Digital Economy: Policies Exchange and Development for SMEs

DEEDS - IST 1999-290

TABLE OF CONTENTS

1.    ICT: market and infrastructure in Germany, Greece and UK

1.1   ICT market overview________________________________________ 2

1.2   Adoption by industry_________________________________________ 5

1.3   Internet user profile________________________________________ 10

1.4   Broadband: impact and prospective__________________________ 14

1.5   UMTS overview____________________________________________ 20

2.    SMEs in Europe: Facts and Figures

2.1   An overview_______________________________________________ 22

2.2   Germany__________________________________________________ 24

2.3   Greece___________________________________________________ 27

2.4    United Kingdom___________________________________________ 27

2.5   Innovation policies for SMEs________________________________ 34

2.6   Electronic Commerce_______________________________________ 35

2.7   E-marketplaces____________________________________________ 36

References_____________________________________________________ 40

Source: CEC,  2001 European Competitiveness Report

The graph (“cobweb”) summarises information on indicators about growth, impact of research on productivity, specialisation of national industries and innovation.

1.      ICT: market and infrastructure in Germany, Greece and UK

1.1             ICT market overview

The following section attempts to describe the ICT Markets in Germany, Greece and UK.

According to the EITO definition, ICT includes: ICT equipment (computer hardware, end user communications equipment office equipment and datacom and network equipment) plus software products, IT service and carrier services. IT market includes office equipment, electronic data processing and datacom equipment, software and service. It is necessary to note that the data are not always available for all three countries.

Germany

Within the German ICT market, IT hardware and telecommunications carrier services represent the largest sector with respectively 23% and 39.7% of the ICT market.

The strongest ICT growth impulses derive from software and services. As regards hardware, sales are strong for Local Area Networks (the rate of growth between 1999 and 2000 has been 14%), NT servers and mobile computers (11% between 1999 and 2000).

Developments in telecommunications and new data networks, the deregulation of the telecom market, the increasing significance of the Integrated Services Digital Networks (ISDN) and the Internet - have been very favourable to new opportunities in multimedia sector. Due to the improving network infrastructure and multimedia production facilities with integrated digital services, online/distance learning and multimedia training projects are gaining importance.

The telecommunication services have received a big boost from the boom in the mobile communications, but the demand for fixed telecommunication networks should also increase in Germany in the coming years for many reasons, such as the introduction of new access technologies such as ADSL onto the existing copper lines, the conversion of cable TV into a broadband data network for Internet and multimedia usage.

Table 1.1 - IT market indicators

Source: Eito, 2001

Greece

The Greek public utilities are keen to exploit the new opportunities offered by the deregulation in the market. State power, transport and water companies have announced plans to form two companies that will install new networks for fixed line telephony.

At present the ICT market shows a mixed population of companies: out of a total of 2,000 companies reported by SEPE (Greek Federation of IT firms), the large companies are no more than 70. The majority are located in or close to Athens. There are many small firms striving for survival, most of which will probably disappear gradually, or fall under the umbrella of large corporations or holdings.

In the following table are shown the average of IT indicators in Greece compared to Western Europe.

Table 1.2 - IT market indicators

Source: Eito, 2001

United Kingdom

The Information and Communication Technology market in the UK has experienced a robust growth over the past few years. In the UK, the ICT market grew by 12.7% in 2000, but its forecasts decrease to 11.8% in 2001. Moreover, despite falling prices in the PC segment and increase of demand for Internet access, the growth  in the PC home market is not strong, except for notebooks, whose shipment has kept on increasing fuelled by strong business and consumer demand.

The introduction of new technologies around the Internet boosted expenditure also for software products. The UK software market was worth € 11,352 million in 2000 and is expected to grow by 15.2% in 2001. The UK software market represents 22.75% of the Western European software market and around 6% of the world market.

Table 1.3 - IT market indicators

Source: Eito 2001

1.2      Adoption by industry

Germany

Germany business community has started fully perceiving experiencing the potential of the Web and the market of e-Business services is recording solid growth. The level of employees making daily use of PCs in Germany’s enterprises has caught up 98% of business. As shown in fig 2.1, 66% of the German businesses have a marketing Web site.

With respect to marketing Web sites, they amount at 66% in 2000, same level to UK, USA and Canada. With 40% of businesses allowing their customers to order online, Germany has the highest record in Europe.

The figure below shows the current and potential adoption of e-commerce by German micro and small enterprises.

Greece

The level of adoption of ICT in Greek enterprises cannot be shown in statistics, because there is insufficient available information.

United Kingdom

The figure below gives measure of the trend of use by businesses of the PCs, Internet, LAN, WAN, Intranet and Extranet.

It reveals that the use of the Internet Businesses in the UK is very widespread  (around 90%). Extranet, a good indicator of e-business practices, has a relatively low rate of deployment across all size-bands (only 17% of businesses have an Extranet): but it is a good performance when compared to 5% in 1999.

The adoption of LANs in the UK enterprises is very high, second only to Sweden and Germany (both at 81%), with 78% of UK businesses having a LAN, an increase from an adoption level of 45% in 1997.

It is interesting to note that over half small business have marketing Web Sites. In UK 76% of large businesses and 65% of medium have a marketing Web site. The majority of businesses which have a Web site uses it to publish most of their marketing material.

