November 11, 2004 - 07:00
Racing to catch
By Peter Wolchak
E-business in Canada has been extensively researched and
previous work has highlighted both strengths and weaknesses,
but the most recent study paints an especially dire picture of
the near future.
Any hope Canadian companies have of
leading the world in strategic innovation and economic
performance rests on the ability to deploy Internet business
solutions (IBS), such as e-mail and corporate Web sites,
according to the 2004 Net Impact study, conducted by the
Canadian e-Business Initiative (CeBI). Yet the implementation
of IBS among small and medium enterprises has slowed, and may
indeed have stalled.
The SME segment is critical, as
companies of less than 500 employees comprise 99 per cent of
Canadian businesses. “A lukewarm SME response to IBS adoption
may weaken any national strategy to bolster Canada’s
international competitiveness,” according to the
“The cost of inaction is to have this vital
sector of the economy stall at current levels of engagement
while other nations catch up or increase their
Indeed, numbers from Microsoft Canada president
Frank Clegg show us losing the race in relation to our biggest
trading partner. “Canada is about 10 percent of the population
of the U.S., but our spending on IT is about 6.3 per cent of
the U.S., and on software we’re at about five per
Clegg was speaking in Ottawa at the e-Commerce
to e-Economy conference, a large gathering of sector leaders
organized by Industry Canada in September.
adoption by SMEs showed no improvement between 2002 and 2004,
according to various CeBI studies. In fact, data from both
2002 and 2004 indicate at least 50 per cent of SMEs have not
employed even a single IBS. In 2004, only 10 per cent of SMEs
said they had plans to adopt an IBS for the first time, and
only 11 per cent of adopters indicated they would implement
additional business technology projects in the next 12
The central point, say industry watchers, is
two-fold: not only have half of Canadian SMEs not adopted an
IBS, but the other half, who have typically implemented only a
Web site and e-mail system, have stopped there, even though
they have seen economic benefit from early technology
The financial gains
generated by IBS can be significant, Terry Walsh, CeBI
co-chair and president and CEO of Cisco Systems Canada, told
“Half of SMEs have adopted Internet
business solutions and are realizing an average of 9.5 per
cent gain in revenue and a 30 per cent reduction in cost,”
Walsh said. “Some are seeing as much as a 40 per cent increase
in revenue and a 150 per cent increase in profit.
the 50 per cent who are not participating are in real danger
of falling behind not only their local competitors, but their
global competitors as well.”
Of those companies which
experienced increased revenue, the most often-cited reason was
the use of IBS to attract new customers, concluded a 2004 CeBI
The survey also found IBS use resulted in
reduced costs for SMEs, although the effect was less
pronounced than was seen with revenue generation.
asked if IBS gave them a competitive advantage, 56.7 per cent
of SMEs answered yes, and many cited an improvement in
customer and supplier relationships.
With all that, Walsh asked, why are half of all SMBs
not rushing to implement their own IBS projects?
don’t have time, they don’t have the skills onboard and in
many cases the way forward is unclear,” he said.
is echoed by the Net Impact study, which concluded that owners
and managers in the SME space do not have the time to explore
the benefits of IBS adoption and are struggling with the fact
technology vendors offer only a limited range of tools that
target smaller companies.
David Johnston, a Schulich
School of Business associate professor at Toronto’s York
University and one of the report’s authors, said most
e-business tools are made for large companies. “Technology
providers need to downsize their product offerings a lot more
intelligently. And they haven’t done that very well.”
Johnston also said business owners are often simply
too busy to engage in even those activities that are
“People sometimes don’t adopt
this technology because, even when there are positive
benefits, they are not positive enough to deflect them from
the other parts of the business, like running after customers.
That means some people are too busy fighting alligators to
drain the swamp. In some cases, this technology would allow
them to drain the swamp: find new customers, reduce costs,
“A lot of people, if you ask them ‘Is this a good
idea?’ will reply ‘Yes, it’s a good idea.’
they get to it tomorrow? Maybe.”
