development manager
- Business manager
- Company supervisor
- Head of external communication
Age groups
| 18 - 24 | 4% |
| 25 - 34 | 15% |
| 35 - 44 | 32% |
| 45 - 54 | 30% |
| 55 + | 19% |
Gender
| Male | 76% |
| Female | 24% |
Region
| North | 28% |
| South | 28% |
| East | 19% |
| West | 25% |