Communication Technologies for Small Businesses - Research Paper Example

 Research Report on Communication Technologies for Small Businesses Abstract Expanding economic activities in the light of globalization and liberalization have greatly enhanced the demand for communications, world over. Traditional communication systems are inadequate to meet the present day needs. Advent of computers, growth of information technology and the Internet ensured rapid growth of new global communication technologies. This development has thrown open world markets and the worldwide resources to businesses. Leveraging these changes, even small-scale firms can compete effectively and expand their operations, without suffering the disadvantage of limited financial or physical resources. Table of Contents Section Page No. 1. Introduction 1 i. Subject 1 ii. Purpose of report 1 iii. Scope 1 iv. Plan of development 2 v. Background 2 II. Data Section 3 i. Communication methods of yesteryears – an overview 3 ii. Changing scene 4 iii. Marketing and advertising 5 vi. Mass communications and new technologies 6 v. Instant communications of today 6 a. Internet and broadband 7 b. VoIP 8 c. WiMAX 8 d. Convergence 9 vi. Impact on businesses (examples) 9 a. Evolve Inc. 9 b. Skype Ltd. 10 c. EnvironmentIQ 11 d. Nirafon Oy 11 vii. Lessons from the previous examples 12 viii. Risk factors 13 III. Research Method 13 Published data 13 IV. Conclusions 14 i. Summary and interpretation of data 14 ii. Recommendations 14 Research 1 Research Report on Communication Technologies for Small Business Firms 1. Introduction Small business firms promoted by enthusiastic entrepreneurs pass through the initial pangs of birth and survival. The initial period of 3 to 5 years is usually crucial and it is during this period that businesses find their feet, gain market acceptability and start growing. However, this may not be true for all! Some stagnate and some even die. The problem of survival is even more acute for companies depending upon the ever-changing technologies. i. Subject This research report reviews the advances in global communication technologies relevant to small business firms. ii. Purpose This report is prepared for the purpose of recording existing / old communication methods, later developments, impact of these developments for survival and success of small businesses and the selection of appropriate technology and techniques by a company. This report is being prepared and presented as per the iii. Scope The report briefly reviews the communication methods over the years and the needs of small business firms. It examines the advantages of opting for the newer technologies. Options available to firms and the trends of development in global communications technologies are cited. Research 2 iv. Plan of development a. The report gives an overview of communication systems in general, identifying the older / existing methods; the short-comings of such systems in the present age of global business opportunities are presented; the inevitability of adopting changing technologies is brought out. b. Brief description of the new technologies available is provided along with a broad idea on the economics involved. c. Options available for small businesses are drawn based on the experience of successful firms, which have adopted them. d. Recommendations are made based on the data recorded in the report. v. Background A business firm exists in an environment of stakeholders. They are the promoters, shareholders, employees, customers, suppliers, financial institutions and the regulatory authorities of the country / countries in which they operate. A firm’s need to communicate with all the stakeholders is well recognized. The economy, efficiency and effectiveness of the communications are crucial for successful operations. A firm’s organization takes care of entrusting responsibility for different communications. In this report, the emphasis is on the set of communications that are crucial for survival and growth of businesses and to this extent, communications between a firm, its suppliers and its potential / existing customers, are specifically dealt with. Research 3 II. Data Section i. Communication methods of yesteryears – an overview The earliest commercial communication methods were the oral and written ones. Written words occupied the pride of place. Until the wider use of information technology products in the past 25 years or so, postal communications consisting of letters, document parcels, telegrams and telexes were mainly in use, in addition to the telephones for oral communications. Before the advent of today’s instant communications, written communications were being exchanged for commercial purposes of specifying a need, making an offer, negotiations, follow up, delivery, payments, guarantees etc. In these processes, letters, telegrams and telexes were being exchanged from both sides. Even for information exchanged on telephones, written confirmations were the order of the day for legal requirements. Written communications traveled by road, rail, ships or airplanes, the time of delivery thus