The European Contact information: e-Business Market W@tch · e-Business Market W@tch Industry perspectives on electronic business development. The past five years have seen a steady

European Commission

October 2006

European Commission

The European e-Business Market W@tch

E-Business in Europe · 2006

Industry perspectives on electronic business development

Enterprise and Industry Directorate-GeneralUnit D4 “Technology for Innovation / ICT industries and e-Business” 1040 Brussels, Belgium

Fax: (32-2) 2967019Web: http://ec.europa.eu/enterprise/index_en.htme-Mail: [email protected]

e-Business W@tchc/o empirica GmbHOxfordstr. 253111 Bonn, Germanye-Mail: [email protected] Web: www.ebusiness-watch.org

Contact information:

Contents PageImprint 2Foreword 3e-Business Trends 2006 5e-Business Sector Profiles 8ICT Impact on Company Performance 19Newly Founded Companies and e-Business 20Methodological Notes 22e-Business W@tch Advisory Board 2006 23

The European e-Business Market W@tch

E-Business in Europe · 2006

Industry perspectives on electronic business development

The past five years have seen a steadydevelopment of e-business across theglobe. This development, though notvisibly revolutionary in character, hasbeen nonetheless powerful in itsimpact.

Companies use ICT and e-business fordifferent objectives. While the searchfor opportunities to cut costs is still avalid motive, the most innovative firmshave begun to exploit the potential ofICT for delivering against key businessobjectives: they have integrated ICT intotheir delivery of quality goods andservices, into their quality management,in marketing, and for improving cus-tomer service.

These areas are key to improvingcompetitiveness in the current phaseof development of Europeaneconomies. Competing in maturemarkets requires not only optimisedcost structures, maximal efficiency,and products or services of excellentquality, but also the ability to commu-nicate effectively and indeed cooperatewith existing or potential customers.

For these reasons, the EuropeanCommission has long placed greatemphasis on policy actions supportingthe broad uptake of ICT amongEuropean enterprises. In 2005, DGEnterprise and Industry launched anew industrial policy. As one of theinitiatives covered by this policy, a newTaskforce on ICT Competitiveness wasset up, which will help in identifyingand removing obstacles that inhibitICT take-up among enterprises.

Information and communication technologies(ICT) are changing the way in which companiestrade with their suppliers and customers. e-Business W@tch monitors related developmentsand analyses their impact on different sectors ofthe European economy. Special emphasis is placedon the implications for small and medium-sizedenterprises (SMEs).

The initiative was launched by the EuropeanCommission’s DG Enterprise and Industry in late2001. It will be operational until the end of2006. A follow-up initiative is being considered.In 2006, studies by e-Business W@tch cover 10 sectors, including manufacturing industries,construction and services.

A cornerstone of the monitoring activities is arepresentative survey among decision-makers in European enterprises about their use of e-Business. The latest survey was conducted inMarch and April 2006. To complement the statistical picture, e-Business W@tch has conducted about 75 case studies on e-Businessactivity in enterprises around the world.

This brochure presents findings and conclusionsfrom these activities. More comprehensive sectorstudies, and further resources (Pocketbook,Annual Report) are available in electronic formatat www.ebusiness-watch.org or via the Europaserver at (www.ec.europa.eu/comm/enterprise/ict/policy/watch/index.htm).

Contact informationFor further information and to request copies

of this brochure, please contact:

European CommissionEnterprise and Industry Directorate-GeneralUnit D4 “Technology for Innovation / ICT industries and e-Business” 1040 Brussels, Belgium

Web: http://ec.europa.eu/enterprise/index_en.htm

E-Mail: [email protected]

e-Business W@tchc/o empirica GmbHOxfordstr. 2, 53111 Bonn, Germany

E-Mail: [email protected]

Web: www.ebusiness-watch.org

empirica Gesellschaft für Kommunikations- undTechnologieforschung mbHOxfordstr. 2, 53111 Bonn, Germany

E-Mail: [email protected] Web: www.empirica.com

Furthermore, the i2010 initiativestresses that ”… the adoption andskilful application of ICT is one of thelargest contributors to productivityand growth throughout the economy,leading to business innovations in keysectors.”

The e-Business W@tch supports theseand other policy initiatives in twoways. As an observatory, it providespolicy with data and case study evidenceon current e-business developmentsin the market. As an intermediary, thee-Business W@tch is a platform fordebating relevant issues among stakeholders. This brochure offerssnapshots from the recent study workconducted in 2006.

We are looking forward to the fullsector studies which will soon beavailable on the web (www.ebusiness-watch.org), along with their compar-ative synthesis in the forthcoming‘European e-Business Report – 2006edition’. They will help us understandeven better the impact of ICT onfirms and industries, and design theright policies to enhance growth andcompetitiveness of the EU economy.

02 03

Foreword:

e-Business – a Contributor to Productivity and Growth

Background:

The e-Business W@tch

A European e-Business Observatory since late 2001

Disclaimer

Neither the European Commission nor any person acting on behalf of the Commission isresponsible for the use which might be made ofthe following information. The views expressedare those of the authors and do not necessarilyreflect those of the European Commission.

Nothing in this brochure implies or expresses awarranty of any kind. Results should be usedonly as guidelines as part of an overall strategy.

© European Communities, 2006. Reproduction is authorised provided the sourceis acknowledged.

Imprint

This brochure has been prepared by empiricaGesellschaft für Kommunikations- undTechnologieforschung mbH on behalf of theEuropean Commission, Enterprise and IndustryDirectorate General. It is a publication of the European e-BusinessW@tch which is implemented by empirica GmbHin co-operation with Berlecon Research,Databank, DIW Berlin, RAMBØLL Managementand Salzburg Research GmbH.Editor: Hannes Selhofer, empirica GmbH

Layout: mediadesign-bonn.de Print: Druckerei Gerhards, Germany

D.M. WhiteDirector, Innovation Policy, EuropeanCommission

e-Business matters A broadly-based evolutionary devel-opment of electronic business has setin across the globe. This development,though not visibly revolutionary incharacter, has been nonetheless powerful in its impact. The maturityof e-business has substantially increasedacross sectors and regions over thepast five years.

About 80% of large companiesregard e-business as relevant for theirday-to-day operations. A third ofthem even say that it constitutes a"significant part" of their activities.Among SMEs (small and medium-sized enterprises), about 65% saythat e-business plays a role in theiroperations. e-Business W@tch hasasked companies this question in allsurveys since 2002, and observed asteady increase in the share of firmswhere e-business matters. This holdstrue for firms of all size-bands.

Innovation activities, including thoseenabled by ICT, can be a reaction topressure from outside (from customersor suppliers) or be a proactive measureto seek competitive advantage. Resultsof the e-Business Survey 2006 showthat both types of motivations are highlyrelevant.

Fulfilling customer expectations In particular, pressure from customers'appears to be the most powerful driverof e-business developments in mostsectors. About 70%1 of those firmsthat practise e-business confirm thatmeeting expectations of their customerswas "an important reason" to start e-business. There are some sectoraldifferences, though. Customers are

It is uncontested that the efficient useof ICT can leverage a firm's perform-ance. ICT applications help companiesserving customers in a potentially globalmarket, support production and logisticsprocesses, and facilitate internal workflows.

However, there is no easy win. Tech-nology will rarely lead to the expectedbenefits by itself; what matters inbusiness (and e-business alike) isstrategy. In other words, the way acompany uses ICT must be derivedfrom its overall business strategy. Thisaspect is sometimes underestimatedwhen firms invest in new systems.Technology cannot compensate for alack of strategy.

When companies are consideringwhether to invest in a new technologyfor e-business and which solution toselect, many factors that will normallyguide the decision, including price,technical features and compatibilitywith existing systems.