In the UK, 57% of all businesses allow their customers to order online or order online from their suppliers. Apparently the companies’ behaviour is not correlated to the firms’ size. The level of provision of online ordering is the same in small, medium and large businesses (28%), and only slightly higher than in the micro businesses (21%).

There is comparatively little difference within the four categories of business size, about online payments. In the large businesses this function is slightly wider.

In the UK, large, medium and small businesses all show figures for partial usage of e-commerce at or above 63%. Micro businesses lag behind on 48%.They are also clearly more likely to have no intent to adopt e-commerce – at 20%.

1.3      Internet user profile

According to the EITO definition Web users are “individuals who access the world Wide Web at last once in every three months. The relatively small and diminishing group of people not using the Web, but only the Internet (typically for Tex-based POP/SMTP E-mail) is not included in this definition”.

According to EITO there were some 120 million Web users in Western Europe at the end of 2000, up 46% compared to 1999 and representing some 31% of total population and by 2003 there will be more than 215 million Web users (55% of total population).

Germany

The number of people using the Internet and on-line connections is growing, but Germany is still only in the mid rank. Moreover, the use of the new information and communications technologies is concentrated on a few social groups.

With the action The Internet for Everyone the Federal Government aims to create a broad base on which other initiatives can be built up. The target group are those users who need to be persuaded to use IT on a daily basis.

Between 1998 and 2000, the high cost of Internet access and the  telecommunications costs has been one of major barrier to the growth of the Internet usage in Germany, but at present Germany is leader in Europe, thanks to a growing online population and aggressive online brokers.

The study by Forsa [1] has found that there were 26 million German Internet users in June 2001, with an increase of more than 335 percent in two years. Forsa found that 40 percent of Germans over the age of 14 are Internet users, and almost 20 percent of those users are 50 years old or over.

The table below shows top domains in the Germany. In the following table unique visitors represent the number of different individuals who access the content of a specific site or online services, counted only once, even if they visit the same site more than once. Reach % represents the percentage of individuals who access the content out of the total number of individuals using the Web or online services during the month (http://cyberatlas.internet.com).

Table 1.5 – Germany: top 10 domains

Greece

Greece is far behind the 14 other European Union member in the “online” ranking. Europemedia reports that Greece has 5.7% of its adult population online, compared to second last Portugal at 7.3% and first place Finland at 59.3%.

According to VPRC (a independent public opinion research organisation in Greece) by the end of 2001, 12%  of the Greek population will be Internet users. Greek internet users are expected to grow by 60% this year, as opposed 33% growth in 2000.

According to Strategic International SA, a consulting company in S.E. Europe, the Greek annual growth rates from 40% to 80% per year. Greek Internet users surpassed 750.000 in 2000, and if this growth rate persists, the Internet penetration in Greece may reach 50% in 2004.

This performance is still away from the expectations of the Greek Government of 1 million users by the end of 2000, but, according to analysts of Strategic International SA, this target could be achieved in the last months of 2001, while at the end of 2002 the Greek online community could be around 1,2 million members.

United Kingdom

Although it is not at the level of  the Nordic countries, the Internet use in the UK is relatively high by the European standards.

An OFTEL survey reveals that 10 million homes now have an Internet connection, an increase from 6 million in May 2000 and 8.5 million in February 2001. An increasing number of UK homes are also choosing fully unmetered products with 24% of households connected to the Internet in this way, compared to 18% in February 200.

CommerceNet/Nielsen Media Research reports that out of the 46 million of adult residents in the UK, 12.5 million, or 27% of the population, has used the Internet in September 1999, 44% log on every day.

The table below shows the top domains in the UK (http://cyberatlas.internet.com).

Although the UK Internet users put speed ahead of cost, the use of high-speed access devices such as cable modems and ADSL high-speed lines remains low, respectively for 5 and 2 percent of households. In the case of ADSL, high costs and limited availability play the  deterrent rule.

UK Internet access move from Subscription-Free to Flat-Rate Reinvents Business Model indicates that the access market in the UK is at a turning point.

The number of UK households using the Internet has grown from 28% in 2000 to 32% in 2001 and will grow from 32% to 52% between 2001 and 2005, from 18.8 million users to 31.0 million users surfing the Internet on a regular basis (but is still lower than in the United States, where it is more than 48% in 2001). The number of UK online users continues to grow as simple dial-up access becomes cheaper for consumers. Consumers in the UK have gone from paying local telephone fees without a monthly subscription charge (free access) to paying an up front fee but surfing without paying metered charges (unmetered access). Subscription free access proved to be an efficient tactic to boost customer acquisition, and cheaper dial-up access will build on this trend by encouraging users to stay online.

Table 1.7 - UK: e-population (2000-2005)

Source: Jupiter

1.4      Broadband: impact and prospective

The figure below shows the trend of various access platforms in the EU homes and SMEs. This refers to the EU as a whole, and so ignores the fact that there are significant regional differences

The figure shows that ADSL will capture market share fast, but will eventually loose market share as demand for bandwidth grows beyond the capacity of ADSL. According to the European Commission “upgrading of coaxial copper cable networks will capture market share at a slightly slower rate to ADSL, and new hybrid copper/fibre networks will also be built. As demand for bandwidth grows, so people will be prepared to pay for the higher capacity offered from fibre to the home/SME. ISDN still has some life, and although POTS will be used less and less as an access platform, it will not completely disappear, as it is likely to become virtually free. Currently, satellite and FWA look set to be a niche alternative. However, in both cases there may be a breakthrough that increases the potential of these technologies”.

