Understanding the potential macroeconomic impact of the implementation of technologies for digital b

1
Understanding the potential macroeconomic impact
of the implementation of technologies for digital
business ecosystems in Europe
Characteristics of the Potential users of the DBE

• Lorena Rivera León
• European Commission
• DG Information Society and Media
• http//www.digital-ecosystems.org

2
The power of DBE in promoting regional development

• DBE is a powerful instrument for narrowing the
  knowledge and wealth gaps among different regions
  in Europe
  
• DBE allows business connectivity and global
  talent identification
  
• DBE allows SMEs to increase their opportunities
  to integrate themselves into global value chains
  and global production networks
  
• DBE provides SMEs with more and better
  opportunities for upgrading their IT capabilities

3
Who are the potential users of the DBE?

• Every business entity in Europe, irrespective of
  the size of the enterprise or the sector of
  activity
  
• DBE especially oriented to support connectivity
  among SMEs but also between SMEs and large
  enterprises around Europe
  
• There are more than 17 million SMEs in EU-25
  (non-financial business economy)
  
• In 2003, 99.8 of EU-25 enterprises were SMEs.
• 91.4 of micro enterprises 1 to 9 employees
• 7.3 of small enterprises 10 to 49 employees
• 1.1 of medium enterprises 50 to 249 employees
• 0.2 of large enterprises more than 250
  employees
  

Necessity to study European business
characteristics, focusing on SMEs
4
Large presence of SMEsSMEs per 1,000 population
in EU-25, 2003
Source Eurostat Industry, Trade and Services,
2006
5
Large presence of SMEs

• In average, there are 38 SMEs per 1,000
  population in EU-25 (2003)
  
• Countries above this average are
• Italy, Spain, Czech Republic, Portugal, Hungary,
  Slovenia, Cyprus and Luxembourg
  
• Implementation of DBE would be particularly
  beneficial for these countries
  
• These countries would benefit the most, in
  relative terms, from early implementation of the
  DBE
  

6
Large presence of micro enterprisesEuropean
enterprises by size (totals), 2003
Source Eurostat Industry, Trade and Services,
2006
7
Large presence of micro enterprisesEuropean
Micro enterprises per 1,000 population, 2003
Source Eurostat Industry, Trade and Services,
2006
8
Dominance of micro enterprises

• Demography matters, but also the industrial
  structure of each country
  
• In average, there are 35 micro enterprises per
  1,000 population in EU-25 (2003), in comparison
  with just
  
• 3 small enterprises per 1,000 population
• 0.5 medium enterprises per 1,000 population
• 0.1 large enterprises per 1,000 population
• Countries above this average are
• Micro enterprises Italy, Spain, Poland, Czech
  Republic, Portugal, Hungary, Slovenia, Cyprus and
  Luxembourg
  
• Small enterprises Spain, Portugal, Sweden,
  Austria, Denmark, Estonia and Luxembourg
  
• Medium enterprises Czech Republic, Denmark,
  Slovenia, Lithuania, Latvia, Estonia and
  Luxembourg
  
• The industrial structure of these countries
  explains the proliferation of SMEs within their
  territory
  
• Political (incentives), economic and social
  frameworks can also influence the industrial mix
  i.e. Luxembourg

9
SME concentration in 5 countriesSME distribution
in EU-25, 2003

• More than 65 of EU-25 SMEs are concentrated in 5
  countries
  
• Italy and Spain have more SMEs (in number) than
  20 countries in the EU-25
  

Source Eurostat Industry, Trade and Services,
2006
10
SMEs as drivers of the European economy
Number of persons employed, 2003 ( share of
total)
Value added, 2003 ( share of total)

• SMEs employ about 67 per cent of the European
  workforce (EU-25, 2003).
  
• They employ 69 per cent of the workforce in the
  Czech Republic, 79 per cent in Spain, 82 per cent
  in Italy, 74 per cent in Latvia and 71 per cent
  in Lithuania.

• SMEs generate more than half (57 per cent) of
  EU-25 value added.
  
• They generate 57 per cent of the value added in
  the Czech Republic, 68 per cent in Spain and 70
  per cent in Italy.
  