While all these details are clearly relevant, it may also help to link thedecision making process with revisitingbusiness objectives: "What are ourgoals for the next 3-5 years?""Wheredoes the firm want to go?" "How dowe want to achieve this?" In fact, thesequestions are common denominatorsof most definitions of the term "strategy"and should guide the use of ICT.

Designing, adapting and pursuing astrategy is the core function of man-agement and requires the respectiveskills. This has implications for thedebate of "e-skills" in companies.Many of the case studies we haveconducted in e-Business W@tch showthat the "e-skills" issue is, in fact, ofmost relevance at the managerial andstrategic level.

In comparison, ICT user skills at thelevel of individual workers are of lessconcern, despite the high degree oftechnology used in productionprocesses. It is true that in some sectors, particularly in ICT industriesthemselves, there are signs that ashortage of ICT practitioners couldhamper growth and innovation. Thereis an awareness of this risk at policylevel, and monitoring of developmentshas already been put in place, withreadiness to take supportive actions,if required.

Without ignoring the importance ofthis issue, policy should also payattention to fostering managerialskills in European enterprises. A skilfulmanagement with a sound under-standing of strategy design andimplementation is probably the bestasset for firms in the global economyof today.

clearly the key driving force in tourismand in ICT-related industries, but muchless influential in shipbuilding andconstruction.

This assessment of companies con-firms a general trend in e-business:firms are beginning to explore newforms of ICT-enabled customer service.To radically improve the value propo-sition to client groups of increasingsophistication, customers are beingintegrated into planning, decisionmaking and production processes at an increasingly early stage. Theflexibility offered by ICT applicationspermeating business operations is anessential precondition for this newrelationship with customers.

Though service sectors lead the wayin this field, ICT is already widely usedin manufacturing sectors to improveservice levels. Recent sector studies bye-Business W@tch on the machineryand equipment industry (2005) andthe pulp and paper industry (2006)found clear evidence for these devel-opments.

Gaining competitive advantageMore than 60% of firms1 also state thatthe opportunity to gain competitiveadvantage has been an important reason for their e-business engagement.This holds true for all sectors. By com-parison, supplier power appears to berather limited as a driving force forICT and e-business.

1 measured by their share of employment

04 05

e-Business on the Rise:

Customer Expectations are Driving e-Business Adoption

About 70% of companies in the sectors studied feel that e-business constitutes at least some part of their operations in 2006. This is up from about 60% in 2002, when e-Business W@tch asked this question for the first time. Customer expectations have been a powerful driver of e-businessdevelopments in most manufacturing and service sectors.

Foreword:

A Strategic Perspective on e-Business

Hannes Selhofere-Business W@tch Project Manager, empirica GmbH

[email protected]

Micro (<10)

20 40 60 800 100

Small (10-49)

Medium (50-249)

Large (250+)

% companies saying that e-businessconstitutes "a significant part"/ "some part"of the way they operate"

12

19

18

33

40

46

50

48

Significant part Some part

Competitorsalso do it

20 40 60 800

Customerexpectations

Supplierexpectations

Gain competitiveadvantage

Drivers of e-business: % of firms sayingthat É was an "important reason to engagein e-business"

Small Large

5452

7464

4534

6260

Base (100%): companies with computers from 10 sectors,EU-10, N = 7136.In % of firms from a size-band.

Base (100%): companies from 10 sectors saying that e-business constitutes a part of the way they operate, EU-10, N = 4602.In % of firms from a size-band.

Nordic countries most advancedIn general, firms in Northern Europeancountries tend to be more inclinedtowards ICT and e-business than theirSouthern European counterparts. Inparticular, as the e-Business Survey2006 shows, the connectivity betweencompanies is quite advanced in Finland,Sweden and Denmark, compared tomost other EU countries.

The e-Business Index 2006, composedof 16 indicators, shows Finland as thee-business benchmark in a compari-son of 8 EU countries (see Exhibits).Companies from France, the Nether-lands, the UK and Germany are verysimilar in their use of ICT, particularlyif emphasis is laid on the larger com-panies (see employment-weightedScoreboard). Firms from the newMember States (Czech Republic andHungary), although taking the lowerranks in this benchmarking exercise,are not far behind in their use of ICT.

Impact of industry structure – chal-lenges for comparisons by countryThus, with the possible exception ofthe Nordic countries, the location of acompany is by no means a reliablepredictor for the level of its e-businessactivity.

ManufacturingIn general, large companies drive e-business development in manufac-turing industries. Supply-chain inte-gration is still the key objective formany e-business initiatives; in parallel,innovative ICT-based forms of customerservice are rapidly gaining momentum,even in B2B oriented sectors. However,the 'digital divide' between large andsmall companies is still very pronounced,for example in the food & beverages,pulp & paper and shipbuilding indus-tries. In the footwear industry, ICTusage appears to be much lower thanin other manufacturing industries,even among larger firms.

ConstructionTo some extent, this also applies tomany of the small companies in theconstruction industry; however, as thesurvey questionnaire was mainlyadapted to ICT use in manufacturingindustries, it may not fully reflect someof the emerging trends in construction.Project-oriented technologies such asproject web and 3D visualisation toolscarry significant economic potentialfor this sector. Although they are notwidely deployed yet in the sector,there are relevant business examplesdemonstrating that companies canbenefit from using them.

Services – telecommunications and tourismTelecommunications companies havea forerunner position as intensiveusers of ICT and e-business in almostall application areas. Moreover, thewide diffusion of e-business technolo-gies also among smaller enterprisesdistinguishes the sector from mostother industries.

e-Tourism is one of the most dynamicareas of e-business with a major impactfor nearly all players involved. ICTenable service providers to interactdirectly with customers, which putssevere pressure on traditional inter-mediaries such as travel agencies andtour operators.

HospitalsAlmost all European hospitals have atleast an electronic system for patientdata and financial administration.However, few of them use moresophisticated systems, and depart-mental information systems are oftennot integrated with each other. Coredrivers of e-business in hospitalsinclude cost containment, improvementof quality of care, and state regulations,for example the implementation ofDiagnosis-Related Groups.

This can be due to structural charac-teristics. In Italy, for example, sectorsdominated by small firms are muchmore prevalent than in other countries.Since large firms are more advancedin electronic business, aggregateddata may point at a lower level of e-business activity in Italy. This reflects,at least to some extent, the structureof the economy rather than the over-all e-maturity of firms.

In contrast to Italy, the relative per-formance of French and Dutch com-panies is significantly better if theemphasis is on larger firms. Thesebenchmarking results suggest thatthe digital divide between small andlarge firms could be quite pronouncedin these countries.

Geographic differences within the same sector Within sectors, the deployment of ICTand e-business is even more alignedacross countries, as differences in thesectoral structure of national industriesare eliminated. The general patternremains strikingly similar in practicallyall sectors surveyed. ICT adoption ismost advanced in firms from theNordic countries; differences betweenthe other EU countries are much lesspronounced.

06 07

Benchmarking:

e-Business Activity in Countries of the European Union

In international comparisons, EU enterprises are level with theircounterparts in other advanced economies in their use of ICT.However, there are still some differences within the EU, particularly with regard to the average ICT maturity of smallercompanies.

Benchmarking:

e-Business Activity in 10 Sectors of the European Union

Activity in e-business still differs considerably between industries.However, the state-of-play has matured. Large companies in manufacturing pursue similar objectives with their ICT strategies:improving supply-chain processes (e.g. to reduce inventory),streamlining procurement processes and – increasingly – enhancingcustomer relations.

Telecom

20 40 60 800 100

Hospitals (*)

Shipbuilding

ICT manuf.

Cons. electr.

Pulp & paper

Tourism

Construction

Food

Footwear

100

94

83

81

72

61

56

46

40

38

Benchmark based on firm-weighted data1)

(indexed values: highest score = 100)

Telecom

20 40 60 800 100

ICT manuf.

Hospitals (*)

Pulp & paper

Cons. electr.

