Benchmark Final Report - Issue -2
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Benchmark Final Report - Issue -2

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Research Project into Business Uptake, Understanding and Awareness of ICT and Broadband in the South West Ref TEN/03/104 Final Report For the South West Regional Development Agency By Broadband Access Strategies LLP Submitted on: 30th March 2004 Contact Details Rob Moffatt 07887 888830 Rob.Moffatt@basllp.co.uk Office address: Suite 12 Buckfastleigh Business Centre Chapel Street Buckfastleigh Devon TQ110AB Tel/Fax 01364 644110 www.basllp.co.uk Registrations: Companies House OC302856 VAT 784 4891 74 Data Protection Act Telephone Preference Service Memberships: Market Research Society Contents Page 1 Executive Summary ............................................................................................ 4 2 Introduction ......................................................................................................... 6 3 On-line Connectivity 8 4 Broadband ........................................................................................................ 14 5 ICT Skills and Support ...................................................................................... 24 6 ICT Drivers and Economic Impact .................................................................... 34 7 Focus Groups ................................................................................................... 48 8 Tourism and Leisure Sector........................ ...

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Research Project into Business Uptake, Understanding and Awareness of ICT and Broadband in the South West Ref TEN/03/104Final Report For the South West Regional Development Agency By Broadband Access Strategies LLP Submitted on: 30th March 2004
Suite 12 Buckfastleigh Business Centre Chapel Street Buckfastleigh Devon TQ11 0AB
Contact Details Rob Moffatt 07887 888830 Rob.Moffatt@basllp.co.ukOffice address: Registrations: Memberships:
Tel/Fax 01364 644110
www.basllp.co u. k
Companies House OC302856 VAT 784 4891 74 Data Protection Act Telephone Preference Service
Market Research Society
Contents
Page 1Executive Summary 4 ............................................................................................2Introduction ......................................................................................................... 63On-line Connectivity 8 ............................................................................................4Broadband ........................................................................................................ 145ICT Skills and Support ...................................................................................... 246ICT Drivers and Economic Impact .................................................................... 347Focus Groups ................................................................................................... 488Tourism and Leisure Sector 56 ..............................................................................9Conclusions ...................................................................................................... 6210 Glossary............................................................................................................ 63
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1 Executive Summary This report contains a wealth of detail on the use companies make of ICT. Detail gathered from statistical analysis of the 2500 responses to the telephone questionnaire survey and also from important insights into the mindset of management through the focus group work. The information obtained from this survey forms a firm fact base on which to build effective ICT policies in the South West. One of the major objectives of the study was to establish a statistically robust dataset that would provide a benchmark against which to measure progress in the South West region. The 2500 responses to over 50 detailed questions ranging from the type of internet connection, through the use of e-commerce to business planning for ICT projects, provides the South West with a robust dataset for the first time. The questionnaire survey showed that nearly 60% of companies now have internet access. Indications are that this figure should continue to grow with between 20 to 30% of those companies that do not have an internet connection responding that they were either actively setting up an internet connection or were considering doing so. Statistics recently published in the DTIs annual ICT Benchmarking report for 2003 indicated that internet access by companies with less than 10 employees had been decreasing over the past three years. However, this survey has shown that less than 3% of those businesses who do not have an internet connection had disposed of their internet connection in the past year. This indicates that the worrying trend observed by the DTI has flattened out or reversed here in the South West. Broadband was a very hot topic in all the focus groups conducted in the course of the survey. Only after allowing managers to talk about broadband and the effect it was having on their businesses was it possible to start investigating other aspects of ICT. The survey shows that 80% of businesses are located within areas served by ADSL enabled telephone exchanges. This figure will climb over the next 12 to 18 months as more exchanges pass their trigger levels and are enabled. Take-up of broadband services is growing rapidly; 17% of all businesses surveyed now report that they have a broadband connection. This figure rises to 20% for those companies that are located within ADSL enabled areas. Not all of these companies have ADSL of course, some are using cable broadband from the two remaining cable TV companies, and others are using leased lines, wireless or satellite access. The highest percentage change in internet connection type was from dial-up to ADSL but the changes from dial-up to ISDN and ISDN to ADSL were also significant. The decision to switch to broadband is generally on the basis of a speed/cost comparison with dial-up and ISDN access. Focus group work showed that there was little appreciation of any other benefits broadband may bring to business. In those areas that do not yet have some form of broadband other than satellite it is clear from the results of the survey that the medium and large size companies are turning to leased lines and satellite technologies for their broadband access. Smaller companies in the 6 to 50 employee range are not adopting these more expensive services at the same rate and therefore must wait for their exchanges to be enabled to catch up with their competitors located in areas that have ADSL or cable broadband.