The table 1.9 describes the main broadband access platform in terms of technical characteristics.

Source: European Commission

Germany

Germany's early adoption of DSL, partly due to lack of investments in the cable infrastructure, makes Germany leader in the European broadband market, with expected increment to 5 million DSL subscribers by 2003. Jupiter MMXI predicts that Germany will have 17 percent of households with a broadband connection at the end of 2005.

Over the last few years Deutsche Telekom has undertaken  marketing activity to promote ISDN technology for Internet access, and now in Germany over 12% of the households use ISDN for their Internet connection.

In terms of ADSL roll out, Germany is the most advanced country in Europe and this is likely to become the dominant broadband access platform in the country.

Deutsche Telekom (the largest telecom business in Europe and the third largest in the world, after NTT and AT&T) has been the first to launch a DSL product for business in 1998 and has successfully continued to roll out the service to residential and business. DT dominates the market of telecommunication and cable infrastructure, but competition has forced it to be proactive in offering broadband access.

KPNQwest, has installed 2,700 km route of fibre optic ring linking 16 German cities, as connecting 46 key European business centres. With this network in place, KPNQwest is now planning a European DSL service for businesses.

Also QS Communications has installed its own network, connecting 40 German cities.

Another DSL offer for business comes from VersaPoint and it is available in Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. VersaPoint plans to offer ADSL to residential customers in the future.

Greece

The Greek market of broadband is in fast expansion. It represents an interesting opportunity of growth through the increasing demand of value added services. The availability of alternative networks will be contributing to the development of competition to the benefit of both the quality and cost-effectiveness of the services provided to the Greek economy.

Within the context of a worldwide trend towards a deregulation of the telecom market,  FORTHnet - the biggest ISP provider in Greece - in co-operation with STET International and Nederland [2] has created Mediterranean Broadband Services. The Mediterranean Broadband Access SA, which was formed by Telecom Italia Group (60%) FORTHnet S.A. (40%), is awarded a licence for the use, on the entire national territory, of a block of Wireless Local Loop frequencies (WLL) through an auction process of approximately 8 million dollars.

United Kingdom

Broadband has received considerable attention over the last 18 months since it remains a key factor for competitiveness.

Although the broadband in UK has got off to a slow start, estimates from a number of research firms suggest that by 2004 the UK will be the second largest broadband market in Europe behind Germany. But in the government report UK Online: the Broadband Future, it is estimated that by 2003 only 50% of the United Kingdom will have coverage of both cable and DSL, 25% of population will have access by ADSL, but not by cable modem and less of 10% will have access by broadband fixed wireless.

The cable industry is relatively new in the UK and it is going through a process of consolidation. The two major cable providers, NTL and Telewest have already extensive networks across the UK. They are both offering bundled deals of Digital Television, telephony and Internet connections, in addition to a low cost, narrow band Internet connection for PCs or TV, NTL is also offering a broadband Internet. Telewest also has a broadband Internet product, however because of technical problems it has been slow to sign up new customers. It is likely that NTL and Telewest will merge in order to compete more effectively against BT ADSL product. However, the pan-European cable operator UPC has now acquired a 25% stake in Telewest (Microsoft had a minority share in both UPC and Telewest).

The map below shows the geographical coverage of the various broadband technologies within the UK

According to the opinion of many experts, the development of broadband infrastructure across the UK requires the partnership between public and private sectors. Private companies are already making major investments in broadband networks where they believe these will be commercially viable. But the market alone will not deliver affordable high speed connections to all rural areas or to lower-income urban communities.

Public sector is already investing in services over high speed networks. British Telecom has upgraded switchers  covering 38% of the population for ADSL and intends to cover 70% of the country by 2002. BT with MCI Worldcom, Energis and others have installed fibre-optic Internet backbone networks linking major UK cities with the rest of the world.

The most advanced experience of broadband application in UK is superJANET, an Internet network for education. SuperJANET was proposed in 1989, with the aim of developing a national broadband network to support UK higher education and research.

The majority of UK schools are encouraged to connect to the National Grid for Learning at ISDN2 and the Department for Education and Skills Enter  is working to ensure that schools have high speed access to the Internet. The New Library Network aims to provide broadband connectivity to every library in the UK.

Many local authorities and RDAs are considering how to upgrade their local telecommunications infrastructure. The Office of Science and Technology is investing £98 million over the next years to solve problems in the processing, communication, storage and accessibility of ever-increasing amounts of data, including the development of Grid technologies. This is in the project e-science, one of major plan of broadband application.

The original focus of broadband service for the SMEs and residential consumer market is fast Internet access (up to 500 kbit/s) in addition to interactive TV service (video on demand).  In UK Online: the Broadband Future, it is estimated that by 2003 only 50% of the United Kingdom will have coverage of both cable and DSL.