Tourism

Shipbuilding

Food

Construction

Footwear

100

92

80

75

72

70

69

64

45

42

Benchmark based on employment-weighteddata2) (indexed values: highest score = 100)

The e-Business Index (2006) for sectors

1) Firm-weighted data express e-business adoption as "% of firms in a sector", irrespective of the size of the com-panies (i.e. small companies and large ones count equally).Results are thus mainly determined by the situation in small firms, as there are many more small companies than large ones in the population of enterprises.

2) Employment-weighted data express e-business adoption as "activity in firms comprising …% of employment in a sector", thus emphasizing the situation in larger companies.

(*)Data for hospitals are not 100% comparable, as for someindicators proxies had to be used, and because the typicalindustry structure (in terms of firm-size) does not apply tothe hospital sector.

FI

20 40 60 800 100

DE

UK

IT

FR

NL

CZ

HU

100

Benchmark based on firm-weighted data1)

(indexed values: highest score = 100)

89

88

77

75

72

68

56

FI

20 40 60 800 100

FR

NL

UK

DE

HU

CZ

IT

100

68

64

59

58

53

48

44

Benchmark based on employment-weighteddata2) (indexed values: highest score = 100)

The e-Business Index (2006) for countries

1) Firm-weighted data express e-business adoption as "% of firms in a country", irrespective of the size of the companies (i.e. small companies and large ones count equally). Results are thus mainly determined by the situation in small firms, as there are many more small companies than large ones in the population of enter-prises.

2) Employment-weighted data express e-business adoption as "activity in firms comprising …% of employment in a country", thus emphasizing the situation in larger companies.

Large retailers exert their power andtend to maximise the advantage oftheir direct control over suppliers. Ingeneral, the powerful ICT systemsand e-business solutions of largeenterprises enable (and help drive)more advanced practices which yieldcorrespondingly greater savings andefficiency. As a result, large firms aremore active in e-business than smallerones; they also attribute more impor-tance to it.

Supply chain management (SCM) islikely to remain a key point of focusfor the leading players in the future:while it was previously focused mainlyon cost reduction and logistics, today,with the globalization of supply chainsourcing – driven by cost-reductionpolicies – and intensified safety concerns, two important new linkshave been added to the supply chain:the issues of food supply safety andtraceability.

Large retail chains continue to drivesystem integration along the supplychain, leveraging their bargainingpower towards manufacturers.

Data for sectors weighted by employment ("firms representing x% of sector employment").Data for size-bands in % of firms from the size-band.

Source: e-Business W@tch (2006)

The e-Business Scoreboard approachwas developed by e-Business W@tchin 2004. It is a compound index thatcondenses data on ICT adoption ande-business activity, enabling compar-isons across different sectors, coun-tries or size-bands. Conceptually, thee-Business Scoreboard owes a debt tothe Balanced Scorecard (BSC) approach,which suggests that an organisationshould be viewed from four perspec-tives, and that metrics (and targets)are to be defined for each perspective.Similarly, the e-Business Scoreboardlooks at ICT use by enterprises fromfour (inter-related) perspectives. TheScoreboard is based on 16 componentindicators, which represent the metricsfor these perspectives.

Aggregation: The component indicatorsof the Scoreboard can be aggregatedon several levels. CI can be aggregatedinto 4 main sub-indices that representmajor application areas of e-business.Next, the sub-indices can be furtheraggregated into 2 dimensions and,finally, into the overall "e BusinessIndex".

The four main perspectives are: (A)Access to ICT networks; (B) e-Processintegration; (C) Supply-side activities;(D) Marketing and sales processes.

Normalisation: This takes into accountthe percentages (diffusion rates) fromall sectors (size-bands, …) and showhow a specific sector (size-band, …)differs from the all-sector average. Tothis end, values of component indicatorswere normalised, based on mean valuesand standard deviations. The scale inthe diamond graphs shows the multipleof a standard deviation for a specificsector. 0 equals the mean value for all10 sectors.

Fact-Box

The food and beverages (F&B) industry covers business activities specified by NACE (Rev. 1.1) DA 15: Manufacture of food products and beverages.

Total employment (EU-25) 3.9 millionNo. of enterprises (EU-25) 282,000% of employees working in SMEs 62%

(Source: Eurostat SBS, latest available figures)

The F&B industry is one of the major pillars of the European economy, accounting for about 13% oftotal manufacturing. In 2004, the EU-25 food and beverages industry had a turnover of 815 billion euros,transforming over 70% of EU’s agricultural raw materials and employing about 3.9 million people.

ERP

15 30 45 600

SCM

Remoteaccess

ICT fore-sales

ICT fore-procure-

ment

Food All 10 sectors

Food 32 21 35 14micro (0-9) 4 11 11 3

small (10-49) 17 11 20 4medium (50-249) 33 19 37 16

large (250 +) 66 50 69 39

Footwear 23 14 17 11Construction 18 16 25 9Tourism 15 16 38 23Telecoms 32 18 74 48

ERP

SCM

Rem

ote

acc

ess

CR

M

However, diverse ICT systems, integra-tion costs and the lack of informationstandards continue to hamper externalintegration. Many manufacturers andretailers are devoting considerableefforts to integrate their informationsystems.

RFID (Radio Frequency Identification)is the latest technology that can sup-port traceability and quality assurancein the F&B industry. RFID applicationsare expanding from quality assuranceto efficiency gains and control overinventory, delivery, selling and distri-bution. However, RFID is still mostlyused at the pallet and case level. Atunit level, there are still technologicalconstraints to be overcome if it is tobe applied on a large scale.

08 09

e-Business Profile:

The Food and Beverages Industry

In the food and beverages (F&B) industry, ICT and e-business have their main impacts in the areas of production and logistics. In the marketing and sales areas, the potential of e-business is not yet fully exploited for the benefit of manufactures.

e-Business Sector Profiles:

The e-Business Scoreboard 2006

Foodwear industry

Consumer electronics

Tourism

Pulp & Paper

Shipbuilding & repair

Telecommunications

Food and beverages

ICT manufacturing

More information

This sector study was conducted by Databank (www.databank.it). The full study report isavailable on the website at www.ebusiness-watch.org (‘resources’). For more informationabout this study, please contact Ms ElenaGaboardi ([email protected]).

Most of the Scoreboards shown are based oncomponent indicators that have been weightedby employment (see p. 22), which emphasizesthe situation in larger companies.

The Scoreboard for the footwear industry isbased on indicators expressed as % of firms(and not by employment). For this industry witha very high share of micro and small firms this isprobably a more adequate approach to makingcomparisons with other sectors.

Among the ten sectors studied by e-Business W@tch in 2006, and prob-ably for other sectors as well, the P&Pindustry is a perfect yardstick for thestate-of-play in ICT adoption and e-business activity. Survey results andcase studies show that companies useICT quite intensively in all applicationareas along the value chain: for pro-curement processes, in production,inbound and outbound logistics, andin marketing and customer service.

Large companies from the sector arequite advanced users of e-business. Theneed to organise trade and logisticson an international scale has been astrong driver to adopt ICT for thatpurpose. A bottleneck is currently thesmall installed base of ERP (EnterpriseResource Planning) systems amongsmaller companies, as ERP is animportant hub for B2B integrationand consequently conducting e-business.

papiNet has been established as astandard for exchanging data in thepaper industry. However, even if papi-Net is a success story, there is still widescope for new papiNet implementa-tions, especially those involving SMEs.

Data for sectors weighted by employment("firms representing x% of sector employment").Data for size-bands in % of firms from the size-band.


Among the ten sectors studied by e-Business W@tch in 2006, the foot-wear industry has the lowest overalluse of ICT and e-business. What isimmediately striking is the relativelylow level of e-business activity amongthe larger footwear companies. Thedelayed ICT adoption, relative to othersectors, is at least in part caused bythe economic circumstances andcompetitive evolution over the pastdecades.