Ed Kilroy, president
of IBM Canada and also a conference speaker, said lack of
knowledge among senior management is often the biggest
to the adoption of Internet business
“When you ask business leaders what they
think some of the biggest issues are in terms of making these
changes, the first thing they cite is the ability of their
management to take them through this
Many of them, even once introduced to
the concept of IBS, will stand back and say, ‘Do I have the
ability to do this in my company?’”
Too often, the
answer is no.
“So this is not really a technical issue,
although we can identify some technical challenges; it’s
actually a leadership issue around business
Kilroy said this fact effectively
dooms some companies.
“You’re going to have leaders,
you’re going to have followers and you’re going to have people
who just aren’t going to participate. So we need to highlight
the leaders, push the followers, and the people who aren’t
going to participate will suffer those consequences,” he
Consequences which, according to report co-author
Ron McClean, also of the Schulich School of Business, loom in
the very near future. “The pace of change is so quick that
within two or three years, any company that is not doing
something with Internet business solutions will be in serious
DO THIS NOW
So there is a significant
dichotomy among SMEs. When asked, many say IBS grants
competitive advantage and has proved important in the ongoing
health of their companies, yet the rest are staying away from
the technology in droves.
However, for those companies
who have seen the light and want to pursue a forward-looking
strategy, there is some positive advice out there. The most
important step is education.
“If I ran a small or
medium business,” said IBM’s Kilroy, “first I would pick up
the phone and call the major associations that I belong to,
and ask ‘What are we doing to educate ourselves on the
capabilities that are already out there in the marketplace, to
improve the productivity of our firms? What do we need to
understand to make the biggest changes in our
In general, Kilroy advocates tracking down
trusted advisors, people and organizations with knowledge that
is relevant to an individual’s business
McClean from Schulich points to community
colleges with the same advice.
“Go to your local
They have small-business advisory
groups and that’s a good starting point.”
Although the current adoption numbers are gloomy,
the outlook going forward shows promise.
bright light, according to a worldwide CEO survey conducted by
IBM, is that growth is back on the corporate radar. “The most
that came back from the survey was that
the number one priority for 80 per cent of them was growth,”
said IBM’s Kilroy.
“Growth is back on the agenda. “Cost
cutting and productivity are still important, but they said we
have to get growth back.”
Two-thirds of those surveyed
expected growth would come from new products developed over
the next three to five years.
The second upbeat note
came from the recognition that Canada has a bright past, and
from a commitment to the future.
Michael Sabia, BCE president and CEO, said the tech industry
has recently been a victim of its own success; because it had
been healthy for a period it garnered scant strategic
attention from government or even from
“[Information and communications
technologies] are so integral to the economy of this country
that they need to be high on the list of public issues.
And let’s be honest, they haven’t
However, he said the industry has been a
worldwide leader and with some attention it will be again.
And attention to the industry was pledged by federal
Industry Minister David Emerson. Although details were hard to
come by, Emerson said his ministry
is engaging in a
“rethink” on the role of ICTs (information and communication
technologies) in Canada’s economy.
“We should aim to
make Canada a fully ICT-enabled economy, a worldleading
e-economy that will foster growth and wealth creation across
and throughout the country,” he told the symposium
Canada will do this, he said, by creating an
“environment in which Canada gains advantage, in which we can
attract and retain even more graduate students, researchers,
engineers, financial experts and marketing managers. We can
create the climate in which highly qualified people make
considered decisions to build businesses here...”
in a statement that many observers saw as a commitment from
his government, Emerson observed that the numbers showcased by
CeBI amount to a set of action items.
Canadian firms are global leaders in the generation and
production of ICT, too many Canadian firms, mostly in the
small and mediumsized enterprise sector, have been slow to
adopt powerful new technologies,” he said. “This has negative
implications for Canadian competitiveness.
We need to
assess how we can accelerate technological adaptation by the
growing number of firms in the SME category. Tax incentives
taxes may have a role to play here, as the
“That is why we are engaged at Industry
Canada in a strategic rethink.
We are asking ourselves
where we want to see the Canadian economy 10 years from now,
and what policy levers can be best applied to get us