1.5      UMTS overview

UMTS is called  “third generation mobile phone system” and it will give access to new wireless multi-media services. It is clearly superior to the scope offered by the present second generation, like GSM networks, and it will use both terrestrial and satellite transmission elements. UMTS will enable the mobile use of broadband services like the Internet throughout Europe and so improve the competitiveness of mobile phones compared with fixed lines. Details of future service concepts and of future user requirements need to be addressed in order to formulate regulatory, frequency and standardisation responses at a European and national level.

In the Community, the regulatory conditions for a harmonised introduction of the new mobile system are based on existing legislation governing licensing conditions. Different selection procedures have been used: auctions, comparative selections, or a mixture of the two. The number of licences proposed in each country varies from 4 to 6, while the charges for the licences normalised on the population of each country average between 0 € and about 650 € per inhabitant. Licences have varying duration and enter into force at different moments. Deployment conditions (legal coverage requirements and network-sharing conditions) also differ considerably.

Table 1.10 - Five most expensive 3G auctions per capita ($)

Table 1.11 - Largest licenses spending by carriers

Below the characteristics of the licenses auctions for Germany, Greece, and UK. The first launches are expected in 2002, with 80% of the national coverage planned by 2007, but after the 2001 stock market’s breakdown the industry is crippled by the debts incurred to access 3G licenses, and is delaying the building of the 3G Network. This has raised the hypothesis that UMTS will initially be launched as a premium business service.

2.      SMEs in Europe: Facts and Figures

2.1      An overview

Data referring to SMEs in different countries not always refer to the same thing.

We are usually confident with the European Commission’s definition [3] , which takes into account number of employees and total turnover or balance sheet: micro enterprises are those employing up to 10 people, small those up to 49, medium up to 249, with total turnover up to 40 million Euro or balance sheet total less than 27 million Euro.

United Kingdom’s official sources use the definition given by the European Commission.

In Germany the mainstream definition, used also by BMWi (The Federal Ministry of Economics and Technology) and IfM (Insitut fur Mittelstandsforschung Bonn), is that SMEs employ up to 500 people and roughly the total turnover is to be less than 100 million DEM per annum. To be precise, they distinguish between sectors and give a maximum total turnover different among industrial activities. Sometimes it is used also the independence from an industrial group.

The same happens in Greece, where SMEs are those enterprises having up to 100 people on average during the previous three years and average annual turnover less than or equal to GRD 800 million during the same period.

Because of this reason, it is quite difficult to make comparisons between the three countries’ data. Data should be treated in the most careful way as possible also because they usually refer to different years.

As far as concerned SMEs development and status, size class for economic sector, turnover and employment by industry and by size class, there is quite a lot of information for UK, some for Germany and scarce for Greece. The German Web sites and documents do rarely provide information in English. As far as regard Greece, Web sites are available also in English, but most of the time they do not provide documentation and report in English.

SMEs in the European Union play a vital role. They are particularly present in the southern countries of Spain, Portugal, Italy and Greece, while in Denmark, the Netherlands and Ireland they are on average less important. But in all EU economies, SMEs are numerous and their weight has expanded during the last two decades.

There are more than 19 million enterprises in EU-15, among these over 18 millions (93%) are micro enterprises and about half of these ones has no employees at all.  SMEs all together represent more than the 99% of the total number of the European enterprises and account for 65% of total turnover and 66% of total employment but if we consider separately each size-class, large and micro account for the highest shares of the total employment (respectively over and almost 34%). On average, an enterprise in EU-15 employs 6 persons, while the average for SMEs is 4 and is over 1000 for large enterprises.

Despite the limitations to reliable comparisons between data, some interesting facts come out: although the definition used for Greek SMEs is narrower than that one used for the EU average, Greek large enterprises are very few; and while German definition is wider, still Germany accounts for the highest share of the large enterprises if compared to United Kingdom, Greece and the European average (see table 1 below).

According to The European Observatory for SMEs, 6-th Report, Greece is defined a micro-dominated country, where dominance mean that the class has the highest share of employment. Always according to the above mentioned report, in Greece SMEs show higher real value added growth and more favourable profitability (defined as the difference between value added and labour costs then adjusted for the attributed wage of self-employed) than in large enterprises. This is not true neither for Germany nor for United Kingdom. The European Observatory uses the standard definition also for German and Greek SMEs. This explains why it gives few data disaggregated by country. Data for Greece are often not available.

Table 2.1 - Share of enterprise population by enterprise size-class (%)

Table 2.2 - Share of overall employment by size-class (%)

Table 2.3 - Share of overall turnover by size-class (%)

Table 2.4 - Main activity (% of SMEs) by country (1999)

As far as regarding SMEs’ exporting capacity, the German ones perform best, quite above the average EU-19 and the other countries. In this case, comparison is possible, because data are from the same source.

Table 2.5 – Exporting: percentage of SMEs exporting by country and

by sector (1998)

2.2      Germany

In Germany, SMEs are those enterprises employing up to 500 people and recording a total turnover up to DEM 100 million. This definition is that one used by the main sources of information such as Government Departments and IfM (Insitut fur Mittelstandsforschung Bonn).