Many of the smaller companies thatdo not practise e-business state twomain reasons: they regard themselvesas "too small", and they say that theycannot afford the required technologies.

For those companies that use ICT ande-business the main impact is felt inproduction and logistics. Firms putserious efforts into the integration ofinformation and logistic flows withtheir business customers. StrategicICT investments by companies tend tofocus on production planning, stock-turn improvement and the reductionof out-of-stocks.

In this context, collaborative work is akey issue for footwear and componentmanufacturers. The objective is tospeed up processes and achieveinstant visibility of orders, shipments,and inventory across the supply chain.Companies are challenged to addressthese issues without expensive solutionsor the release of sensitive informationto external databases.

Another important objective is inte-gration with distribution, in order toimprove links between production,logistics, warehousing and sales.There are successful examples ofonline integration with proprietarydistribution networks.

Fact-Box

The manufacture of footwear (NACE Rev. 1.1 DB 19.3) is a sub-sector of the leather industry (NACE 19).

Total employment (EU-25): 290,000No. of enterprises (EU-25): 13,700% of employees working in SMEs: Not available


The footwear industry is dominated by SMEs which together generate 65% of the value added.Specialised distribution plays a particularly important role in the sector, accounting for about halfits turnover. There are some 80,000 sales outlets employing about 300,000 persons.

Fact-Box

The pulp, paper and paper products industry in the EU. The manufacture of pulp, paper and paperproducts covers business activities as specified in NACE Rev. 1.1 Division DE 21.

Total employment (EU-23): 740,000No. of enterprises (EU-25): 18,400% of employees working in SMEs: 50%


The manufacture of pulp and paper is dominated by very large, typically internationally operatingcompanies. It is a capital intensive business. In contrast to paper manufacturing, the convertingindustries cover a larger number of enterprises, but these are typically much smaller firms.

ERP

15 30 45 600

SCM

Intranet

ICT fore-sales

ICT fore-procure-

ment

Pulp & paper All 10 sectors



ERP

10 20 30 400

SCM

Collaborativee-design

ICT fore-sales

ICT fore-procure-

ment

Footwear All 10 sectors

Footwear 23 14 11 58micro (0-9) 5 8 11 33

small (10-49) 12 12 6 48medium (50-249) 34 19 12 81

large (250+) 40 30 17 71

Pulp & paper 45 21 16 83Telecoms 32 18 27 91Construction 18 16 9 52Tourism 15 16 21 83

ERP

SCM

Co

llab

ora

tive

e-d

esig

n

Web

site

Pulp & paper 53 45 21 7micro (0-9) 14 8 6 1

small (10-49) 29 18 13 3medium (50-249) 53 45 13 1

large (250 +) 74 70 41 11

Food 40 32 21Telecoms 76 32 18Construction 31 18 16Tourism 46 15 16

Intr

anet

ERP

SCM

pap

iNet

sta

nd

ard

RFID is increasingly used for ware-house and inventory management.Early examples of RFID implementa-tion already demonstrate that it canhelp companies to link ordering, pro-duction and logistics processes, andthus to streamline their supply chainand reduce times. However, usage upto now is mostly limited to large com-panies.

On the whole, ICT and e-businesshave a considerable impact on workprocesses in individual companies inthe sector, but findings do not indi-cate a comparable impact on theoverall industry structure.

10 11

e-Business Profile:

The Pulp and Paper Industry

In the pulp and paper (P&P) industry, the main impact of ICT is as a driver and enabler of process innovation in supply chainmanagement and B2B trading processes. However, e-businessactivities and experiences differ widely between large manufac-turers and the smaller companies in the sector.

e-Business Profile:

The Footwear Industry

The potential of ICT as a working tool and as a means to gainproductivity improvements is not fully exploited in the footwearindustry. ICT is mainly being used to automate existing flows andprocesses rather than for innovative working methods.

More information

This sector study was conducted by Databank (www.databank.it). The full study report isavailable on the website at www.ebusiness-watch.org (‘resources’). For more informationabout this study, please contact Ms ElenaGaboardi ([email protected]).

More information

This sector study was conducted by empiricaGmbH (www.empirica.com). The full studyreport is available on the website atwww.ebusiness-watch.org (‘resources’). For more information about this study, pleasecontact Mr Hannes Selhofer ([email protected]).

CE companies face serious challengesrelated to their supply chain activities.Challenges include highly fragmentedand global supply chains, short prod-uct lifecycles and dependency on keydistributors. ICT and e-business toolscan support CE manufacturers in over-coming these challenges.

In fact, companies are well-equippedwith basic ICT infrastructure. Simplee-business technologies are widelyused. However, more complex ICTsystems are less widespread than couldbe expected for an ICT-related manu-facturing industry. For example, a relatively small share of CE companieshave integrated their ICT systems withthose of their customers or suppliers;and only few companies use XML orEDI-based e-business standards.

On the other hand, ICT tools thatsupport marketing and sales activitieson a global basis are increasinglyimportant in the CE industry. Onlineconsumer sell-though may not onlyhelp to increase revenue; CE companies’web shops are also a source of dataabout customers’ needs and theirshopping behaviour.



More than in other industries, compa-nies from the ICTM industry feel amajor impact from ICT on relationswith business partners and on theentire value chain. By combining newtools with strategy adjustments, mostcompanies benefit from ICT. Improvingsupply chain efficiency and informationflows in logistics is a key areas of ICTimpact.

However, competition is also intensifiedby ICT. The gravity of these changeshas been greater in markets in whichSMEs operate.

It can be expected that ICT and improvedsupply operations will continue tofacilitate the transformation towardslean organization and lower logisticscosts. Typically, large companies initiatethe process of supply chain integration,imposing their interests and require-ments on business down the valuechain. Nevertheless, SME participationin standards setting is necessary torealize the full potential of supplychain integration.

The terms of competition in the ICTMindustry are changed by technologicalconvergence, which forces companiesto expand into new business areasand to integrate business processes.At the same time, companies’ successdepends on user skills and the provisionof complementary products by contentproviders. However, economic uncer-tainty can hamper investment in newtechnologies, even in this industrywith a high affinity with ICT.

A significant impact of ICT specificallyon the PC industry has been theadoption of demand-driven productionand a standardized organisationalstructure. This resulted in significantinventory and overhead reduction.

Fact-Box

The ICT manufacturing industry as defined by e-Business W@tch comprises business activities coveredby NACE Rev. 1.1 DL 30 ("Manufacture of office machinery and computers") and DL 32("Manufacture of radio, television and communication equipment and apparatus").



The ICTM industry exhibits a high level of concentration. Only 3% of all enterprises have more than 250 employees, but they account for over 70% of value added and over 65% of total industryemployment.

Fact-Box

The consumer electronics (CE) industry as defined by e-Business W@tch comprises business activities covered by NACE Rev. 1.1 DL 32.3 (“Manufacture of radio, television and communication equipment and apparatus”).



The CE sector comprises very diverse activities. First, output subsumed under the term “consumerelectronics” is very heterogeneous. Second, the CE industry’s manufacturing process is divided. Onecan distinguish roughly two groups of manufacturers: Original Equipment Manufacturers (OEMs) andElectronics Manufacturing Services (EMS).

ERP

10 20 30 400

SCM

CRM

ICT Links to customer

ICT Linksto supplier

C. electronics All 10 sectors



EDM

10 20 30 400

SCM

Voice-over-IP

ICT linkedwith customers

ICT linkedwith suppliers

ICT manuf. All 10 sectors

ICT manuf. 24 24 28 95micro (0-9) 15 9 18 76

small (10-49) 17 14 24 90medium (50-249) 23 22 28 95

large (250 +) 29 39 39 98

C. electronics 26 20 29 88Telecoms 25 18 45 96Construction 17 16 13 69Tourism 13 16 16 81

Elec

tro

nic

Do

cum

ent

Man

agem

ent

SCM

Vo

ice-

ove

r-IP

Fire

wal

l

Consumer electr. 39 20 25 39micro (0-9) 6 5 7 51

small (10-49) 30 19 19 40medium (50-249) 63 19 39 49

large (250 +) 75 32 71 58

ICT manuf. 61 24 31 34Telecoms 32 18 48 48Construction 18 16 9 20Tourism 15 16 23 30

ERP

SCM

CR

M

Ord

er >

10%

of

sup

plie

s o

nlin

e

Already today more than 70% of CEcompanies interviewed state that e-business accounts for a “significantpart” or “some part" of the way theyoperate.