depending upon the efficiencies of physical transmission arrangements of the concerned postal departments. In addition, there were always the processes of manual or mechanized sorting of mail, both at the point of receipt and at the point of delivery. Speed and efficiency of communications varied for different countries, in line with the state of development of their economic infrastructure. Thus, inter-city letters could take a minimum of 2 to 3 days while that for international mail took anywhere from one to three weeks or even more. The following statistics of postal mail volumes in a select few countries indicate the not-so-large scale of such operations, as also the impracticality of depending upon such means for today’s needs. These statistics indicate a broad picture wherein the mail volumes are either declining (USA & Brazil) or showing signs of stagnation with very little growth. This, Research 4 in spite of the fact that ‘direct mail’ (DM) as a weapon of advertising has gained great volumes in the recent past. Table 1: Postal mail volumes in select few countries Country Population (mil.) Mail volume in thousands1 2004 2002 2003 2004 Australia 19.94 235,899 259,284 261,022 Brazil 183.91 53,49 46,65 44,25 Great Britain 59.48 357,732 360,582 361,114 Norway 4.6 542,205 579,547 559,796 USA 295.41 657,053 650,007 (No data) If one takes into account, the tens of thousands of small businesses and the myriad of products / services they offer to millions of customers even within one country, one can very well imagine the astronomical volume of mail that would need to be handled. Evidently, physical transmission of communications has limitations. The advent of private courier services enhanced the efficiency of handling mail and reduced the time of delivery, but not much more. Postal and courier communications are also expensive if viewed on a per capita basis. This has generated other forms of communication channels like radio, TV, cinema, public hoardings and so on. Starting as the media for entertainment and information dissemination, these channels quickly became the main carriers of commercial messaging, which itself underwent transformation into a mass communication mode. ii. Changing scene Since the mid-1960s, dramatic changes have been taking place in the world of business. The earlier methods of communication still remain in place although one notices a metamorphosis of ______________________________________________________________________________ 1. Universal Postal Union, Statistics, Available at: http://www.upu.com Research 5 the physical mode on the one hand and on the very concept of communication on the other, due to technological revolutions. Facsimile technology, popularly known as telefax, permitted transmission of written word or pictures over telephone lines in the first place and the age of instant communications arrived. Just as telephones were a great leap in general communications, telefax heralded revolution in business messaging. While the economical faxing facilities permitted instant transmission of data, formatting was not being maintained unless the more expensive facsimile facilities were in place, like the ones used by multiple edition newspapers being printed from different cities. Fast on the tracks of facsimile, the arrival of computers and the Internet revolutionized the very meaning of communications. iii. Marketing and advertising The great boom in industrial and economic activity in the last century, has redefined the role of ‘sales’ function. It first expanded to sales promotion and later to ‘marketing’. Marketing is more about creating a desire for acquiring a product or a service than about just sales. Today, everything about marketing and advertising is communications on a national or even global scale. Those businesses, which are offering advertising and marketing services themselves, have to meet the demands of their clients for wider reach and also expand their own business opportunities into a much wider geographical area than was hereto sufficient. This is so because, rivals are poaching into their territory, thanks to the new generation communication facilities! The following table gives an idea of the growth of advertising spends in the five countries considered earlier, indicating the power of new communication technologies. Research 6 Table 2: Growth of per capita advertising spend2 in select few countries (US$) Country Per capita ad. spend in various media (1997) Total* Total* DM Magz. NewsP. Radio TeleM. TV ad. spend (1997) ad. spend (2005) Australia 22.29 29.66 111.11 21.86 1.9 91 318.43 407.7 Brazil 2.02 3.16 8.67 1.43 0.08 25.27 43.12 28.5 Gr. Britain 105.96 78.52 120.35 11.2 37.96 102.19 57879 791.3 Norway 70.61 20.22 134.1 19.1 9.55 100 444.98 556 USA 151.92 51.99 155.51 50.35 249.82 166.14 1115.84 1401.1 (* includes other miscellaneous ad. spends) iv. Mass communications and new technologies With increasing globalization of trade and commerce, there is rapid integration of world markets. Aided by revolutionary technologies in communications, companies are competing with each other in the world