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The questionnaire survey showed that management was generally very confident that their employees have the ICT skills to fulfil current requirements. The type of ICT training employed by businesses confirms this perception, most respondents citing ad-hoc training when a need was identified. Few companies, even in the large size categories, reported that they have any ICT training programmes as such. Whilst this result was very positive the degree to which smaller companies report making provision for the development of ICT within their business plans was relatively low. Just over 20% of those companies already using computer technology in the 6 to 10 employee category and a third of all companies in the 11 to 50 employee category have a structured ICT plans. A related planning indicator is the degree to which companies measure the costs and benefits of ICT. Analysis showed that this was also very low for these smaller companies. Without a clear understanding of the costs and benefits of existing ICT systems these smaller companies may find it difficult to plan adequately for the implementation of new systems. The provision of ICT support is clearly lower in the south west peninsular than in the Bristol and Swindon area. Only 1 in 170 companies in Cornwall specialise in providing ICT support services; around Bristol and Swindon the ratio improves to 1 in 70 companies. Focus groups indicated that managers find it difficult to know where to turn to for external ICT support. They tended to find ICT support services confusing due to the strong technical orientation of many of these companies and complained that they could not find a one stop shop locally that would provide all the ICT support they need. Despite these difficulties managers were generally of the view that ICT was the way forward for their businesses. This finding applied not only to those companies that already use ICT but those still to adopt it. Managers of those companies already using ICT were more positive about its benefits than those that are not using ICT. Questions relating to the turnover of the business over the past 12 months showed that there has been a general improvement. Companies that use ICT however showed a greater increase in turnover, 6%, than those that do not, at 3%. Although the difference is modest it is statistically significant. Whether there is a causal relationship between the use of ICT and increased turnover is not clear from the statistics. Maximum benefit can only be extracted from a survey of this nature if it is repeated on a regular basis. Just as the DTI conducts its ICT Benchmarking survey annually it is recommended that the SWRDA and other stakeholders in the development of ICT in the region fund this survey, on an annual basis, to deliver a longitudinal study.
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2 Introduction The UK government set broad targets for the national use of ICT in 1999; these included the requirement for government services to be on-line by 2005 and for universal access to the internet. Recognising the importance of broadband in relation to the second of these targets the government set another goal for the UK to have the most extensive and competitive broadband market in the G7 by 2005. In November 2003 Stephen Timms, the minister responsible for the governments role in achieving these objectives, set an even clearer target for broadband when he called on the broadband industry, government and communities to work together so that 100% of communities have broadband by the end of 20051. In the South West a partnership between the Regional Development Agency, County Councils, Unitary Authorities, Business Links and Government Office is working together to reach these goals. Although much is being achieved the RDA and its partners have recognised (through the Regional ICT Strategy) that much more needs to be done to help business remain competitive let alone improve the regional economy. Where EU Structural fund support is available, principally in Devon and Cornwall, programmes are already in place not only to promote the use of broadband but also improve the turnover and profitability of businesses through carefully focused advice. More recently the Wiltshire Smartplace project has obtained funding from the RDA with objectives similar to those of ActNow in Cornwall and Broadband4Devon. All of these bodies and projects require baseline data on the take-up and use of ICT in the business community if they are to devise effective interventions and, once programmes have been implemented, monitor their impact against the specified intervention goals2. ICT usage data has been collected, in the region, during the annual DTI International Benchmarking Study, but with a sample size of 3,000 for the UK , the resulting sample in the South West of only 200 is too small. The Office of National Statistics also conducts an annual survey of the use of e-commerce throughout the UK. Although the sample size is large it lacks detail on the use of ICT in businesses. Other market research projects have addressed some specific issues of ICT adoption, use and form. For example, there have been activities focused on broadband and specific geographical areas such as ActNow in Cornwall. But, until the advent of this study no detailed, statistically robust data has been available across the whole scope of ICT adoption and use, and throughout the entire region. This project had it genesis at the start of 2003 when SWRDA decided to remedy this lack of regional statistical data on the use of ICT. The overall aim of the project set by the SWRDA was to conduct a region wide study  into the business uptake, understanding and awareness of ICT and broadband. A workshop held in January of 2003 provided input from a range of stakeholders across the region on the form the study should take. This information was collated and further refined by Force4, a consultancy based in Plymouth, to produce an information pack which was used by 1Entrepreneurship in the UK, Stephen Timms, Speech to Cambridge MIT Institutes Third v.uk/minis mms121103.html 2dfedarondagrsosluvacnamnieacidsrotasurekeyperforyedisngdetoemtsdutaeperaAsgoi.dtit/sehceeps/sretSummit2iveness:p//ww.w00,3httpmoCtite ICT development projects in the region is also underway.
