Yankee Group Finds Small, Medium Business Market Missing Web Commerce Opportunity

EDP Weekly's IT Monitor, Nov 23, 1998

The Yankee Group's recent small and medium-business (SMB) survey finds the overwhelming majority of SMBs "have not strategically embraced the Internet as a business tool, nor do they grasp the unprecedented opportunity the Internet offers to level the playing field." As a result, Yankee Group researchers conclude that Internet solution providers "need to revise their product lines to reflect a staged approach to Internet commerce focused on first building a foundation," before attempting to migrate SMBs to higher-value services.

"We have identified a three-phase process that SMBs undergo as their Internet commitment strengthens -- connectivity, customer connections and commerce. More than two-thirds of the companies we surveyed have yet to move into the customer connection phase," says Chris Gwynn, senior analyst in the Yankee Group's Internet Market Strategies program. "Promoting the Internet as a tool to transform the way SMBs buy and sell will not connect with this market. Their needs today are focused on improving communications, with e-commerce coming much later."

Among the small (2-99 employees) and medium (100-499) businesses surveyed, only an average of 30 percent stated that the Internet was important to achieving business goals. In fact, although 61 percent of small businesses and 82 percent of medium businesses report that they have some form of Internet access, only 50 percent of all PCs within small businesses and 31 percent of all PCs within medium businesses have Internet access.

"SMBs account for 98 percent of all US business, represent about 50 percent of the GNP, and spend approximately $445 billion annually on information technology products and services," says Joseph Villarosa, director of the Yankee Group's Small & Medium Business Communications program. "There is no question that service providers, as well as equipment manufacturers, have a huge opportunity to turn these companies into 'Internet believers' through substantial education efforts and long-term relationship building."