Source Eurostat SBS size class
11
Different business/industry structures within the
EU-25

• Special focus on Italy and Spain high importance
  of micro enterprises in terms of employment and
  value added when compared with the EU-25
  averages.
• In Italy, micro enterprises account for 47.1 of
  total employment and 31.7 of total value added.
  
• In Spain, micro enterprises contribute to 38.6
  of total employment and 26.8 of total value
  added.
  
• In these two countries, large enterprises
  accounted for a relatively low share of
  employment and value added.
  
• The use of DBE could be highly beneficial for
  these countries.
  
• In Slovakia, the United Kingdom and Finland large
  enterprises have a relatively large presence
  within the non-financial business economy.
  

Source Eurostat SBS size class and Schimiemann,
2006
12
A vulnerable SME structureTotal SMEs growth
rate, 1990-2003

• The countries with the largest concentration of
  SMEs have seen their number of SMEs decrease
  considerably in the last 10 years
  
• A change in industrial dynamics is not plausible,
  given the short period of time
  
• SMEs large mortality rate due to vulnerability
• DBE as a tool for reducing SMEs vulnerability

Source Eurostat Industry, Trade and Services,
2006 and Observatory of European SMEs
13
SMEs serving primarily two sectorsSMEs by
sector, 2001

• SMEs concentrated in two sectors services and
  trade
  
• Manufacturing industry less important by number
  of enterprises but relevant in value added and
  employment
  

Note Numbers are presented in thousands SMEs.
Source Eurostat Industry, Trade and Services,
2006 and Observatory of European SMEs
14
SMEs structure by country and main activity, 2001
Source Eurostat Industry, Trade and Services,
2006 and Observatory of European SMEs
15
SMEs and employment changeChanges in employment
by size class and sector, EU-25 2001-2003
(overall change)

• The overall percentage change is the net result
  of gains/losses through movements between
  activities, between size classes (enterprises
  that grow or shrink), and births and deaths of
  enterprises.

Source Eurostat SBS size class and Schimiemann,
2006
16
SMEs structure by country and sector, 2003

• SMEs accounted for more than 75 per cent of
  persons employed in EU-25 in the construction
  sector, and hotels and restaurants. They also
  accounted for more than 50 per cent of total
  employment in manufacturing, distributive trades
  and business activities.
• SMEs contributed to more than 75 per cent of
  total value added in the construction sector
  (EU-25, 2003), and for more than 50 per cent in
  distributive trades, hotels and restaurants and
  business activities.
• The Italian case. Special role of Italian micro
  enterprises in distributive trades, real estate,
  renting and business activities, construction and
  hotels and restaurants.
• They provided an absolute majority of sectoral
  value added and up to two thirds of the workforce
  (share of total employment between 58 per cent
  and 67 per cent).

Source Eurostat SBS size class and Schimiemann,
2006
17
SMEs by main activity in the 5 largest countries

• SMEs are concentrated mainly in 4 activities
• Business services SMEs are predominant in Italy,
  Germany and France
  
• Construction SMEs are concentrated in the UK
• Manufacturing industry SMEs are dominant in
  Italy, with the largest value added in the EU in
  2000
  
• Retail trade SMEs are predominant in Spain.

Note Numbers are presented in thousands SMEs.
Source Eurostat Industry, Trade and Services,
2006 and Observatory of European SMEs
18
SMEs and labour productivity

• Apparent labour productivity measure of the
  average value added (or wealth created) by each
  member of the workforce within an enterprise.
  
• In 2003, apparent labour productivity in the
  EU-25 was highest for energy, mining and
  quarrying, and lowest for hotels and restaurants.
  
• In manufacturing, construction, hotels and
  restaurants, and transports and communications,
  there is a pattern of increasing labour
  productivity according to the enterprise size.
• Mainly due to economies of scale.
• Connecting enterprises through DBE will help them
  to increase their productivity
  
• In mining, quarrying and energy activities, micro
  enterprises recorded the highest labour
  productivity in EU-25.
  
• In distributive trades, real estate, renting and
  other business services, SMEs had higher apparent
  labour productivity than large enterprises.
  