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the SWRDA as the basis for their invitation to tender issued towards the end of the year. The main objectives specified in the tender document were that the study should help form an understanding across several issues, including: ƒ Which ICT technologies are currently being used by businesses in the South West and how / why / to what extent are they are being used;  The ICT applications which regional businesses enable their customers to use ƒ and how / why / to what extent this is happening; ƒHow regional businesses work with their suppliers and how ICT is used to support those interactions; ƒ How ICT is used by regional businesses to support their internal functions / business processes; ƒ ICT is used to support the running of regional businesses; How ƒ drivers and barriers to ICT usage among regional businesses; The ƒ The sources of ICT advice used by regional businesses; ƒ The future intentions of business owners with respect to ICT and its application. ƒ To investigate potential opportunities for ICT across the South West as a whole, concentrating on those which are likely to most benefit the entire region. Broadband Access Strategies LLP was awarded the contract in December 2003 with a proposal to conduct a 2,500 sample of businesses in the region. The quantitative analysis based on this very robust statistical sample specified in the contract was supplemented by a number of focus group interviews based around specific industry sectors of importance to the economy of the region. Development of the questionnaire started in January 2004 with consultation between BAS LLP, staff within SWRDA and other stakeholders in the outcome of the study; the starting point was the DTI national benchmarking study. Echo SW, a call centre operating from Exeter, conducted the telephone based survey using the resulting questionnaire in February. Analysis of the ensuing dataset by Broadband Access Strategies and the University of Plymouth started towards the end of February and was completed by the second week of March. Focus groups were conducted across the region from the middle of February until the third week of March. Following a review of the draft report by the SWRDA the final report was delivered at the end of March along with a presentation of the main findings of the study. Details of the sampling methodology employed in the study are included in the separate Technical Annex which accompanies this report. The South West Regional Assembly and the SWRDA expressed an interest in extending the study to examine the details of ICT use for the priority business sectors in the region. Unfortunately, despite the best efforts of these two bodies and Broadband Access Strategies LLP, sufficient funds could not be raised to cover the cost of the extension. Nevertheless a basic analysis of the use of ICT by Tourism and Leisure sector was carried out within the study and is included in this report. The additional work could be completed once the requisite funds become available. The lesson learned from this shortfall in funding is that this work should be seriously discussed by stakeholders in the South West with a view to agreeing a syndicated approach to funding, without which this work cannot be repeated.
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3 On-line Connectivity The survey found that 58% of all companies in the South West have Internet access; the percentage found to be using external email was marginally lower at 54%3. These figures indicate that the significant majority of companies in the region are now using, at least, basic forms of ICT. Correspondingly some 35% of companies reported that they do not use any form of ICT; a further 6% reported some IT capability but no connection to the internet or a company website. Q6ICT use across the South West (%) % denominator: all businesses Internet Access Website Internal E-Mail External E-Mail Local Area Network Wide Area Network Intranet Extranet Interactive telephone system EDI Internet EDI? Video conferencing Remote or Mobile terminals Remote terminals synchronised to your main network Wireless LANS Wireless WANs Computerised Process Control None of the above Do not use ICT 0 10 20 30 40 50 60 70 80 90 100 Figure 1 - ICT connectivity systems Almost 40% of companies in the region reported that they make use of a website, indicating that they can see the value of a web presence. As a consequence of the need to limit the extent of the questionnaire no further examination was conducted to differentiate between those who have their own website and those who subscribe to a single page on a trade or town website. However, further data was elicited using the questionnaire to identify the degree to which these websites provided information to both customers and suppliers and the level of integration with the responding companys internal systems. Over 25% of all companies deploying ICT and nearly 50% of those with an internet connection make use of a local area network, LAN. The adoption of networked operation indicates a degree of sophistication beyond the standard residential consumer system of a single PC with a narrowband connection to the internet. The use of wireless LANs, WLAN, appears to be growing strongly given that they only came to the mass market some 18 months to two years ago. The survey showed that 15% of LANs are now wireless LANs. We expect this proportion to continue to grow rapidly now that prices for WLAN equipment is approaching that of wired LANs and the latest improvements to speed and security developed by Intel and the standards bodies are starting to appear in the market. 3The 4% difference is related to those users who see an advantage in being able to access information from websites but either can see no point in e-mail or are afraid of the virus attacks it can bring.