Digital Rights Management (DRM)and broadband convergence are veryimportant issues in this sector, consid-ering the role of CE companies assuppliers of ICT. Interoperability is criticalfor DRM integration. With multipleDRM technologies on the market,interoperability may help to makeDRM implementation economic andto increase usability for consumers.

12 13

e-Business Profile:

The Consumer Electronics Industry

Two main trends are challenging consumer electronics (CE) companies. First, the industry’s globalisation is forcing the worldwide integration of e-business applications. Second, thetrend towards content digitisation and the increased impact ofbroadband on the CE market are altering the sector’s output.

e-Business Profile:

The ICT Manufacturing Industry

The ICT manufacturing (ICTM) industry is not only a producer of technology needed for e-business, but is itself well positionedto benefit from ICT. In fact, the prevalence of large companies,intensive competition, frequent product changes and productiondispersion drive e-business adoption.

More information

This sector study was conducted by DIW Berlin(www.diw.de). The full study report is availableon the website at www.ebusiness-watch.org(‘resources’). For more information contact Mr Daniel Nepelski ([email protected]).

More information

This sector study was conducted by BerleconResearch GmbH (www.berlecon.de). The fullstudy report is available on the website atwww.ebusiness-watch.org (‘resources’). For more information about this study, pleasecontact Mr Andreas Stiehler ([email protected]).

Until recently, the construction industry(CI) was rather conservative in its atti-tude towards ICT and e-business. Oneof the main reasons is that the typicalnature of the service provided in con-struction – being an on-site and oftenhighly customised service – does notlend itself to typical e-business concepts.

Nevertheless, large construction enter-prises and the public sector are nowdriving ICT uptake in the CI. Theyhave the financial resources, humancapital and ICT capabilities which arenecessary to benefit most from ICT.The public sector could further accel-erate development, both as a majorbuyer of construction services and viapolicy initiatives.

New concepts such as strategic pro-curement are enhanced by the use ofe-procurement as a tool. Centralisationof tendering, establishment of frame-work contracts, consolidation of thesupplier base and products are oftenaspects of strategic procurement,and construction enterprises use e-procurement as a tool to optimisethe price/quality ratio.



Due to increasing international com-petition, structural changes in theshipbuilding and repair industry haveresulted in co-operation in engineeringand production along the value chainbetween shipyards, subcontractors,system suppliers and suppliers forstandard products. The informationflow between different players withinthe industry has intensified.

Aside from computer aided design(CAD), e-mail and the internet, few e-business technologies such asEnterprise Resource Planning (ERP) orSupply Chain Management (SCM) arecurrently being used in the shipbuildingindustry. The adoption of new ICT ande-business tools in the industry is slowdue to the structural characteristics ofthe industry and complex productionprocesses involving many different actors.

Structurally, there is a clear dichotomybetween the large shipyards and thesmall supply firms. Most of the tech-nologies for collaborative engineeringthat have been specifically developedfor the shipbuilding and repair industryare mainly used by large shipyards.

The picture is different for smallercompanies, where implementationcosts are a major barrier to e-businessinitiatives. Furthermore, investments inICT and e-business and their subsequentimplementation require substantialstructural, organisational and mentalitychanges among companies in theindustry.

Since 2000, some of the major playershave launched a variety of e-businessinitiatives to support B2B trade. How-ever, the characteristics of the ship-building industry created significantdifficulties for the development of e-procurement. As a result, no signifi-cant impact of these initiatives isobservable yet.

Fact-Box

The shipbuilding and repair industry (NACE Rev. 1.1 DM 35.11) is a sub-sector within the transport equipment manufacturing industry (NACE 35).

Total employment (EU-25): 260,000No. of enterprises (EU-25): 7,200% of employees working in SMEs: Not available


The shipbuilding industry is composed of several different sub-sectors, with a distinction between theconstruction of merchant and naval ships, the repairing and conversion of ships and the differentsuppliers of marine equipment and engineering services.

Fact-Box

The e-Business W@tch study on the construction industry focuses on business activities specified by NACE (Rev. 1.1) F 45.2 ("Building of complete constructions or parts thereof, civil engineering")and F 45.3 ("Building installation").

Total employment (EU-25): 14 millionNo. of enterprises (EU-25): 1,5 million% of employees working in SMEs: 80%


Construction is one of the largest industrial cluster in the EU, representing about 10% of GrossDomestic Product (GDP) in the EU and about one quarter of total industrial output. Activities of the construction industry can be grouped into house-building (26%), non-residential (29%), civilengineering (20%) and rehabilitation (25%).

ERP

15 30 45 600

SCM

Place ordersonline

ICT for e-pro-curement

Construction All 10 sectors




ERP

10 20 30 400

SCM

Managecapacity

online

Shipbuilding All 10 sectors



Shipbuilding 30 14 19 42

Pulp & paper 45 21 32 40

Footwear 23 14 17 21

Construction 18 16 14 26

ICT manuf. 61 24 37 57

ERP

SCM

Man

age

cap

acit

yo

nlin

e

Use

sec

ure

ser

ver

tech

no

log

y

Construction 18 16 53 18micro (0-9) 8 10 51 15

small (10-49) 20 15 54 22medium (50-249) 26 13 57 12

large (250 +) 37 26 58 24

Footwear 23 14 35 17Shipbuilding 30 14 62 26Pulp & paper 45 21 59 25Tourism 15 16 60 24

ERP

SCM

Plac

e o

rder

so

nlin

e

Rec

eive

e-i

nvo

ices

fro

m s

up

plie

rs

The benefits of e-tendering are firstand foremost on the buyer side, however, and the development istherefore mainly driven by the publicsector (public e-tendering).

Potential benefits for constructionenterprises of implementing advancedICT solutions (such as 3D, projectwebs) include cost reductions, riskminimisation and more precise com-munication between stakeholders.Barriers to the uptake of ICT includethe strong adherence to traditionalwork flow processes, a lack of skillsand capabilities for e-business, andincompatibility between different ICTtechnologies.

14 15

e-Business Profile:

The Construction Industry

Large construction enterprises have increased their awareness of ICT-related opportunities. They have started to adopt advanced ICT solutions such as e-procurement systems, collaborative design systems (3D technology) and tools for collaborative document sharing (project webs).

e-Business Profile:

The Shipbuilding and Repair Industry

A key application area for ICT in the shipbuilding and repairindustry (SRI) is the integration of engineering and productionprocesses along the value chain. This integration has effects onthe competitiveness of individual shipyards, as well as on theindustry as a whole.

More information

This sector study was conducted by DIW Berlin (www.diw.de). The full study report is availableon the website at www.ebusiness-watch.org(‘resources’). For more information contact Ms Birgit Soete ([email protected]).

More information

This sector study was conducted by RambøllManagement (www.r-m.com). The full studyreport is available on the website atwww.ebusiness-watch.org (‘resources’). For more information about this study, pleasecontact Mr Anders Pennerup Gantzhorn ([email protected]).

The telecommunications (telco) industryhas a dual role as user and supplier ofICT and e-business technologies. As aresult, companies in this sector arehighly familiar with the benefits ofICT and e-business technologies aswell as with strategies for their inte-gration.

In particular, the telco industry setsstandards for the use of ICT in mar-keting, sales and customer care.These are areas of high strategic rele-vance in an industry which is charac-terised by increasing competition and limited opportunities for productdifferentiation. Even small companiesuse e-business tools for customerservice in a way that could serve asrole model for SMEs in other industries.