According to IfM, a strict quantitative definition for SMEs is not suitable to embed the features of German SMEs. Nonetheless IfM recognises the necessity of a quantitative measure but different from that one used by the European Commission. For example, as economic sectors differ quite a lot in the amount of turnover, it is trivial to give the same maximum turnover level for all the sectors. Therefore, in sectors as energy or manufacturing, where average turnovers are usually higher, large enterprises will be bigger than the large one in other sectors. This explains the need to develop the different maximum turnover levels according to the sector as follows:

In any case, an enterprise with more than 100 million DM turnover is not to be considered an SME. The number of employees is used less than the level of turnover and it is different from the EU standard as well:

The measures are bigger than the standard one so that medium enterprises are a large class, quite heterogeneous.

Micro enterprises are not mentioned and are replaced by the category of the small ones. This could be due to the fact that the average size is bigger, so that is not necessary to refine data subdividing the medium class in small and medium and to introduce another item for micro.

But definitely, the classification is based on the turnover size-structure.

According to the definition given, in Germany there are 3.2 million SMEs which employ about 20 million employees. In the table below are showed some figures concerning the SMEs’ performance.

Table 2.8 – Germany: SMEs’ performance (1999)

SMEs represent the 99.3% of the enterprises subject to VAT, account for the 44.8% of all turnovers subject to VAT, employ the 69.3% of the total employment,  account for the 57% of total gross value added (1999) and place 46% of gross investments.

Investment spending per employee is lower in SMEs than in large enterprises. This could be  because SMEs are more labour intensive than capital intensive. According to IfM, this explains why  SMEs usually demand for skill labour force and invest more in the formation of human capital. SMEs offer 80% of training places and the service and construction sector enjoy the highest share of trainees per total number of employees (respective the 8.8% and the 6.9% of the total employees) (1996).

Among the 20 million employees, 3 million are self-employed persons, one third is engaged in trade, transport and communication, one forth in the manufacturing industry and the rest, more than 50% of all self-employed persons, in the service sector (1998).

The self-employed ratio (the number of self-employed per 100 employees) increased from 7.3% in 1991 to 9.7% in 1998.

The share of SMEs in the overall turnover for each sector differs a lot: they provide 88% of total turnover in “hotels and restaurants”, 84% in recycling and in construction. SMEs account for the lowest shares in the manufacturing industry (31%) (1997) and health sector (33%).

2.3       Greece

There is very few information about actual situation of SMEs in Greece. Moreover the majority of Web sites are available only in Greek and when in English, the paper and documents are often not translated.

According to Eommex [4] and OECD, 2000, Small and Medium Enterprise Outlook, they represent a high percentage of the industrial, commercial and agricultural sector and they are key factors for job creation and for regional/ national economic growth.

According to the 1998 census, in Greece there are  509.000 enterprises and SMEs account for the 99% of the total business activities. Among these 96.3% are micro enterprises, 3.6% firms with10-99 employees and only the 0.2% with more than 100 (data from Eommex and OECD, 2000, Small and Medium Enterprise Outlook). SMEs contribute up to 12% of the total GDP and their exports represent the 19% of the total exports (Eommex).

According to OECD, during the decade 1988-1998, the number of SMEs increased of 19.000 units and created 50.000 new job. SMEs’ major difficulty is access to finance, absence of alternative form of finance than those provided by the banks and low level of entrepreneurial professionalism.

Most of the available information concerning SMEs is about projects and programmes designed to help them to improve their international competitiveness and enhance clusters or networks formation [5] , fostering the adoption of new technologies [6] . For example, the initiative Go-Digital [7] aims to help SMEs exploiting the potentialities of the Internet and apply the new technologies for doing business on-line. The initiative is an action of the Operational Programme “Information Society”  sustained by the Greek Ministry of Development and the support of the Greek Research and Technology Network [8] . The role of the Greek Research and Technology Network is to provide a training support for SMEs in order to give them the necessary tools and knowledge in the usage of the new technologies. The aim of the programme is to develop skills to 50.000 Greek SMEs in using Internet and e-commerce.

2.4     United Kingdom

United Kingdom’s official sources agree in recognising small firms central to the UK economy, by providing an essential part of the dynamism and diversity which makes the economy work. The British Government is highly committed to support SMEs in every field: finance, skills, e-commerce and e-business advice and competitiveness enhancement. For example, the Department of Trade and Industry Web site has a page dedicated to SMEs [9] and provide a lot of publications and related documents. 

Every Government sites and related official sources provide wide documentation about SMEs opportunities, tax regulation, initiatives. The Government’s Expenditure Plans 2001-02 to 2003-04 and Main Estimates 2001-02 dedicate a lot of attention to SMEs [10] .

The Small Business Service and the Small Business Council were both established in 2000, the first in order to represent SMEs inside the Government and improve the quality of support programmes for SMEs, the second was designed in order to give advice to the Small Business Service, monitor and report the effect of Government policies regarding SMEs. It is an independent public body which consists of 19 entrepreneurs and 1 small business academic.

UK on-line for business is a programme led by the DTI in order to help businesses to use successfully the new technologies, providing case studies and useful links. UK on line for business runs the initiative “E-commerce Awards” designed to sort out those SMEs that developed excellent business solutions through the use of e-commerce.