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Internet Access Website External E-Mail Local Area Network Do not use ICT
Use of ICT by company size band shows similar features to those observed in the adoption of broadband, Figure 2. The use of ICT increases rapidly as the company size band increases (i.e. from smaller to larger companies). It is notable that 50% of even the smallest companies now have internet access, this take-up rises to 80% for the medium sized companies with 51 to 200 employees but drops to nearer 60% for the largest companies. Focus group work for this study indicates that this drop is related to decisions by these companies to limit employee access to the internet amid fears of IT virus attacks, or concerns about employee productivity. The use of external e-mail is correspondingly lower for these larger companies. ICT use by sizeband (%)llbsuniseessQ8Q+6de%minotonaar: 100 90 80 70 60 50 40 30 20 10 0 1 to 5 Employees 6 to 10 Employees 11 to 50 Employees 51 to 200 Employees 201+ Employees Figure 2 - Basic ICT system use by company size band Only 30% of smaller companies have websites but this rises to nearly 80% of companies in the medium and large size categories. LAN use also shows a predictable trend, rising from 17% in the smallest companies to nearly 90% in the large companies. Given that only 50% of these 1 to 5 employee companies have an internet connection, one third of these must have more than one computer to require the use of a LAN. This represents relatively high use for these very small companies and must place high demands on staff that are unlikely to be specialised in the use of ICT. The subjects of ICT support and training of staff are covered in section 5. A further illustration of the broad spectrum of basic ICT skills required of staff in smaller companies is provided by the statistics on the use of e-mail, Figure 3. 90% of the smallest companies with an e-mail connection responded that 75  100% of their staff used e-mail on a regular basis. Only 50% of companies in the 11 to 50 employee category reported that the majority of their staff used e-mail while very few employees in the large companies used e-mail at all. Clearly only those employees dedicated to office work in the larger companies are using e-mail, demonstrating a high degree of job specialisation compared with that required by the smaller companies.
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0%-24% 25%-49% 50%-74% 75%-100%
Q18aPercentage of employees using email % denominator: total employee numbers derived 100 from a mid point estimate using Q3 90 80 70 60 50 40 30 20 10 0 1 to 5 Employees 6 to 10 Employees 11 to 50 Employees 51 to 200 Employees 201+ Employees Figure 3 - Employees use of e-mail by company size band To return to the overall pattern of ICT usage but this time at a county level, Figure 4. Two peaks in the distribution are clearly apparent, one for Avon and the other for Cornwall. Devon, on the other hand, lies in something of a trough. Avon has a slightly higher proportion of larger businesses than the other counties and this may account for the higher overall average use of the internet for that area. Application of this logic would however lead to the conclusion that Cornwall should have less than average connection rates to the internet; which, clearly, it does not. Q6+Q8ICT use by county (%) % denominator: all businesses 100 90 80 70 60 50 40 30 20 10 0 Wiltshire Gloucestershire Avon Dorset Somerset Devon Cornwall Figure 4 - Basic ICT system use by county
Internet Access Website External E-Mail Local Area Network Do not use ICT
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Yes -currently setting it up Yes - considering setting up Yes - we used to but disposed of it No - considered but decided against No - not thought about it Don'tknow
Q7 % denominator: businesses without any ICT or without an Internet connection (no response to Q6a or Q8)
The higher than average use of the internet in Cornwall is most likely to be related to its concentration of Tourism and Leisure businesses relying on websites and e-mail; and the perceived disadvantages of Cornwalls relatively remote location, (see also section 8). The relatively high use of the internet in Cornwall indicates that there may have been a significant level of latent demand for the high speed services that broadband can offer before the start of the ActNow project. Potential connection to the Internet (%) 100 90 80 70 60 50 40 30 20 10 0 Wiltshire Gloucestershire Avon Dorset Somerset Devon Cornwall Figure 5 - Potential for future connection to the internet by county The survey also examined the intentions of the 35% of companies in the South West without any form of ICT and those who have some deployed ICT but do not have a connection to the internet, Figure 5. Wiltshire and Gloucestershire followed by Somerset reported the highest percentages of companies claiming that they were in the process of setting up an internet connection. Whilst Avon and Dorset tended to respond that they were considering setting up a connection. Combining these two responses, some 20% of those without connections are actively considering the position, these are very encouraging statistics. Companies reporting that they considered obtaining a connection to the internet but decided against connecting to the internet are probably the hardest group to influence, even more so than those companies which have not even considered the issue of connection. This hardened reluctance would appear to create a significant problem for the recently initiated Broadband for Devon project since more than 30% of those companies across the county, not connected to the internet, claimed to have considered having a connection but had decided against it. This view of the relatively hard attitude against the internet appears to be reflected in the connectivity statistics by county, Figure 4, where Devon exhibits something of a trough in the trend compared with the other counties. Reviewing the same issue of reluctance to connect to the internet, but this time on a company size basis, one finds that there is little difference between the response profiles, Figure 6. One exception is the large companies that report relatively frequently that they have considered an internet connection but have decided against it. This correlates with the comparatively low rate of internet connectivity shown in
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