market. Small businesses offering niche products or services are able to convey their offerings instantaneously across the globe, even as they leverage the latest communication technologies for running their businesses. The change from traditional communications to modern communications is complete. It is in these mass communication systems that new technologies have emerged and are further rapidly evolving. v. Instant communications of today Transmission of documents is no more a tedious affair of days and weeks of physical activity. Information and communications technology (ICT) is a facility that connects virtually ‘everybody with everybody else’ instantaneously. Digitized data in multiple media of voice, data and images can be transmitted in real time without limits of time and space. Several new technologies are emerging and they offer a variety of options for businesses to adopt for their ____________________________________________________________________________ 2. IDMAPS Version 2.0 (Feb. 2000) Research 7 specific needs, 24 hours a day and 7 days a week. Local area network (LAN), wide area network (WAN), intranet, Internet, voice over Internet protocol (VoIP) telephony, broadband and convergence are some of the buzzwords of communications technology. A brief outline and promise of these technologies is given blow: a. Internet & Broadband The Organisation for Economic Cooperation and Development (OECD) in their report on ICT3 says: The success of Internet lies in the empowerment of the user and his capacity to access information with less cost and effort…The development of broadband Internet access, as well as the usage of innovative technologies such as advanced wireless systems, including third-generation mobile (3G) and wireless LANs, have triggered a shift in voice traffic from traditional public switched telephone networks (PSTN) to alternative Internet Protocol (IP) networks…The number of broadband subscription in OECD group increased from 136 million in June 2005 to 158 million in December 2005… According to David D. Clark4, The service provided by the Internet is a service that mixes a large number of instantaneous transfers of objects of highly variable size, without any firm controls on what traffic demands each user may make, and with user satisfaction ______________________________________________________________________________ 3. OECD Data (2006). Available at: http://72.14.207.104/dataoecd/56/24/35955832.pdf 4. Clark, David D (1995). A Model for Cost Allocation & Pricing in the Internet. Research 8 presumptively based on elapsed time for the object transfer… A very simple network, composed of a single 45 mb/s 3000-mile transcontinental link, would cost about $135K per month and would yield … a cost of under $6 per year for the users. b. VoIP According to OECD5 again, VoIP traffic is growing rapidly in conjunction with the growth in broadband connections, in particular digital subscriber lines (DSL) and cable modems. According to a recent survey, VoIP is growing at twice the rate of traditional switched voice, and now accounts for 11 percent of international call minutes. Global voice traffic reached nearly 200 billion minutes in 2003, 22 billion of which was carried over the Internet. Ted Shelton6 says that, “It really doesn't take that much money or work! We should all build our own long distance companies…” The variable costs comprising of band width, co-location facilities and connectivity with the local phone company will all amount to about $0.001 per minute and the corresponding cost for the common long distance deals are about 0.05 cents a minute. “The equipment and software needed will all put together cost about $8000.” c. WiMAX According to OECD again, WiMAX and other emerging broadband technologies, “could 5. OECD Data (2006) Available at: http://72.14.207.104/dataoecd/14/29/36133304.pdf 6. Shelton, T. (2004) Economics of VoIP. Research 9 potentially expand connectivity in remote areas and offer faster internet wireless connections in urban environments7.” According to Telecom View8, by 2010 monthly charges for 3G in both voice and data will be around $50 and the corresponding figure for WiMAX will be under $5. -. e. Convergence In their paper entitled, Information and Communication Technology – An Indian Perspective, Vijayanand et al9 point out that Convergence of computing and telecommunications was perceived as one of the most important trends in ICT. Since the early nineties, computer networks were widely used, and increasingly contributed to the globalization of economic activities… Convergence applications go much beyond the three segments of information and entertainment and have a capacity to change the system of governance and delivery of services in the total electronically networked environment. vi. Impact on businesses (examples) Relevance of these technologies to businesses is profound. As pointed out in the earlier part of this report, businesses have to communicate with stakeholders and in this report we are particularly focusing on customers. A few examples of small firms and their activities are cited