There are sites designed specifically for SMEs: http://www.businesslink.co.uk which provides practical business information and advice to UK small firms and  http://www.business.dfee.gov.uk which is an online forum for SMEs where small business can exchange information and example of best practice. The Web site http://www.businesslink.org is a portal providing SMEs business support and also e-business and e-commerce advice in order to increase their productivity and profitability.

There are about 3.7 million enterprises in UK which account for over 22 million of employees; SMEs are over 3 million and account for over 12 million of people employed and their economic importance has continued to increase rapidly [11] .

After growing sharply during the 1980s (cumulative increase over 50% [12] ), the population of SMEs has been relatively constant over the 1990s, even though SMEs are characterised by high entry and exit rates. According to the above mentioned report, “typical SME “half life” is between three and four years”. Recent estimates suggest that over 400.000 business are started every year but almost the same number close down because they fail or change hands (representing nearly 10% of the total). The first two years are the hardest, but those who survive have good chance of longer term of prosperity and growth. It is to be point out that SMEs’ life expectancy is improving and it is to be considered an underlying improvement due to better environment condition developed in the recent years after a period of recession in the early 1990s that hit hard the SME population.

The main factor benefiting to SMEs is a growing support infrastructure for small business: as already mentioned, there are in place a set of governmental initiatives trying to improve SMEs growth and the creation/diffusion of networks of business advisors for starts-up. The banks too have strengthened  their SMEs advisory and services. According to DTI, most of the banks have specific arrangements to help customers in new and small businesses. Moreover, as in other fields, the Government is strongly committed in developing measures aiming to improve finance availability to small business [13] . An example is the SBS Small Firms Loan Guarantee Scheme which guarantees loans from banks and other financial institutions for small businesses which have tried and failed to obtain a conventional loan because of a lack of security [14] .

One of the fastest growing kinds of small enterprise is the very smallest one, i.e. the one person business. Data about the performance of this kind of enterprise are shown in the table below, beside the values for the other size-class.

Table 2.9 – UK: share of enterprise population, employment and turnover by size class

(%) (2000)

Therefore SMEs are more than the 99% of the total enterprise population. Nonetheless large enterprises account for the 44.9% of the total employment and for the 48.9% of the total turnover while SMEs all together account for the 55.1% employment which is smaller than EU average (66%), but it is upward trending and account for 51.1% of the turnover (lower than EU average, 65%) [15] .

Only 5% among SMEs employ more than 10 people, but these larger SMEs account for the highest percentage in the total SMEs revenues, over 50% and account for 46% of total employment in SMEs

                                 Figure 2.1 - UK: SMEs’ size distribution (%)

                                      Source: Foresight Financial Services Panel, 2001, Financing the

                                    Enterprise Society- Final Report

                         Source: Foresight Financial Services Panel, 2001, Financing the

                         Enterprise Society- Final Report

Of course each industry has its own specificity and presents slightly different figures. The same result comes out if we break down for regions.

  Figure 2.3 – UK: cluster map

  Source: DTI, 2001, Business Clusters in the UK - A First Assessment, http://www.dti.gov.uk/clusters/map

Looking at the SMEs’ performance in each sector, SMEs are numerically stronger than large enterprises in all the sectors particularly in agriculture, construction, business & financial services, education and other social/personal services (respectively in the first two sectors SMEs account for 100% of the total number of enterprises in the sectors and in the other for 99.9%).

The highest share in number of large enterprises is reached in mining, energy and quarrying (2.8%), far below the presence in manufacturing (0.7%) and financial intermediation (0.6%) [16] (data Small and Medium Enterprise Statistics for the UK 2000).

The sector with the highest percentage of enterprise with no employees is the construction sector (82%).

As far as regarding employment, large enterprises account for the highest share in financial intermediation (80%) and transport and communication (61.5%) and health sector (59%), while SMEs do better than large enterprises in all the other sectors and enjoy the highest shares in construction (84.5% of the total employment in sector) and other social/personal services (75%).

As far as regarding turnover, SMEs perform best in business activities and education sector (75%), construction (73%) and well also in social/personal services (63%). Large enterprises enjoy the highest share in turnover in manufacturing (66.3%), health sector (64.4%) and transport and communication (62.5%)

As far as regarding innovation, SMEs show smaller figures than large enterprises especially in the manufacturing sector [17] .

Of SMEs with more than 20 employees, about one out of ten spends 10 per cent or more of turnover on new product and process development. But over one third of manufacturing SMEs spend nothing at all. SMEs in chemicals and electrical engineering spend most.

Over 70 per cent of UK SMEs train their employees - a high proportion compared to most other EU   countries [19] .

The government developed some measures trying to increase the availability of equity capital for SMEs [20] .

The number of SMEs wired up to the digital market places is 1.7 million, so the Government target was reached. (Government’s Expenditure Plan, Objective A: To promote enterprise, innovation and increased productivity, PSA target 7 1999-2002 [21] ). This “connectivity indicator” is defined as the number of businesses using external Web sites or making use of external e-mail or Electronic Data Interchange.

The number of SMEs trading on line is 450.000 (the target is 1 million by 2002). 28% of UK business is making payment online to suppliers and 13% of business in the UK enable their customers to do so (third position after USA and Germany) [22] .