Telco companies are important forother industries as suppliers of ICTservices. In this context, the conver-gence of platforms and technologieshas a significant impact on the sec-tor’s output, on competition and ongrowth. The key technical trend that



Rising customer expectations andmarket competition are the main driversof e-business in the tourism industry,while the considerable costs associatedwith acquiring technologies constitutethe main barriers for an even strongerICT uptake. The e-Business Survey2006 shows that travel agencies and tour operators are the strongestadopters of ICT and e-business, followed by the accommodation sector and – with much lower adoptionrates – by gastronomy.

A major impact of ICT in this industryis that it enables service providers tointeract directly with consumers, thusbypassing traditional intermediariessuch as travel agencies and tour operators. However, the extent of dis-intermediation differs betweensub-sectors. While, for example, theaccommodation sector is only partiallyaffected by dis-intermediation, specificbranches of the transport sector,especially the aviation industry, tendto be strongly affected.

Yet ICT solutions may also provide newopportunities for traditional playersand newly emerging online interme-diaries. Many new market entrantswho operate exclusively onlinesuccessfully provide intermediary services, while some bricks-and-mortarintermediaries have managed tosecure their position in the market byoffering value-added online services.

A relatively new trend that hasattracted much attention is "dynamicpackaging", which can empowercustomers not only to search and booksingle components, but to assembleand book their entire travel arrange-ments in real-time by means of web-based technology (configurators).

Fact-Box

The tourism industry as defined by e-Business W@tch includes business activities covered by NACERev. 1.1 H 55 (hotels and restaurants), I 63 (travel agencies) and O 92 ("recreational, cultural andsporting activities").

Total employment (EU-25): 8,1 millionNo. of enterprises (EU-25): 1,5 million% of employees working in SMEs: 79%


The economic importance of tourism and travel has increased tremendously in the last decades, and tourism is still one of the fastest growing industries in Europe and worldwide. Europe’s share ofglobal tourism arrivals is more than 50%.

Fact-Box

The telecommunications industry comprises business activities covered by NACE Rev. 1.1 I 64.2:(“Telecommunications”). This classification without any further subdivision reflects the heritage ofmany companies in this sector as state monopolies. The proposed NACE Rev. 2 will distinguishbetween wired, wireless, satellite and other telecommunication activities.

Total employment (EU-25): 10,1 millionNo. of enterprises (EU-25): 13,000% of employees working in SMEs: 11%

(Source: Eurostat SBS, latest available figures)Only about 2% of all telecommunication companies employ more then 250 people; however, thesecompanies account for the overwhelming share of value added and people employed in this sector.The supplier landscape is highly fragmented with regard to the heterogeneous platforms used fordata transmission and the different types of content transferred.

ERP

15 30 45 600

Acceptingorders online

CRM

Telecoms All 10 sectors





CRM

15 30 45 600

Acceptingorders online

Sell >10%online

ICT fore-sales

ICT for e-pro-curement

Tourism All 10 sectors

Tourism 23 49 30 83micro (0-9) 10 35 16 65

small (10-49) 18 46 26 84medium (50-249) 20 55 31 86

large (250 +) 40 61 42 98

Food 14 31 7 70Consumer electr. 25 25 10 84Telecoms 48 36 18 91Construction 9 13 4 52

CR

M

Acc

ept

ord

ers

on

line

Rec

eive

>10

% o

fo

rder

s o

nlin

e

Hav

e a

web

site

Telecoms 32 36 48 38micro (0-9) 9 40 21 20

small (10-49) 21 37 36 37medium (50-249) 32 35 55 37

large (250 +) 53 63 74 74

ICT manuf. 61 26 31 32Consumer electr. 39 25 25 27Construction 18 13 9 19Tourism 15 49 23 18

ERP

Acc

ept

ord

ers

on

line

CR

M

Use

dig

ital

si

gn

atu

re

currently drives convergence is the “IP transformation” of traditionalservices, for example the delivery ofVoice over Internet Protocol (VoIP)and the provision of TV services viaIP-based networks (IPTV). Mobile sub-stitution, i.e. the delivery of conven-tional fixed-line services over mobilenetworks, is a further driver of con-vergence.

For telco companies, the convergenceof ICT-based services opens newopportunities to use e-business forthe provision of new services, as wellas for automation of internal process-es (e.g. billing platforms). The fastdeployment of broadband is a criticalenabler and growth driver here, for boththe telco industry and the economyas a whole.

16 17

e-Business Profile:

The Telecommunications Industry

Telecommunications companies have a forerunner position asintensive users of ICT and e-business in almost all applicationareas. Moreover, the wide diffusion of e-business technologiesalso among smaller enterprises distinguishes the sector from most other industries.

e-Business Profile:

The Tourism Industry

Underpinning the results of previous studies, tourism is still in the vanguard of ICT adoption and e-business in the area of e-marketing and online sales. In these areas, "e-tourism hastaken off". This has considerable implications for all intermedi-aries: dis-intermediation and re-intermediation occur in parallel.

More information

This sector study was conducted by SalzburgResearch GmbH (www.salzburgresearch.at).The full study report is available on the web-site at www.ebusiness-watch.org (‘resources’). For more information about this study, pleasecontact Mr Markus Lassnig ([email protected]).

More information

This sector study was conducted by BerleconResearch GmbH (www.berlecon.de). The fullstudy report is available on the website atwww.ebusiness-watch.org (‘resources’). For more information about this study, pleasecontact Mr Andreas Stiehler ([email protected]).

The key to understanding the impactsof ICT on performance is to view ICTas an enabler of innovation. Processinnovations can be enabled by e-businessand ICT investments in general, oncondition that the implementation ofnew ICT succeeds, the routines arechanged, and the new system is actuallyutilized. ICT investments can alsoenable product or service innovationsat the enterprise level.

The share of growing firms is signifi-cantly higher among the innovators.70% of firms that conducted ICT-enabled innovations report turnovergrowth. Also, 60% (63%) of firmsthat used traditional, non-ICT enabledproduct (process) innovation experiencedturnover growth in 2005. In addition,innovative firms were significantly lesslikely to exhibit a decrease in turnovercompared to non-innovative firms. Incontrast, only 44% of firms that didnot conduct any kind of innovation in2005 experienced increased turnoversthat year. More advanced users of ICTand innovative firms are also morelikely to exhibit productivity increasesthan non-innovative firms at all stagesof ICT development.

Advanced users of ICT are more likelyto exhibit increases in employment.Furthermore, firms that conduct product innovations, whether theyare ICT-related or non-ICT-related, aremore likely to increase employment.Only 22% of non-innovative firmsreport an increase in employment,compared to 34% of firms that carriedout non-ICT-enabled product innova-tions and even 43% of firms that hadICT-enabled product innovations.

Core drivers of e-business in hospitalsinclude cost containment, improvementof quality of care, and state regulations,for example the implementation ofDiagnosis-Related Groups. On theother hand, the survey revealed securitychallenges and expensive technologyas the most important barriers to ICTinvestment. The importance of certainbarriers in hospitals is quite differentfrom other sectors.

Hospital Information Systems canhelp to cope with the huge amountof data a hospital has to deal with,they can enhance communicationamong professionals and bring usefulknowledge to them, and they canmake processes more efficient.However, while 83% of the hospitalsin the sample have a computerisedpatient administration system, only27% said they have a RadiologyInformation System, and only 12%transmit prescriptions electronically.Furthermore, often these systems arenot integrated with each other insidethe hospital.

The main reason for a lack of integrationmay be managerial shortcomings inhospitals, related to an often frag-mented organisation and insufficientstrategic ICT planning.

