Small business in South Africa – online or offline?

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Shaping the future

Leonard Cohen once said he “heard there was a secret chord” when he wrote the song Hallelujah. He then proceeded to spell out exactly how the chord went. The iconic lyrics are almost a theme song for those trying to understand the secret of providing services to small and medium enterprises (SMEs).

On the surface, it seems SMEs are run by hardened entrepreneurs who count every penny and resist any product that will cut into their profit margins. However, there is indeed a secret chord for SMEs.

We found it when we examined the trend lines of changing responses to questions about technology being used by SMEs over the past 15 years. The annual SME Survey conducted by World Wide Worx began, fortuitously, in 2003 when ADSL first became available to small businesses.

In contrast to almost every other new technology emerging in the first 10 years of the commercial internet, which saw SME decision-makers continually resisting early adoption, ADSL made an instant impact. Over the following six years, we saw a perfect technology replacement of dial-up internet access by ADSL.

On the surface, it didn’t make sense, as dial-up only required a small monthly subscription, while ADSL had a high cost for both line rental and subscriptions. The secret, however, lay in the cost of use. We estimated that ADSL became cheaper when SMEs were online for only 15 minutes a day. Being able to go online for a full working day at the same cost was such a blindingly obvious option, dial-up was dead by the end of that decade.

In this decade, we saw the same happening with cloud computing: not as a cost-saving, but in making a dramatic impact on efficiency, access to services, productivity and, ultimately, profitability.

The moment the benefits became blindingly obvious, and access easy and cost-effective, we saw a dramatic increase in uptake of public cloud services.

Now, the same is happening with fibre. Both fibre-to-the-home and fibre-to-the-office represent a new revolution for SMEs. A single connection that provides far higher speed, throughput and access to services than ADSL is now doing to that service what it previously did to dial-up. In the coming five years, wherever fibre access is available, it will replace ADSL and eventually kill it off.

The common themes in all of these technology shifts represent the secret chord for providing services to SMEs: it has to be cost-effective, easy to use, readily available and – most important of all – a no-brainer. In other words, the benefits are blindingly obvious, as are the negative consequences of not embracing such a service.

While all these technology shifts were changing the SME landscape in South Africa, another quieter revolution was taking place: the migration of small and medium businesses onto the web.

The 2018 edition of SME Survey showed 43% of SMEs using paid web hosting services. That in itself was not new or dramatic. But there was another secret underlying this number. In a separate question, SMEs were asked how profitable their businesses were.

Only 36% said they were highly profitable. When this was correlated with the online services being used by SMEs, it was found that a massive 78% of those using paid web hosting services were highly profitable.

Such numbers suggest there should be mass migration to the web, just as there was to ADSL all those internet years ago.

The difference is that the benefits of connectivity and productivity technology can be quantified even before they are adopted. A website still requires a trial by fire. It has to prove itself in the real world, and that proof often has little to do with the website itself.

Badly implemented fibre or cloud services merely need to be replaced or optimised. A badly designed website, or one that is slow and unresponsive, can, in fact, damage a company or brand.

This is the secret of highly profitable SMEs: the return on investment is not obvious because it depends on what else the business does with the resource.

Clearly, having a website offers massive benefits in visibility, being contactable and trust: it not only tells customers and potential customers what the business does, but can also provide a sense of the culture and ethos of the business. In an era when many younger consumers want to take their custom to businesses that resonate with their values, this has become a key role of websites.

This is where the allure of the website dissipates for many entrepreneurs. They see such benefits as nice-to-haves rather than have-to-haves, and with no tangible, measurable returns.

In other words, they have little appreciation of the power of marketing, let alone the skills to embrace it.

Then there is the matter of a badly designed website: many would rather avoid being on the web altogether rather than have a presence that could be embarrassing. Not only do they lack the skills to run a website themselves, but they lack the knowledge to specify how they want it run, and the strategic skills to integrate it with business goals.

For those who make it work, a website is a no-brainer. For the rest, there is a barrier to entry that comprises a combination of skills, knowledge, cultural fit and strategy.

That scenario, however, will shift significantly in the coming years as website hosting and design, and cloud computing services and resources mature into a plug-and-play landscape.

Do-It-Yourself website builders already break down some of those barriers by simply pushing the technical processes behind-the-scenes and taking the complexity out of design work.

In short, websites are no-brainers for those SMEs already using them, those making the leap, and those who discover D-I-Y. For the rest, there will always be those who remain waiting on the other side of the digital divide. They have yet to hear the secret chord.

  • Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Follow him on Twitter and Instagram @art2gee

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Arthur Goldstuck
Goldstuck is an award-winning writer, analyst and technology commentator. A winner of SA’s Distinguished Service in ICT Award, he is author of 19 books and editor-in-chief of South Africa’s longest-running online consumer technology magazine, He writes a weekly tech trends column for the Sunday Times, South Africa’s largest-circulation newspaper. He is founder of World Wide Worx, leading groundbreaking market research, and presents his insights to audiences across the globe. Follow him on Twitter and Instagram @art2gee