below: a. Evolve Inc. is an advertising and marketing services company. Its main products are a) logo design / stationery / business cards b) brochures c) copy writing for magazine ________________________________________________________________________ 7. OECD Data. The implications of WiMAX for Competition and Regulation 8. The Register (February 14, 2005) WiMAX turns the screw on 3G 9. Vijayanand et al (2003). Information and Communication Technology – An Indian Perspective. Research 10 newspaper advertisements d) outdoor advertising e) radio and TV commercials f) internet related services like web design, interactive CD and DVD development and g) 3D display units for exhibition stalls. This young company with its limited staff of just 8 employees has to compete and gain business worldwide. At the same time, its customers are those that promote their own products and services around the world. This means that there should be compatibility of the offerings of Evolve with the desire of its customers for global reach. This necessitates Evolve to use the latest global communication technologies. If not, it will remain isolated and would even face competition from similar firms across the globe on its own turf. This is the power and peril of ICT. For Evolve to offer products compatible with the new telecommunications technologies, it must make use of the same weapon. ICT and convergence enable design of its products anywhere in the world; there need be no physical meetings – teleconferencing facilities take care of this minor issue; for a client in the US, it can use a graphics designer in Hyderabad, an ad copy writer from Ireland and a project leader in the HQ! The dividends in the form of economies and international talents are very real. b. Skype Ltd. is a firm facilitating voice communications free of cost over the Internet using VoIP technology. This nascent company is making giant steps and is growing by leaps and bounds. The older telephone companies, big or small are facing great challenge from such new start up companies who are exploiting ICT to offer free services on the Research 11 one hand and having successful revenue models through channels like subscription for premier services, banner advertisements etc., all becoming possible only because of ICT! c. EnvironmentIQ (formerly, CamAxys Ltd.) specializes in software products for environment, health and safety (EH&S) management by enterprises in their operations. These software products not only permit organizations to strictly follow government regulations on EH&S on a real time basis, but also enable them to submit statutory reports, online. For example, their product, The RiskLedger™ platform offers a number of modules that may be implemented on their own or together. The modules include Incident/Accident Monitoring, Risk Management, Audit, Event Manager, Action Management, Medical Records and Occupational Health, Training, Control of Substances Hazardous to Health (COSHH), Material Safety Data Sheet (MSDS), Environment Monitoring and Waste Management. The application suite can be implemented in its entirety across an organization worldwide. The services of Environment IQ may be software products but their application exploits the new communications technologies fully. This UK based firm has business all over Europe, Middle East, SE Asia and other far flung countries. Each of these countries have their own set of rules and regulations concerning EH&S and those differences have to be integrated into the country-specific products. The team sitting in the UK and communicating with clients, consultants and service providers across the globe accomplishes all this. Without ICT, this would not have been feasible. d. Nirafon Oy This very small engineering firm located in Finland deals in acoustic cleaning Research 12 devices, designed and developed by them. The smallness of the firm did not prevent this firm from reaching across the world with their unique product and establish commercial operations in India, US and Canada. In this process, Nirafon fully exploits the communication technologies of Internet and broadband with minimal staff in Finland. It has presence on the Internet (almost taken for granted for any firm these days). While it jealously safeguards the technology and supplies a critical component like the diaphragm by itself, for everything else, it simply enjoys the benefits of its business through the business of subsidiaries! vii. Lessons from the previous examples The four examples cited above give an idea of the utility of new global communication technologies for small and nascent companies. The advertising and marketing company Evolve Inc. can exploit the economics of a graphics designer in Hyderabad, a software engineer in Bangalore, an animation expert in Chennai etc. and perform its tasks and market itself around the world with ease. In this process, it can also design its products to suit local tastes and preferences. Here it is a case of outsourcing and global marketing, made possible by ICT. Skype’s example is a success story for other small firms who can also set up similar