Source Eurostat SBS size class and Schimiemann,
2006
19
But... Are these SMEs engaged in e-business?The
e-Business Index 2006 by firm size

• Yes, but with great differentials in comparison
  with large enterprises
  
• Average SME Index equal to 62 for the use of ICT
  networks
  
• Weak use of internal applications and supply
  chain integration (especially among micro
  enterprises)
  
• Relatively important use of e-Marketing and
  sales
  

Note Index 100 for Large enterprises.
Source E-business W_at_tch, 2006
20
E-business differentials by firm size (small vs.
large enterprises)Connectivity matters for Small
Enterprises!
Source E-business Survey, 2006
21
E-business differentials by firm size (small vs.
large enterprises)Connectivity matters for Small
Enterprises!

• There are not large differentials between large
  and small enterprises when connecting online with
  suppliers and customers.
  
• 54 per cent of small companies place orders for
  supply goods or services online. 38 per cent of
  total order up to 10 per cent of goods/services
  online, and 16 per cent more than 10 percent.
• There are no differences between small and large
  enterprises when receiving orders from customers
  online.
  
• The sectors connecting/receiving online orders
  from customers more frequently for small
  companies are Tourism, Telecommunications and
  the Pulp and Paper sector.
• Most important sectors for large companies when
  receiving orders from customers online are
  Telecommunications, Tourism and Consumer
  electronics.
• Small enterprises in Poland, Finland and the
  United Kingdom are those which receive the
  largest share of orders from customers online in
  the EU-10. The lowest performers are Italy, Spain
  and the Netherlands.
• 84 per cent of small companies consider that
  e-business constitutes a part of the way they
  operate, in comparison with 81 per cent of large
  enterprises (E-business Survey, 2006).

Source E-business Survey, 2006
22
E-business differentials by firm sizeOverall
index (based on firm-weighted data), 2006

• Overall Index ICT networks, e-Integration of
  internal processes, e-Procurement and supply
  chain integration, e-Marketing and sales
  
• There is approximately 50 SMEs engaged in
  e-business for every 100 large enterprises.
  
• Benchmarking ICT adoption and e-business by
  country is complex. Results could reflect other
  factors such as industry structure.
  
• However, Nordic countries are in general the most
  active users of e-business among SMEs.
  
• Differences are not pronounced and not clear
  among countries like France, Germany, Italy,
  Spain and the UK.
  

Note Firm-weighted data express e-business
adoption as of firms within a size-band with a
certain activity.
Source E-business W_at_tch, 2006
23
Impact of industry structure in ICT use for
businessE-business index 2006 for 10 EU countries

• Finland is the e-business benchmark in a
  comparison of 10 EU selected countries.
  
• The connectivity between enterprises is quite
  advanced in Finland, Sweden and Denmark, compared
  to most other EU countries.
  
• The results of the benchmarking suggest a
  pronounced digital divide between small and large
  firms.
  
• In Italy, sectors dominated by small firms are
  much more prevalent than in other countries. This
  structure is reflected in the score of Italy in
  the benchmark.
• The DBE, as a non-traditional application of
  ICT for business, could help the sectors (and
  SMEs) of these countries to overcome the digital
  divide.

Note Benchmark based on firm-weighted data
(Indexed values highest score 100).
Firm-weighted data express e-business adoption
irrespective of the size of the company. Results
are mainly determined by the situation in smaller
firms, as there are more small companies than
large ones.
Source E-business W_at_tch, 2006
24
SMEs and Open Source SoftwareCompanies using OSS

• OSS systems may help to unlock SMEs from
  specific ICT service providers
  
• The use of OSS increases sharply by firm size
• Operating systems based on OSS are widely used by
  large companies (47 per cent). This is not the
  case for SMEs (only 13 per cent of total).
  

Note The total is weighted by employment and
should be read as enterprises comprising of
employment in the 10 sectors. Figures for
size-bands are in of enterprises from the
size-band. SMEs average is the average from
micro, small and medium enterprises.
Source E-business W_at_tch, Survey 2006
25
SMEs and Internal Process Integration

• The DBE provides support for management by
  enabling transparency of all business processes.
  
