Europe and the challenge of electronic commerce Barcelona 2 December 2002 Reinhard Büscher

1. European Commission Europe and the challenge of electronic commerce Barcelona 2 December 2002 Reinhard Büscher reinhard.buescher@cec.eu.int

2. European Commission Agenda • The facts • ICT infrastructure • General attitude • Activities • e-business integration • The challenges • The policy implications

3. European Commission The main message • SMEs have taken the first step to go digital . . . • They feel it constitutes a part of their business • They are connected to the internet • They have their websites • They sell and procure online • … and they seem to be satisfied with e-business … • . . . but: They struggle with digitally integrating their business processes • The "e" part of their business processes tends to be a front-end / customer faced activity • More advanced e-business solutions are mainly used by large enterprises • This could have economic implications in the long run

4. European Commission Infrastructure: SMEs are connected to the net • Nearly all SMEs use computers and are connected to the internet. Only for about 10% of the smallest firms, internet access seems to be irrelevant. • They have closed the gap to large enterprises in terms of basic connectivity. Data enterprise weighted (% of enterprises). Computation base: all enterprises. Includes EU4 (D, F, I, UK). Source: e-Business Watch. Survey 2002

5. European Commission Infrastructure: Differences in diffusion of network applications – example intranet For small firms, an intranet is less useful than for larger companies. Adoption rates clearly reflect this difference. Data employment weighted (enterprises comprising …% of employees) Computation base: all enterprises. EU4 includes D, F, I, UK. Source: e-Business Watch. Survey 2002

6. European Commission Infrastructure: Economies of scale Brutal economies of scale force the smallest enterprises to invest 6 times more human capital in their poorer IT infrastructure compared to the largest enter-prises. Computation base: all enterprises. Includes EU4 (D, F, I, UK). Source: e-Business Watch. Survey 2002

7. European Commission Infrastructure: The IT skills gap – it still exists • EITO (2001): demand for 14.5 million ICT and e-business professionals in Western Europe – supply of only 12.7 million • Situation has changed after crash of new markets • But: still shortage of specialists who combine entrepreneurial and engineering skills ("e-business professionals")

8. European Commission The attitude: How important is e-business already today for your enterprise? SMEs feel that e-business is just as important for them today as it is for large enterprises. Data employment weighted (enterprises comprising …% of employees) Computation base: all enterprises. EU4 includes D, F, I, UK. Source: e-Business Watch. Survey 2002

9. European Commission Activities: e-commerce • Adoption of e-commerce activities among SMEs have gained momentum. • Even among small firms, more than a third say they procure online. Medium-sized companies have already closed the gap to the large enterprises.

10. European Commission Simple processing of online orders: information about order by e-mail However, the typical way of "handling" online orders in SMEs is not yet very advanced:The standard process is that the order generates an e-mail. In many cases, the e-chain of processing the order ends at that stage. Data employment weighted (enterprises comprising …% of employees) Computation base: enterprises selling online. EU4 includes D, F, I, UK. Source: e-Business Watch. Survey 2002

11. European Commission Sophisticated processing of online orders: Integration with back-end system Only a minority of SMEs report that online orders are integrated with their back-end system. Larger enterprises are more advance in this respect. Data employment weighted (enterprises comprising …% of employees) Computation base: enterprises selling online. EU4 includes D, F, I, UK. Source: e-Business Watch. Survey 2002

12. European Commission e-Integration: do online orders "trigger business processes"? A quarter of small firms, a third of medium-sized and about half of all large firms report that online orders trigger business processes. Data employment weighted (enterprises comprising …% of employees) Computation base: enterprises selling online. EU4 includes D, F, I, UK. Source: e-Business Watch. Survey 2002

13. European Commission Summary: The four main challenges for SMEs on their way to go digital • Themanagerial challenge: • to understand the mechanisms and impacts of e-business • to take the right e-business decisions at the right time • The e-skills challenge: • to find IT and e-business professionals in the labour market • to ensure a high level of e-skills in their companies • The technology challenge: • to have access to affordable e-business solutions • to ensure SME friendly technical standards • The networking challenge: • to develop new forms of co-operation • to become a part of the networking economy

14. European Commission Possible policy objectives to support SMEs in taking .the next e-steps (I) • To encourage managerial understanding: • To promote and show-case "good SME practices" • To provide financial incentives for working with (e-)business consultants • To further develop SME support networks • To improve and increase the availability of e-skills in the market • To monitor demand and supply • To improve the diversity of education programmes • To facilitate life-long learning mechanisms

15. European Commission Possible policy objectives to support SMEs in taking the next e-steps (II) • To improve the availability of e-business solutions for SMEs: • To foster the development of affordable modules for SME needs • To promote open standards and interoperability • To promote networking and co-operation among SMEs • To support pilot projects of co-operative SME networks • To encourage the participation of SME networks in electronic marketplaces