ventures with an investment of under $10,000. - using VoIP. EnvironmentIQ has leveraged ICT to greatly enhance its traditional strengths in EH&S regulations, in depth knowledge in chemical engineering and development of software products. This combination makes it a global power in its line of business. Yet, it remains a very lean organization. Research 13 Nirafon’s two inventors cum promoters ensured global presence for their technology and products without a large set up but with leveraging ICT. viii. Risk factors Trust among the users of ICT networks is an increasing priority for business, industry and governments. In a borderless world and ever increasing outsourcing of services facilitated by ICT networks, the age-old concept of safeguarding critical commercial information to prevent competition from gaining access to the same, has some what taken a beating. Businesses still keep some very vital data to themselves but not all. Risk of copying or theft of intellectual property or leak of important business plans etc is high. Security and anti-spam are the issues on which developments are taking place to ensure that businesses and their customers, adopting these technologies feel confident about them and misuse by unauthorized persons for fraud or mischief is minimized. The widespread theft of personal data on credit card / banking accounts on the Internet is a pointer to the difficulties in adopting ICT and making customers accept the same. It is fair to say that many of the newly established firms in the past 5 to 10 years are already using latest ICT as they emerge. The older firms have to switch over to the latest technologies and this will entail a major issue of transition for the managements. Some of the older employees will have to be retrained or will become redundant or will leave; new staff to be recruited and trained; workflow must continue even as changes are taking place. Managing transition is a major management responsibility. III. Research Method Published data: The data presented in this report is entirely based on published material. Research 14 The exhaustive data provided by the Organisation for Economic Cooperation and Development (OECD) is of particular value. Similarly, the article ‘ICT – An Indian Perspective’ is very informative on the new technologies and their promise. A list of the various sources consulted is given at the end of the report. IV. Conclusions i. Summary and interpretation of data Rapidly expanding economic activities in the light of globalization and liberalization have greatly enhanced the quantity and quality of communications, world over. Traditional physical involvement in communications is totally inadequate to meet the present day needs. Advent of computers, growth of information technology and the Internet ensured rapid growth of global communication technologies. This development has thrown open not only the world markets but also the worldwide resources to businesses. Leveraging these changes, even small-scale firms can compete effectively and expand their operations, without having to fall back on huge financial and other physical resources. ii. Recommendations Global communication technologies must be exploited to expand business and to meet demands of today’s customers. Internet and broadband are the appropriate economical channels for small companies. Utilization of the full potential of ICT not only to communicate but also to receive outsourced services should be the target for small businesses. Reference List Clark, David D (1995). A Model for Cost Allocation & Pricing in the Internet. Retrieved May 6, 2006 from http://www.press.umich.edu/jep/ works/ClarkModel.html EnvironmentIQ, About Us, Retrieved May 6, 2006 from http://www.environmentiq.com Evolve Inc. About Us, Retrieved May 6, 2006 from http://www.evolveinc.com International Direct Marketing Analysis and Profiling System (Feb. 2000), IDMAPS Version 2.0, US Postal Service. Nirafon Oy, Company, Retrieved May 6, 2006 from http://www.nirafon.com OECD Data (2006). Available at: http://72.14.207.104/dataoecd/56/24/35955832.pdf OECD Data (2006). Available at: http://72.14.207.104/dataoecd/14/29/36133304.pdf OECD Data (2006). The Implications of WiMAX for Competition and Regulation. Available at: http://72.14.207.104/dataoecd/32/7/36218739.pdf OECD (2006) Information and Communication Technologies. Retrieved May 6, 2006 from http://www.oecd.org/topic/0,2686,en_ 2649_37409_1_1_1_1_37409,00.html Shelton T. (2004) Economics of VoIP, Retrieved May 6, 2006 from http://tedshelton.blogspot.com/2004/02/economics-of-voip.html Skype Ltd. Retrieved May 4, 2006 from http://www.skype.com The Register (February 14, 2005) WiMAX turns the screw on 3G, Cheaper networks a real possibility Retrieved May 6, 2006 from http://www.theregister.co.uk/2005/02/14/wimax_versus_3g Universal Postal Union, Statistics, Retrieved May 6, 2006 from http://www.upu.com Vijayanand, K & Ananda S K (2003). Information and Communication Technology – An Indian Perspective. Retrieved May 6, 2006 from http://www.gisdevelopment.net/proceedings/mapasia/2003/papers/i4d/i4d004.htm Read More