Australia’s Next Net Boom: SMEs

Consumers in Australia’s small and medium enterprises (SME) marketplace are driving the growth and adoption of online services. There are estimated to be nearly 1 million small and medium businesses in Australia, according to the Australia Bureau of Statistics (ABS), and in the Asia-Pacific region, IDC forecasts that business-to-business e-commerce will grow from US$560 million in 1998, to US$17.1 billion by the year 2003.

Internet Use by Australian SMEs
Use 1998 1999 2000
Use Computers 75% 82% 87%
Use Modems 42% 63% 72%
Use Computers 75% 82% 87%
Internet Connection 34% 48% n/a
Potentially Sell Online 32% 36% n/a
Source: Yellow Pages Small Business Index, November ’99

In the last 12 months, there has been evidence of strong growth in the use of the Internet and e-commerce by small business, with the May 1999 Yellow Pages Small Business Index reporting that almost nearly half of the nation’s small businesses are now Internet connected, up from one-third 12 months ago. The survey also reported that market segments with the greatest perceived potential for e-commerce enablement were Transport/Storage and Business Services, and the lowest in Building/Construction.

There are a number of key players in Australia’s emerging local online SME market, including software migrators (e.g., MYOB, Quicken, Solution 6); business publishers (e.g., EBC); online media aggregators (e.g.., nineMSN’s small business site); and of course, natural born start-ups (e.g., Peakhour.com.au).

Software Migrators are moving quickly to extend their brands online. Reckon Limited, publisher of Quicken financial management software (www.quicken.com.au), launched in November. Also last month, Quicken Business Online, an online service targeted at SMEs, and part of the Quicken.com.au financial services portal launched. There were just over 460,000 visitors to Quicken.com.au in November. The site gets over 5 million page views per month, and revenue is generated through publishing and transactions on Quicken.com.au.

E-Commerce Use by Australian SMEs
Product Bought Percent of
Respondents
Software 47%
Equipment/Tools 21%
Books 19%
Subscriptions 9%
Parts/Components 7%
Research Info 6%
Stationery 5%
CDs 4%
Travel Bookings 2%
Source: Yellow Pages Small Business Index, November ’99

A key feature of a number of the new players is the way they leverage either pre-existing customer relationships or offline audiences. For example, the NineMSN Small Business Site operates in conjunction with the Channel 9 Small Business Show. Solution 6 has developed a vertical B2B portal, www.eccountancy.com, which provides its 10,000 accounting and legal firms (300,000 end accountants) the means to develop Web sites and feed information to their own customer bases. Quicken launched Quicken Business Online, leveraging off its base of 100,000 users of Quicken’s QuickBooks financial accounting software. EBC, publisher of Small Business Guides, launched www.ebc.com.au on the back of its 45,000-customer database.

The two trends to watch are B2B infomediation and application service provision. Business and regulatory complexity, in addition to the increasing number of product and service choices facing SME’s, has created a niche in online sites aggregating information and news for the SME market. Onvia (www.onvia.com) is a B2B online operations center devoted to meeting the needs of entrepreneurs through targeted business products, services, tools, and expert advice from a single point of purchase. As of October 1999, Onvia.com now receives close to 1 million unique visitors each month and has acquired 104,000 members

Moving forward, there is likely to be growth in the market for online outsourcing of SME business processes through Application Service Providers (ASPs). An ASP enables customers to operate business software via the Internet or through private networks. In this model, customers rent the applications from companies like Solution 6 Centrum or a new startup such as Peakhour, and access the applications through an Internet browser. The types of applications most likely to be distributed in this fashion include tax, accounting, and practice management business processes.

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