Small Business Embraces Internet

US small businesses accessing the Internet increased dramatically from 19.7 percent in 1996 to 41.2 percent in 1998, according to IDC Research.

Small businesses (less than 100 employees) are overwhelmingly accepting the Internet as critical to the operation and management of their business, enabling them to compete much more equitably with larger, more well established companies, according to IDC. An earlier report by The Yankee Group found that the overwhelming majority of SMBs have not strategically embraced the Internet as a business tool, nor do they grasp the opportunities the Internet presents to level the playing field with larger companies. The Yankee Group study found that among the small (2-99 employees) and medium (100-499) businesses surveyed, an average of only 30 percent stated that the Internet was “important to achieving business goals.”

The IDC study, called “US Small Business on the Internet,” shows Internet usage among small businesses gaining momentum with penetration forecast to approach 4.3 million small firms by 2001.

However, the IDC study found smaller companies do lag behind larger companies in overall online penetration.

“Internet usage by company size can easily be traced to the PC penetration gap between larger- and smaller-sized companies,” said Warren Childs, research manager of IDC’s Small Business Market program. “When just PC-owning companies are considered, Internet penetration tends to be relatively consistent across all size categories.”

Other findings in the report include:

• The professional services sector (e.g., law firms, insurance agencies, real estate agencies, accounting firms) leads in Internet usage with 63 percent of PC owners online
• Retail and health care industries continue to be the laggards in terms of Internet use
• Internet users in manufacturing companies log onto the Internet most frequently and for the broadest range of applications
• PC-owning small businesses with home pages will increase from nine percent in 1997 to 20.1 percent by 2001
• 36 percent of small businesses that plan to go online expect to use the Internet to sell products
• Less than five percent of small businesses access the Internet through any type of shared server
• Small businesses that use the Internet have higher revenues, averaging $3.79 million compared to $2.72 million overall