Australian small businesses are spending less on computers, but focusing more attention on online technologies, according to the Sensis 2009 e-Business Report released today.

The special report, which is in its 14th year, explores how small and medium-sized businesses (SMEs) use and purchase information and e-commerce technology. The results are based on interviews with 1,800 businesses.

Report author Christena Singh says SMEs are looking to online technologies and applications to improve business efficiency and effectiveness in these challenging economic conditions.

“Spend on computer hardware and software by small and medium business operators has fallen considerably over the last two years, possibly due to high penetration levels and falling costs of laptops and other equipment,” she says.

“At the same time, businesses have begun focussing on online technology, becoming more creative with the way in which they market their products and services online, and more adventurous with the technology they purchase.”

According to the report findings, one-third of SMEs undertake email marketing, for example electronic direct mail (EDMs), with a further 12 percent expected to take up the technology during 2010.

Approximately one-quarter (24 percent) of SMEs now undertake digital marketing activities, such as advertising on third-party websites and portals, with a further 8 percent expected to sign on in 2010.

Online auction sites are also becoming an accepted channel to sell products and services, with around one in five SMEs (19 percent) using the sites, with a further 7 percent penetration expected in 2010.

However, email remains the number-one use of the internet for SMEs (97 percent), followed by obtaining product and service information (92 percent), sourcing reference material (91 percent), conducting internet banking (86 percent) and using online directories (83 percent).

SMEs are also purchasing a range of new telecommunications equipment. The report shows 62 percent own a 3G mobile telephone with internet access, up 10 percentage points from 2008.

Use of wireless technologies for navigation and for mobile email has also continued to grow. More than one-third of SMEs (36 percent) have a satellite navigation device, either in-car or hand-held, a rise of six percentage points in 12 months.

A mobile e-mail device, such as a Blackberry, is used by one in five SMEs (17 percent), an increase of three percentage points over the year.

No growth was seen in the take up of a LAN network (at 56 percent), and there has been a marginal decrease in the proportion of SMEs with an advanced telephony system such as a PBAX or IVR (at 30 percent).

More than 50 percent of SMEs now have a website, with 13 percent expecting to start a website over the next 12 months. Less than one-third of businesses have no intention of having a website.

Eight in 10 businesses in the accommodation, café and restaurant sector now have a website, while just two in 10 businesses have an online presence in the building and construction sector.

Seventy-one percent of SMEs with a website say it improves business effectiveness, up from 65 percent last year. The findings suggest a website improved business efficiency in the cultural, recreational and personal services sector (88 percent) more than any other and least of all in the finance and insurance sector (48 percent).

A website increased business effectiveness, according to the SMEs interviewed, by:

• Informing people about the business (18 percent)
• Increased awareness (11 percent)
• Exposure to a broader market (10 percent)
• Easier for people to access (10 percent)
• More enquiries (9 percent)
• Extra sales (8 percent).

The use of the internet for procurement rose strongly during the year, with increased penetration across all components of the procurement cycle. About 74 percent of SMEs now place orders over the internet, a rise of seven percentage points during the year.

Singh notes one in five businesses now place more than 50 percent of their orders online.

The internet is used to pay for goods and services by 74 percent of SMEs, an increase of three percentage points during the year.

SMEs in the communications, property and business services sector are most likely to place orders through the internet (82 percent), while SMEs in the building and construction sector are least likely (57 percent).

On a national basis, SMEs in the Northern Territory are most likely to place orders online (86 percent), with those in Western Australia the least likely (71 percent).

Airline tickets (48 percent) are the most frequently procured item online, a rise of 11 percentage points during the year. Software purchases are the second most popular purchases (47 percent), followed by stock and merchandise (42 percent), office supplies and stationery (40 percent), and equipment (39 percent).

Once the sole domain of large corporations, small businesses are now also selling goods and services online.

Currently 56 percent of SMEs take orders online, an increase of two percentage points over the year. Sixty-seven percent of SMEs receive payments online, up four percentage points.

“For the first time, there were more small businesses than medium businesses taking orders online, indicating the barriers to entry including cost, risk and skills have declined,” Singh says.

Around the nation, SMEs in the Northern Territory are more likely to take orders online (70 percent) with those in Western Australia the least likely (45 percent).

In terms of the proportion of orders, SMEs in New South Wales are most likely to take the majority of their orders online, while Victorian SMEs are least likely.

“Improved return on investment could be one reason to explain the increase in online activity and e-commerce,” she explains.

Currently, seven in 10 (67 percent) businesses with an e-commerce strategy have already recovered their investment. A further 7 percent are expecting to recover their investment in the next year.

“Reduced concerns about e-commerce could be another reason for the increased activity we have seen during the year,” Singh says.

Concerns about hacking have remained the major concern for SMEs. However, the level of concern has reduced over the year, down three percentage points to 43 percent.

Overall, 95 percent of SMEs are now connected to the internet, up one percentage point over the year. Of the 5 percent not connected to the internet, 2 percent own a computer but have not connected to the internet, while the remaining 3 percent do not own a computer.

The lowest internet penetration is in the cultural, recreational and personal services sector (91 percent), the retail trade (93 percent) and accommodation, cafe and restaurant (93 percent) sectors.

SMEs continued to shift to broadband internet connection over the past year. Ninety-six percent of businesses connected to the internet now use broadband, an increase of two percentage points over the year.

ADSL is the most popular form of broadband connection (56 percent) followed by cable (20 percent) wireless (12 percent) and satellite (2 percent).

Of the SMEs without a broadband connection to the internet, almost half intend to obtain one in the year ahead.

The Sensis e-Business Report shows while there was an increase in business’ online activity, there has been a considerable decline in expenditure of computer hardware and software.

Average expenditure by SMEs on computer hardware and software for the 2009 calendar is expected to be $8,500, down $2,500 from 2008 and $3,000 from 2007.