This makes sense when the changes in the world economy are evenly spread or relatively predictable, however that's not the situation right now; some markets are booming whilst some are tanking. Investing in a sector that looked great one year - by recruiting, opening offices and facilities - might look foolish in the next.
Many costs with this sort of investment vary wildly from energy and transportation, to commercial property values, currency fluctuations and interest rates. One area that has not increased but has fallen dramatically over time is the direct costs of IT and telecommunications, at least bit for bit in hardware in terms of processing power, storage capacity or transmission speeds. Yes, of course, service or human costs have increased and businesses use more technologyand associated electricity than they ever did, but the capabilities have grown dramatically, including those within the global digital marketplace-the internet.
Fifteen years ago, it was a challenge to sell a business internet connection for serious commercial use. It was the domain of research, academia, geeks and cool Californians who would surf, send ‘flame' emails and use quirky tools like Gopher, Mosaic and Veronica. Today, it is fundamental and vital, even for the smallest of businesses. According to recent Quocirca research almost two thirds of small and medium sized businesses (SMBs) have been connected for over five years, fewer than a third of SMBs can cope without a connection for longer than a day and around a quarter will not accept a drop in connection for longer than one hour. As well as connecting to communicate, many SMBs are going further with over a third already using their internet connections for e-commerce.
This is most effective when the raw product or service can be digitised and distributed to the point of use, as Nicholas Negroponte noted in his book "Being Digital", shipping bits, not atoms. Many services and products have been ‘digitised' for delivery over the network - even formerly physical goods, such as the delivery of media or software.The recurring cost of manufacturing CDs, shipping them to shops and selling them, with all its dependencies on the price of raw materials, transportation, fuel, retail space and shop assistant wages, disappears when digitised.
Not all products can be replaced with bits, and many physical goods still need to be manufactured, assembled, and delivered. For them the internet offers worldwide distribution, a low cost sales channel and even access to the untapped potential of creative suppliers if you follow the model through to Web 2.0 and user generated content. The sale of physical goods online has soared, from browse-able items like books to costly white goods and perishable food. Although many SMBs are already using e-commerce to sell online, they should now go further and look at other aspects of their business processes, and move them online to reduce dependence on location and transportation.
Anything connected with information, workflows, processes, specialist expertise, even the interaction of people - much of the service industry - can be turned into a digital deliverable form, saving the cost, time, inconvenience and environmental impact of moving things and people. For any business this is not simply about making incremental improvements, but architectural step changes anywhere the financial model is directly affected by transportation costs - of people or goods -to diminish the impact and variability of those costs.
Some products or elements of business processes are easier to digitise than others, but knowledge sharing, or the interaction with other people in decision making processes, or getting input from those with particular domain expertise is something that affects most industries. Conducting this interaction at a distance is now far simpler and can include simply sharing screen content or full conferencing with web, audio and video.
Tiny, low cost cameras can be fitted in the 3mm thick lid of an Apple laptop, and at the other end of the spectrum, multi-screen high definition cameras give the realistic shared room experience of telepresence, provided by the likes of Tandberg, Cisco and HP. Similarly audio no longer has to be the basic clipped tones of analogue telephony, but can deliver high fidelity stereo sound. However a bigger transformation is occurring beyond the hardware, with those using it becoming more accepting of being on camera - perhaps Big Brother and the surveillance society have redeeming features after all.
Overall, reducing the need to move people - to and from work locations, through mobile, remote and home working, or to interactwith other businesses - might not only have a significant commercial impact, but also environmental and social benefits as well. This means that business dependence on the reliability and quality of the network increases, and additional focus will need to be applied. Nationally it means that governments and regulators need to encourage the industry to gear up for a substantial infrastructure investment to support international competiveness.
However some businesses too have to change. Despite significant use of the internet by SMBs for e-commerce, IP telephony and even video conferencing, over a third of SMBs have no strategy for their commercial use of the internet. Worse still, over half of them see spending on IT as short term cost covering, rather than a long-term investment. These companies may simply react to the downturn by applying cuts across all cost centres and might thus be missing an opportunity to save moneyand create flexibility elsewhere in the business by not switching their dependency on oil for one on silicon.
Further consideration of the business impact of internet connectivity on SMBs can be found in this free to download report "Soaring not Surfing".