The role of acute care hospitals is toprovide in-house, comprehensive,specific and round-the-clock care.This role may change due to ICT. Theanalysis suggests that ICT impacts mainlyon the need for in-house care. Mostimportantly, electronic communica-tion between hospitals, general prac-titioners and patients may make apatient’s visit to the hospital unneces-sary. The hospitals’ boundaries poten-tially become more permeable; therole of hospitals may slowly shift froman in-house care provider to an out-bound communicator.

Fact-Box

Hospital activities, as defined in class 85.11 of NACE Rev. 1.1, are a sub-section of human healthactivities (Division 85.1) which comprise medical, surgical technical and other related on-site care activities.

Total employment (EU-25): (e) 2,5 millionNo. of enterprises (EU-25): (e) 13,000% of employees working in SMEs: Not available


(e) = estimated on the basis of figures for the former EU-15 (no figures available for EU-25) Hospitalsare a large service sector both in terms of employment and value added. Hospital activities includeshort- or long-term hospital activities of general and specialised acute care hospitals as well as relatedorganisations such as psychiatric hospitals, sanatoria, medical nursing homes, including prison andmilitary hospitals.

Data in % of hospitals.


Securityconcerns

15 30 45 600

Technology tooexpensive

Legalissues

Lack of reliableIT suppliers

Hospital toosmall

Hospitals All 10 sectors

31

59

38

57

22

37

55

37

23

34

Hospitals 33 29 41 21micro (0-9) 3 3 0 2

small (10-49) 8 15 11 7medium (50-249) 24 22 22 13

large (250 +) 36 31 46 24

ERP

Co

mp

ute

rise

dPh

ysici

an O

rder

Ent

ry

HL7

sta

nd

ard

Elec

tro

nic

tra

ns-

mis

sio

n o

f p

resc

rp.

No innovation

20 40 60 800

Turnover Increased

Innovative firms are more likely to grow

100

Turnover UnchangedTurnover Decreased

ICT-enabledproduct innovation

Non-ICT-enabledproduct innovation

ICT-enabledprocess innovation

Non-ICT-enabledprocess innovation

44 40 16

70 22 8

60 29 11

70 22 8

63 26 11

No innovation

20 40 60 800

Employment Increased

A positive relationship between ICT-enabled innovation and employment

100

Employment UnchangedEmployment Decreased

ICT-enabledproduct innovation

Non-ICT-enabledproduct innovation

ICT-enabledprocess innovation

Non-ICT-enabledprocess innovation

22 64 14

43 46 11

34 54 12

43 46 11

37 50 13

The data suggest a similarly positivepattern for process innovations.Employment increased in 2005 in37% of firms that conducted non-ICT- enabled-, and 43% of firms thatreported ICT-enabled process innova-tions.

Firms with a high share of college-educated employees tend to be moreadvanced users of ICT and vice versa.This is consistent with the view that ahighly skilled workforce and intenseICT usage complement each other.This could lead to changes in thelabour market which over-proportion-ately benefit highly skilled individuals.

Ongoing public policy action is mainlyneeded in two areas. First, policy makersshould focus on improving the frame-work conditions for innovation ingeneral; this includes education, R&D,and market regulation. Second, recenttechnological developments shouldbe monitored and analyzed in orderto inform governmental institutions,industry, and the interested publicabout the implications of these devel-opments.

18 19

Special Study:

The Impact of ICT on CorporatePerformance, Productivity andEmployment Dynamics

As a typical general purpose technology, ICT has a wide range of applications and a large impact on economic activity.

e-Business Profile:

The Hospital Sector

Almost all European hospitals have at least an electronic systemfor patient data and financial administration. However, only few of them use more sophisticated systems, and departmentalinformation systems are often not integrated with each other.

Base (100%): All companies. N = from 12,721 to 12,799depending on missing values, in % of firms.

Base (100%): All companies. N = from 13,516 to 13,610depending on missing values, in % of firms.


More information

This sector study was conducted by empiricaGmbH (www.empirica.com). The full studyreport is available on the website atwww.ebusiness-watch.org (‘resources’). For more information about this study, please contact Mr Stefan Lilischkis ([email protected]).

More information

This special study was conducted by DIWBerlin. For more information about this study,please contact Dr. Philipp Koellinger([email protected]). The full report is available at www.ebusiness-watch.org(‘resources’) by the end of 2006.

Without doubt, management andcontrolling functions in an enterprisedepend critically on ICT systems. Theyprovide information faster, more flexi-bly and more concisely than wouldotherwise be possible. In larger enter-prises, many of the regular manage-ment reports (e.g. from controlling)are automatically generated from ICTbased information systems.

However, there are some pronounceddifferences between small firms andlarge companies in how they see thefuture impact of ICT. In general, largefirms expect a much more significantimpact – this holds true for all busi-ness functions. For example, whileabout 50% of large companies expecta "high impact" on management andaccounting, only 25-35% of small firmsdo. Similarly, relatively more largecompanies than small ones expectthat ICT will have a high impact ontheir future marketing activities andon customer support functions.

It is interesting that marketing andcustomer support have overtakenproduction and logistics as primaryapplication areas for ICT in the scenarioof large firms. This applies not only toservice sectors such as tourism andtelecommunications (obvious for theseindustries), but increasingly also tomanufacturing sectors; for example,even in a traditional production-focusedsector such as the pulp and paperindustry, customer support is perceivedas a key function of ICT in the future.

Research findings from this reportconfirmed the assumption that newcompanies play an important role inintroduction and uptake of new e-business applications in manyindustries. However, there were alsostatements from some industry repre-sentatives that there are no significant differences between new and estab-lished companies in this respect. Atcompany level, the impact of newcompanies on e-business innovationand diffusion depends on the impor-tance of e-business in their businessmodel. On an aggregate level, theimpact of new companies on e-busi-ness innovation and diffusion differsbetween industries, regions, types oftechnologies and stages of the innova-tion process.

The e-Business Survey 2006 for thefirst time offered the opportunity toanalyse data by the age of the com-pany. Overall, 9% of the survey com-panies were founded between 2006and 2003, 22% between 2002 and1997, a relative majority of 42% wasfounded between 1996 and 1981,and 26% were founded before 1981.The findings indicate that new com-panies are more innovative thanestablished companies with regard toICT and e-business. However, the ageclass differences are not large.

New companies have a lead in ICT-related product, service and processinnovation. Product and service inno-vation activity declines with companyage, and there are considerable differences for ICT-related product orservice innovation: 62% of the inno-vative firms founded 2006 – 2003introduced new ICT-related products

or services in the past twelve months,followed by the age classes of 2002 –1997 (58%), 1996 – 1981 (53%) andbefore 1981 (49%). Furthermore,companies founded 2003 – 2006 hadthe highest level of all age classes(79%) with regard to the introductionof ICT-related new business processesin the past year, followed by “before1981” (74%), 2002 – 1997 (73%)and 1996 – 1981 (70%). The levels ofinnovativeness by age class differ con-siderably between sectors so that adifferent composition of sectors maylead to different overall results.

Start-ups tend to have the highestpercentage of use of particularlyinnovative e-business applications.New companies have the highest useof VoIP of all age groups (24%) andthey are at the same level with compa-nies founded before 1981 as regardse-Invoicing (20%) and RFID (4%).

In common e-business applications,new companies do not have a clearlead. New companies are behindother age classes in ERP (EnterpriseResource Planning), SCM (Supply ChainManagement) and CRM (CustomerRelationship Management); these systems are more beneficial for largethan for small companies.

These findings confirm the impressionthat e-business is increasingly evolvingfrom a tool for cutting costs into aninstrument that helps companies servetheir customers better. The developmentin B2C focused service industries nowseems likely to take place in B2B- focusedmanufacturing industries.

Thus, the use of ICT in business isprobably far from having reached itszenith. It is an evolutionary developmentwhich can be described in terms ofinnovation life-cycles. The current life-cycle has been characterised by afocus on process efficiency and wasled by large players in the private andpublic sectors. The next life-cycle(which is now beginning to emerge)could see companies go beyond thisgoal. They will increasingly use ICTnot only as a tool to run their business,but to change their business. In thelong run, most business will probablybe "e-business" in one way or another.

