Lower uptake of cloud, ICT limiting medium-sized enterprises' productivity: CEBR
Medium-sized enterprises in the UK lagging behind large businesses in terms of productivity, because of lower adoption of ICT and cloud
Research from CEBR (Centre for Economics and Business Research) has shown that the productivity of medium-sized enterprises in the UK is lagging behind that of large businesses, because of lower adoption of technological tools,
But cloud can help them plug this gap, CEBR added.
The study, Adoption of ICT and cloud services by medium-sized businesses in the UK, France and the Netherlands by CEBR and cloud platform provider Cordys found that medium-sized enterprises generated £1,518 less per worker than a large enterprise.
According to CEBR, performance of medium-sized enterprises (between 50 and 250 employees) in all three countries has taken a knock as a result of the financial recession. A comparison of productivity growth between medium-sized and large enterprises revealed that medium-sized enterprises have “suffered disproportionately more”.
“This is particularly the case in the UK and France where large enterprises have seen productivity rise by an average of 1.1 percentage points more per year than medium-sized enterprises,” according to CEBR.
Lower ICT adoption
The study attributed this lag to 18% lower ICT adoption by medium-sized enterprises in the UK.
Data from the European Commission (EC) showed that medium-sized enterprises' productivity in the UK declined by a significant 4.8% per year since 2008.
They demonstrated a structurally lower take-up of a range of different ICT-based activities compared with their larger counterparts, the study showed.
For example, 84% of large enterprises in the UK have adopted intra-company data sharing solutions, compared with only 66% of medium-sized enterprises, pointing to a lack of technology integration.
This gap was reflected across the board, including supplier-related processes (54% versus 34%); selling online (42% versus 28%); CRM (customer relationship management) applications (44% versus 29%); and ERP (enterprise resource planning) software (48% versus 24%).
Less agile processes
In part, the productivity gap is explained by less agile and efficient business processes in medium-sized enterprises, which burdens them with additional costs and time-intensive processes, said CEBR’s senior economist, Shehan Mohamed.
Between the three countries, the UK medium-sized enterprises saw the sharpest productivity decline (1.7% more than larger businesses between 2007 and 2011) than elsewhere in Europe.
France saw a difference of 0.5% and Dutch medium-sized enterprises actually performed 1.4% better than the large firms.
This is partly explained by increased use of a range of ICT activities with French and Dutch medium-sized enterprises, the analyst firm estimated.
But this is not all – CEBR found that, in 2012, UK medium-sized enterprises had higher mobile internet adoption rates than France and the Netherlands, with around 80% using mobile email and 73% using mobile internet browsing.
But UK medium-sized enterprises’ use of mobile tools for strategic business purposes, such as document sharing or using business software apps, was significantly lower.
Cloud – a productivity enabler
The report examined how cloud computing can help medium-sized enterprises to address this productivity gap. ICT activities can be implemented through the cloud, in turn making medium-sized enterprises more competitive.
The analyst firm outlined three benefits that medium-sized enterprises can yield with cloud adoption: cost savings, business development and new opportunities.
Cloud can help medium-sized enterprises eliminate their server and storage costs, cutting capital expenses (capex) and asset management costs and CEBR suggested that the implementation of a private cloud environment would lead to a 17.3% reduction in total IT capex, with a public cloud leading to a bigger reduction (39.9%).
Migrating to the cloud means that there’s also a reduced need for power and cooling, with CEBR suggesting a 44% reduction in energy costs in a private cloud and a 79% saving in the public cloud.
Cloud’s scalability features can help medium-sized enterprises better manage seasonal peaks, increasing output by 0.1% per year. In other words, this would increase the output of an average medium-sized enterprises by €21,528 (£18,605) in the UK.
Lastly, cloud adoption – and the subsequent lowering of the barrier to entry – will see the creation 35,000 new medium-sized enterprises in the UK.
"We see this in the market every day," said Art Landro, chief executive officer (CEO) at Cordys. “Medium-sized enterprises want to adopt enterprise applications like their larger counterparts, but find it tough to implement and support the required infrastructure and gain the same benefits as their larger competitors.
“However, solutions which previously would have come with off-putting upfront costs and slow deployment times are now available in the cloud in pre-packaged or custom solutions, underpinned by a business process platform as a service (PaaS).
“This enables medium-sized enterprises to take advantage of the benefits of a customised enterprise solution at a much lower cost. With this approach, they can combine cloud and on-premise systems in the same way that enterprises can,” Landro said.
