Tech-savvy small and medium-sized enterprises (SMEs) created more new jobs and drove more revenue gains over the past three years than SMEs using little technology, according to new research commissioned by Microsoft Corp. and independently conducted by The Boston Consulting Group (BCG), a global management consulting firm and a leading adviser on business strategy.
The BCG report, Ahead of the Curve: Lessons on Technology and Growth From Small Business Leaders, which is being published Saturday, found there is potential for SME revenue to grow by a combined $770 billion in the five primary countries if more SMEs could achieve the growth rates of those SMEs that use modern IT. These same SMEs could add some 6.2 million new jobs in those countries alone. What’s more, BCG believes that this association between IT adoption and growth would be consistent in countries across the world.
“SMEs are a critical growth engine for jobs and economies today, and we wanted to better understand the impact of technology on these small businesses,” said Orlando Ayala, corporate vice president and Microsoft chairman of Emerging Markets. “Since the economic crisis, many economies have struggled to return to strong economic growth and to create new jobs, and this research suggests strongly that greater use of advanced IT by SMEs can potentially boost both growth and employment.”
BCG’s research found that over the past three years, IT-enabled SMEs, which BCG refers to as “technology leaders,” grew revenues 15 percentage points faster and created twice as many jobs as SMEs that use less technology. The research also revealed that across nearly all product categories, these fast-growing SMEs use more Microsoft solutions than any other products, and that SMEs view Microsoft as the top partner for new and future technology needs. In fact, when asked what technologies survey respondents could not live without, they chose Microsoft Office as the top productivity application over all others. What’s more, SMEs that adopted Microsoft Cloud services grew faster than SMEs that do not use any Microsoft products.
“The BCG research revealed that Microsoft products and services are the No. 1 choice of these technology leaders,” said Vahe Torossian, Microsoft’s corporate vice president of Worldwide Small and Mid-Market Solutions and Partners organization. “Microsoft is the brand that small businesses trust and use to power their growth.”
The BCG report argued that the latest wave of technological advancement, such as cloud services, brings potential for the most far-reaching innovation and business growth ever, creating an opportunity for more SMEs to achieve the growth rates of technology leaders by leveraging technology to fuel productivity and growth. The research revealed that high-performing SMEs stayed ahead of mainstream IT adoption, riding new waves of advancement to improve productivity, connect with new customers and markets, particularly outside their own region or country, and compete with much larger players. These companies employ the full range of available tools — from productivity software to Internet connectivity and cloud-based services.
But at the same time, the research revealed a risk, because SMEs’ adoption of IT is decidedly uneven. Across the world, many SMEs, and their customers, don’t have access to modern broadband networks, and many lack the skills to get the most out of IT. Many SMEs are also still using large amounts of old and less efficient hardware and software. New devices are also sometimes very expensive due to high import duties, and SMEs are concerned about online security and privacy. But the growth prospects described in the study are too important for governments and the IT industry to ignore.
The risk of a growing technology gulf is relevant to governments looking to maximize economic growth, and it is an opportunity for policy-makers and the IT industry to implement strategies to remove barriers to IT adoption by addressing small businesses’ top concerns about using more technology.
“Our objective is to help more SMEs transition to, and benefit from, modern IT,” Torossian said. “For customers, it means providing product training and helping SMEs understand the full range of available devices and services, but it also means community investments such as skills training and partnering with governments and communities to remove the bigger, systemic barriers that hold SMEs back.”
The results of the BCG survey of more than 4,000 SMEs in five of the world’s largest and most diverse economies were consistent across all industry sectors, but there were some surprises from emerging markets and with women-owned firms. Technology leaders in emerging markets grew jobs and revenue faster than in developed markets and are even quicker than their developed market counterparts to embrace new tools, and women-owned firms are among the most technically advanced, innovative and successful firms interviewed.
“What we are seeing is that technology can help level the playing field for groups with historical disadvantages in business, and we would like to see more SMEs benefit from being technology leaders,” Ayala said. “Microsoft is committed to enabling people from all over the world and bridging the gender gap in computing careers with tools and programs to provide opportunities in the computing field for business growth and innovation.”
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