2.5      Innovation policies for SMEs

As far as regarding innovation policies, there is an increasing attention to SMEs as important generator for dynamism, flexibility and innovation.

Although Greece is still staying behind, innovation policy is becoming increasingly recognised as essential during last years: steps forward have been done with the Operational Programme for Research and Technology (1995-2000) and the Operational Programme for Competitiveness 2000-2006 [23] .

There is also a lot of attention directed to the improvement of financial, legal and administrative environment for SMEs [24] .

Germany has always devoted great attention to innovation policies and now there is a strong stress in technology transfer between public research and industry, in the improvement of fiscal and administrative environment and in the access to capital available for starts-up.

United Kingdom continues to develop policies as already highlighted, promoting commercialisation of university research, technology transfer, modernisation of the science and technology base and promotion of innovation and SMEs’ participation [25] .

There is a great attention and interest in cluster (see DTI, 2001, Business Clusters in the UK - A First Assessment [26] ) and generally in measures enhancing competitiveness.  As far as regarding small business, there is a lot of concern about it: flourishing of centres for business advice and technical assistance, programme enhancing diffusion of new technologies and dissemination of best practice cases (see also the section about UK SMEs). Most of this activities are supported by the government which is much committed in this field. In the Finance Act 2000 was introduced tax relief for SMEs in R&D spending [27] . The tax credit is expected to benefit to 4.500 SMEs which are estimated to be responsible for about 10% of all UK business expenditure on R&D.

Table 2.10 - SMEs innovation scoreboard by country (EU=100)

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2.6      Electronic Commerce

As far regarding SMEs adoption of B2B and B2C practises, Germany and United Kingdom are above the European average, while Greece is far below. We have to notice that results for Greece are not so bad as they could appear at glance: the percentage of Greek SMEs on-line is only 44% of the total number of SMEs, thus it is this figure that explains the low value for B2B (19%) and B2C (16%). To be noticed also is that Greece has higher percentage of the SMEs connected doing B2B than B2C, while Germany displays the opposite behaviour: in Germany, only 28% of SMEs apply B2B practise, nonetheless 84% is connected.

The relative best result is that one of United Kingdom: if compared to Germany, it shows “only”  70% of total SMEs connected, but 36% do B2B. Anyway, 70% of SMEs online is a good result and overcomes the government target.

Table 1.12 - Small Business on-line, by country

Table 1.13 - SMEs’ use of Internet for commercial purposes by country

2.7   E-marketplaces

“An e-marketplace is an Internet-based broker of goods or services in a community of many buyers and many sellers. E-marketplaces are -ideally- independent from buyers and suppliers. The focus is either horizontal or vertical.” (EITO 2001).

The first e-marketplace in Europe can be dated back to 1996 when British Telecom (BT) established a Private Digital Exchange (PDE) known as BT Trading Places. Of course, it was too early because it could work successfully and BT’s PDE was withdrawn. Two years later, BT re-established BT Trading Places and this time it worked as a true e-marketplace. According to EITO,  it was not before the second half of 1999, that e-marketplaces became to spread all over the world and that demand for e-marketplaces began. Lot of them has disappeared now, but those who survive experience a higher degree of consolidation obtained by means of value added from the provision of a range of business services related to the transaction such as financial and marketing services, logistic, legal and project management support.

According to EITO, there are four types of e-marketplaces:

-buyer-driven: established by a consortium of buyers, usually from the same industry sector (vertical), looking for suppliers via the Internet. They are also called supply-chain-driven marketplaces. This kind of marketplace is purely B2B.

-sell-driven: established by a consortium of suppliers/sellers in order to find buyers via the Internet.

It can vertical or horizontal and B2B or B2C.

-independent: established by an independent organisation on behalf of buyers/sellers. Revenues come from subscription fees, or from percentage of the sale.

-technology provider: established by a technology provider in order to offer their platform for buyers and sellers who do not want or are not able to set up their own e-marketplace (for example, Oracleexchange for SMEs, http://www.oracleexchange.com). Revenues are of the same kind of independent e-marketplaces.

According to EITO, there were 2.000 e-marketplaces all over the world and a third is in Europe. EITO estimates that by the end of 2002, there will be 2.700 e-marketplaces only in Europe, with a dramatic increase in the total number (10.500 estimated worldwide). 

In Europe independent e-marketplaces are 64%, while buyer-driver are 29%, technology provider 5% and sell-driven only 2% (EITO 2001). There are no available data for country’s shares.

As far as regarding market value, independent e-marketplaces account for 66% of the total, buyer-driven for 30%, technology provider and sell-driven for 2% (EITO 2001). There are no available data for country’s shares. EITO 2001 cites a study conducted by Belecon in 2000, which recorded that 133 European e-marketplace are German-based and that in the first 6 months of 2000 there were created more e-marketplaces than in the whole of  1999.

According to the UK online Annual report 2000, UK is the largest e-commerce market in Europe, “with retail e-commerce estimated at £1.2 billion and business to business e-commerce estimated at £800 million”.

UK marketplaces for SMEs seem well designed, highly visited, usually updated and they provide a large variety of services and information, not only purchasing or e-procurement. They often provide visitors with detail information about how to use their service, provide databases of case studies and press release and papers.