  
• The DBE also supports collaborative and
  cooperative processes within and between SMEs
  (i.e. information and knowledge sharing).
  
• Cooperation means splitting a common task into
  sub-tasks which are performed by different SMEs
  involved in the cooperation.
  
• Collaboration means that several SMEs work
  together on the same task at the same time.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
• The DBE supports cooperation among enterprises
  participating in a value chain (or global value
  chain)
  

26
SMEs and online cooperation and collaboration
within the value systemPercentage of firms
Source E-business W_at_tch, Survey 2006
27
SMEs and B2B online tradingPercentage of firms

• In average, only about 11 of SMEs use software
  solutions or internet-based services for
  e-procurement.
  
• There is a massive gap between the percentage of
  SMEs placing at least some orders online (53 per
  cent) and those that use special software for
  this (11 per cent).
• Companies which do not use a special software,
  place orders mainly through websites or extranets
  of suppliers.
  
• The digital back-office integration of
  procurement related processes is not advanced in
  these cases.

Notes. The analysis is driven in 10 sectors
food and beverages, Footwear, Pulp and Paper, ICT
manufacturing, Consumer electronics, Shipbuilding
and repair, Construction, Tourism,
Telecommunications and Hospital services.
Source E-business W_at_tch, Survey 2006
28
SMEs and supply chain integrationUse of SCM and
ICT links with suppliers

• Supply chain management (SCM) software can help
  companies to match supply and demand through
  integrated and collaborative interaction tools.
  
• In average, 11 per cent of SMEs have adopted a
  SCM system, in comparison with 34 per cent of
  large firms.
  
• The share of SMEs reporting ICT links with
  suppliers is lower than the share with an SCM
  system.
  
• Possible explanation many SMEs have software for
  managing their inventory and supplies internally,
  without integrating suppliers directly through
  the system.
• This reveals that they use a form of SCM which is
  not interactive between different companies.

Notes. The total is weighted by employment.
Figures in size-bands are in of enterprises
from the size-band.
Source E-business W_at_tch, Survey 2006
29
SMEs receiving orders from customers online
Percentage of firms

• In average, 26 per cent of SMEs enable customers
  to order products online.
  
• There is practically no difference between SMEs
  and large companies in this respect.
  
• The e-commerce share is higher in ICT-related
  industries (ICT manufacturing, telecommunications)
  and in tourism.
  
• There is a gap between the percentage of SMEs
  receiving at least some orders online (26 per
  cent) and those that have special software for
  doing so (11 per cent).
• This confirms that SMEs use rather simple forms
  of e-commerce receiving orders by e-mail without
  any system integration of the related information
  and document flow.

Source E-business W_at_tch, Survey 2006
30
Similar drivers for the uptake of e-business
between SMEs and large enterprises

• The most important reason, as stated by SMEs, to
  engage in e-business is to gain competitive
  advantage. While the most important reason for
  large enterprises is Customers expectations.
• Suppliers expectations are less important as a
  driver of e-business adoption for SMEs. These
  results indicate that customers have more
  negotiation power than suppliers.

Notes. The total is weighted by employment.
Figures in size-bands are in of enterprises
from the size-band.
Source E-business W_at_tch, Survey 2006
31
SMEs drivers for the uptake of e-business

• There are some sectoral differences when
  analyzing the SMEs drivers for the uptake of
  e-business.
  
• Customers are clearly the key driving force in
  tourism and in ICT-related industries.
  
• Evidence of the existence of new forms of
  ICT-enabled customer service.
  
• Customers are increasingly being integrated into
  planning, decision making and production
  processes.

DBE helps SMEs to connect with potential
customers and suppliers
Source E-business W_at_tch, Survey 2006
32
Why the SMEs are not yet adopting the DBE?

• The DBE cannot be adopted by 1 single SME.
• A critical mass of adopters within a specific
  territory is necessary to guarantee DBE
  sustainability
  
• There is a need of policy development at the
  regional level, driven by the regional/local
  catalysts
  
• Regional/local catalysts would ensure that these
  actions are taken by the local authorities/governm
  ent, industry associations, and any other entity
  that has the capacity to influence policy making
  in favour of the DBE adoption.