20 21

Outlook:

Where Companies Expect ICT toInfluence Their Business in the Future

Firms expect that ICT will have a significant impact on how they do their business in the future. In particular, they believe that ICT will become even more important as a tool to supportplanning, decision making and controlling.

Special Study:

The Role of New Companies in e-Business Innovation and Diffusion

A Special Study by e-Business W@tch in 2006 found that newcompanies play an important role in innovation and diffusion of e-business applications in various sectors. However, there is also evidence that many new companies are not innovative at all asfar as e-business in concerned.

20 40 60 800 100

Firms founded2006 - 2003 62

53

49

54

58Firms founded

2002 - 1997

Firms founded1996 - 1981

Firms foundedbefore 1981

All firms

Firms with ICT-related product innovationin past 12 months by company age

20 40 60 800 100

Firms founded2006 - 2003 79

70

74

73

73Firms founded

2002 - 1997

Firms founded1996 - 1981

Firms foundedbefore 1981

All firms

Firms with ICT-related process innovationin past 12 months by company age

In % of firms stating product or service innovation in thepast 12 months. N = 5,542.

In % of firms stating process innovation in the past 12 months. N = 4,599.


20 40 60 800 100

Management 26

Small firms (10-49 empl.)

32

36 29

23 12

17 18

30 28

24 20

29 26

Accounting

R&D

Production

Logistics

Marketing

Customer support

High impactMedium impact

Percentage of companies expectingthat ICT will have a high/ mediumimpact on … in the future

20 40 60 800 100

Management 47

Large firms (250+ empl.)

30

54 29

29 20

28 28

39 24

42 29

46 22

Accounting

R&D

Production

Logistics

Marketing

Customer support

High impactMedium impact

Base (100%): Companies with computers, EU-10, 10 sectors. N = 2159 (small firms) / 670 (large firms). In % of firms. Survey question: "Do you expect that ICT will have a high / medium / low impact or no impact on <business function> in your company in the future?"

More information

This study was led by empirica GmbH. For moreinformation about this study, please contactDr. Stefan Lilischkis([email protected] ). The fullreport is available at www.ebusiness-watch.org(‘resources’) by the end of 2006.

22 23

Networking and Debate:

The Advisory Board of 2006

To validate research findings, e-Business W@tch seeks regularexchange and debate with international experts on ICT, e-business and specific sectors. The Advisory Board of 2006 consists of 20 industry representatives, researchers and businessconsultants. Board members offer comments on reports, provide input to the research, and thus help e-Business W@tchto identify the relevant trends and to set research priorities. Their services are gratefully recognised.

e-Business W@tch collects data onthe use of ICT and e-business inEuropean enterprises by means ofrepresentative surveys. The e-BusinessSurvey 2006 was the fourth surveyafter those of 2002, 2003 and 2005.It consisted of 14,081 telephoneinterviews with decision-makers inenterprises from 29 countries, includ-ing all EU Member States as well as EEAand Candidate Countries. In 10 coun-tries ("EU-10"), all 10 sectors werecovered; in the other countries, selectedindustries were surveyed. In mostcountries, between 400 and 750interviews were conducted. The surveyfield work was coordinated by IpsosGmbH.

Interviews were carried out in Marchand April 2006, using computer-aidedtelephone interview (CATI) technology.The decision-maker in the enterprisetargeted by the survey was normallythe person responsible for ICT withinthe company, typically the IT manager.Alternatively, particularly in smallenterprises without a separate IT unit,the managing director or owner wasinterviewed. As in 2005, the surveyincluded only companies that usedcomputers.

WeightingFor data presentation, two weightingschemes have been applied: weightingby employment and weighting by thenumber of enterprises. Employment-weighted data should be read as"enterprises comprising x% ofemployees" in a sector or country.

Statistical accuracy – confidenceintervals For totals of all 10 sectors (in the EU-10), an accuracy of about +/- 3 per-centage points can be expected formost values that are expressed as "%of firms", and of about +/- 2 percent-age points for values that are weight-ed by employment. The confidenceintervals for industry totals (EU-10)differ considerably depending on theindustry and the respective value; onaverage, it is about +/- 5 percentagepoints (in both weighting schemes).Differences lying within these inter-vals should not be emphasised.Confidence intervals are highest forthe shipbuilding and repair industry,due to the small number of observa-tions. Data for this industry are there-fore indicative.

Non responseIn a voluntary telephone survey, inorder to achieve the targeted interviewtotals, it is always necessary to contactmore companies than just the numberequal to the target. In addition torefusals, or eligible respondents beingunavailable, any sample contains aproportion of "wrong" businesses(e.g., from another sector), and wrongand/or unobtainable telephone numbers.The completion rate (= the number ofcompleted interviews divided by thenet sample of contacts establishedwith eligible enterprises / hospitals) wastypically about 15-20%, with, however,big differences in some of the countries.

e-Business Survey 2006:

Methodological Notes

Advisory Board

Member Affiliation Appointed for sector / expertise in Country

Mr Martin Baker Tor Consulting Footwear industry UK

Mr Dimitrios Buhalis University of Surrey Tourism UK

Mr Jesús Galván Schiller International University, Madrid Telecom industry Spain

Mr Markus Gratzer Österreich Werbung Tourism Austria

Mr Tony Graziano EICTA – European Information & Communications ICT industries EU

Technology Industry Association

Mr Arturas Kaklauskas Vilnius Civil Engineering Institute Construction Lithuania

Mr Adam Koprowski National Institute of Cardiology, Warsaw Hospitals Poland

Mr Andreas Labrenz Fujitsu Siemens Consumer electronics Germany

Ms Veronique Lessens Agfa Hospitals Belgium

Mr Bernard Lombard CEPI – Confederation of European Paper Industries Paper industry EU

Mr John Sarborg Pedersen ITEK – Confederation of Danish Industries Construction Denmark

Mr Ulrich Paetzold FIEC – European Construction Industry Federation Construction EU

Mr Axel Pols BITKOM - German Association for Information Technology, ICT industries Germany

Telecommunications and New Media

Ms Brigitte Preissl Deutsche Telekom Telecom industry Germany

Mr Henry J F Ryan Lios Geal Consultants Interoperability Ireland

Mr Paris Sansoglou CESA - Community of European Shipyards' Associations Shipbuilding EU

Mr Alfredo Soeiro University of Porto ICT skills Portugal

Mr Salvatore Testa Bocconi University, Milan Footwear industry Italy

Ms Rachel Tym ETOA Tourism UK

Mr Ilias Vlachos Athens University Food industry Greece

Interviews conducted in the e-Business Survey 2006

NACE Rev. 1.1 Sector name No. of firms in EU-25* No. of interviews

DA 15 (most groups) Food and beverages 282,000 1,709

DC 19.3 Footwear 13,700 980

DE 21 Pulp, paper and paper products 18,400 1,158

DL 30, 32.1+2 ICT manufacturing 31,800 1,687

DL 32.3 Consumer electronics 5,400 665

DM 35.11 Shipbuilding and repair 7,200 150

F 45.2+3 (most classes) Construction 1,546,000 2,655

H 55; I 63.3;

O 92.33/52+53 Tourism 1,500,000 2,663

I 64.2 Telecommunication services 12,900 1,580

N 85.11 Hospital activities (e) 18,000 834

(*) mostly based on Eurostat SBS (latest available figures); (e) = estimate

More information

More detailed information about the e-BusinessSurvey 2006 is available at the e-BusinessW@tch website (www.ebusiness-watch.org) inthe "about" section (see: "methodology").

Documents

The European Contact information: e-Business Market W@tch · e-Business Market W@tch Industry perspectives on electronic business development. The past five years have seen a steady