As already said, UK Government is strongly committed in developing measures enhancing SMEs take-up with new technologies. It is for this reason that UK official Web sites usually provide e-business advice centres, guides on-line and information about developing e-business practice and about e-marketplaces’ potentialities. What is to be noticed is that often from the engine search of  UK Government’ sites, lists of e-marketplaces Web sites can be found. This is not the case for Germany and Greece. It is to be point out that till now still these official source do not provide information or documentation about e-marketplaces. Available information about e-marketplaces is often provided in form of forecast and data  refer often to US.

For example, UK online for Business’ engine search suggests a  list of horizontal marketplaces [31] . These e-marketplaces are selected by UK online for Business, according the following criteria: security (all sites must be protected by a secure server), customer choice (all sites should offer a good range of products that are well described and illustrated), customer policy (all sites must have a clear customer policy, clearly stated delivery and returns policy), ease of use (easy to navigate, fast to load and order products).

UK online Annual Report, Monthly Review and Action Plan are published on the Office of the e-Envoy [32] . In the Government Expenditure Plan for 2001 [33] , there is also a specific initiative launched in October 2000 by the DTI The Internet Mentoring Initiative, supported by £5.5 million over 3 years, to help Internet start-ups and established SMEs who want to exploit the Internet potentialities in conducting business. DTI established also a network of 100 Information Society Initiative (ISI) advice centres in order to provide advice on ICT to small businesses.

Another example is the Small Business Service which is a SMEs specific portal born by initiative of the government (http://www.sbs.gov.uk). It provides guide and advice on e-commerce, including domestic and international regulatory issues and links with sites operated by Government Departments in their respective areas of competence.

There are some sites devoted to fostering networks of SMEs and e-cluster or give information about it (http://www.ecluster.org).

There are lot of this kind of portals designed for SMEs offering them different services tailored on specific needs and a range of practitioner focused materials. For example, The Small Business Portal (http://www.smallbusinessportal.co.uk) which provides also useful links and it has a Web-page dedicated to research and studies on the subject, or Business Net (http://www.Bnet.co.uk) which provides  a range of business related guides, directories, case-studies, events and links, produced by government departments, professional bodies and commercial organisation. Other similar sites are http://www.sme-marketing.co.uk and http://www.bt.com/sme.

One of the most successful marketplace is Mondus (http://www.mondus.co.uk) with hundreds of suppliers and thousand of services offered. Others offer Web consultant services, such as http://www.digitaltrading.co.uk which provides e-commerce solutions, e-supply chain solutions and e-project collaboration solution or such as http://www.webzter.co.uk which delivers a range of web-based B2B solutions for the small and medium companies.

Another interesting site is http://www.mysupplychain.co.uk that provides very detailed information about e-marketplaces (what they are, how they work, their benefits) with focus on important aspects about business strategy such as supply chain management issues and ERP, providing papers, statistics, benchmarking, information about e-business models.

Barclays (http://www.barclaysb2b.com) is an example of e-marketplace offering different solutions: e-buy, e-supply, e-tenders and creating private trading networks. It is well designed, it provides full explanation of the services offered and reports of various nature and case studies.

Some marketplaces are rooted in regional area and exploit local resources, such as http://www.yorknet.co.uk.

As far as regarding the e-marketplaces specifically devoted to SMEs, http://www.businesseurope.com is very well designed and provides articles, guides for e-commerce and e-business tailored for SMEs needs and problems, for finance and marketing issues, for IT consultant, about human resources management and training. It is updated.

The Group Buying Partnership (http://www.groupbuying.co.uk) is a e-marketplace designed for SMEs offering products and services, advice and solutions.

Another e-marketplace designed for SMEs is http://www.euroffice.co.uk. It was created in 1999 by three entrepreneurs who wanted to help SMEs to overcome typical problems encountered in their experience.

Most of them are available also in other languages, mainly French and German.

As far as regarding Germany, the impression is that often marketplaces and portals are available only in German, so that maybe they can not exploit the potentialities of “the global marketplace”. This is not necessarily a limit, because it maybe give more space to the dialogue between local parties and institutions or it could be the result of a bottom-up initiative which can have its strength in national specificity. But there is no clear evidence of this: the research is too narrow.

Allocation.net (http://www.allocation.net) is a marketplace based in Germany dealing with e-sales, e-procurement and e-sourcing in metal-working, plastics-processing and electronics industries. It is available also in English.

NetBid (http://www.netbid.de) is a vertical marketplace based in Germany, available in three languages, dealing with machinery and industrial equipment. It is updated.

Portum (http://www.portum.com) is a B2B intermediary, providing strategic procurement solutions for enterprises and marketplaces. It provides different kind of services:

-purchasing and consulting services: product selection, supporting RFQs (request for quotation) and auction strategy, identifying qualified suppliers, training/consulting services

-training and support services: registration of participants, auction supervision/-analysis/-archiving, coaching, customer on-line support, availability of auction platform

-technical services: data exchange integration, ERP integration, adaptation of existing functionality to concrete requests

It is available in four different languages.

Surplex (http://www.surplex.com) provides asset management solutions, available in eight languages.

As far as regarding Greece, no documentation about the status quo or marketplaces in progress has been found.

References

All the links are online (November 2001).