How the Web gives small firms a leg up on giants
By D.C. Denison, 12/15/2002

Who benefited most from the Internet boom? It might have been small-business owners.

That's one conclusion you could draw from a recent report by the US Small Business Administration entitled '' Strategies for Small Business Success.'' The study advances the idea that Web technology ''favors small businesses.''

For example, according to the study, 65 percent of small, niche firms make a profit or cover the costs of their Web sites. That's a percentage many larger companies would envy. And the smaller the firm, the more benefit it gets from being online. Big companies, by contrast, often find Internet initiatives inevitably lead to complicated, and expensive, integration projects. When you've got a massive back office database, multiple divisions, and a variety of overlapping software systems, Web projects have a tendency to turn into costly campaigns.

But savvy small businesses can skim the cream off Internet technology and make it work for them, according to the SBA report. Take marketing: The study points out that tiny companies with niche products are now routinely discovered by customers using Internet search engines like Google.

If you sell booties for dogs, to use a real-world example the study cites, it's likely that pet owners looking for canine footwear will quickly find your Web site by searching for ''dogs'' AND ''booties'' on the Internet. (I just tried it on Google, and it brought back dozens of small firms that sell ''paw protection.'') That kind of market reach for small firms was impossible just a few years ago.

Although the study marshals a mountain of data to support its ''small is beautiful'' thesis, I decided to forward it to a number of small-business-oriented consultants for a reality check.

''This is not news to small-business owners,'' said marketing consultant Michael Katz. His Hopkinton company, Blue Penguin Development, specializes in advising small businesses on their e-mail strategies.

''Traditionally the advantage that the big guys had was related to size and scale,'' he said. ''The larger companies could produce better quality print collateral because they had bigger budgets. They also had better technology because they could afford big information technology departments. The little guy was left with a pad and pencil.''

Katz contends Internet era technology has changed that equation. ''Everybody's going electronic, and `electronic' levels the playing field,'' he said, pointing out that an e-mail from Fidelity looks the same in your mailbox as an e-mail from an independent financial consultant.

At the same time, many small firms are able to keep the one advantage they have traditionally had over large companies.

''The little guys have always had a tight relationship with their customers,'' Katz said. ''That comes with being small and local. And technologies like e-mail enhance that for small companies rather than dilute it.''

The report also rang true for Helen Chan, an analyst who covers small and medium business technologies for Boston's Yankee Group.

''There are now many more products at the low end of the market,'' Chan said, pointing out that a small business can get away with spending less than a hundred dollars for ACT! contact manager software rather than hundreds of thousands of dollars on a Siebel customer relationship management installation.

However, Chan thinks that the difference in perceived benefits is often a matter of time rather than size.

''It may be that there is a longer payback for the larger companies compared to the small companies,'' she said. ''The big companies have more significant up-front costs, and there's a lot of configuration and maintenance involved. So, eventually, the large firms may get the same return on investment as the small firms.''

Ray Boggs, vice president of small business/home office research at IDC, a market research firm based in Framingham, seemed almost cheered by the report. ''It confirms many of the trends we're seeing in our own research,'' said Boggs, but he made a distinction between ''pure'' Web-based companies and companies that have added the Internet to ongoing operations.

''It's been tough for people who started companies on the Web,'' he said, ''but for businesses that are already up and running, the Internet is a terrific booster rocket to get to the next level.''

Boggs pointed out that small-business owners are now a desirable target audience for big Internet players like Yahoo (Yahoo Small Business), Microsoft (bCentral) and Interland, the largest small business Web-hosting firm. Just last week, in fact, Interland bought Concord-based Web site software developer Trellix in a move to strengthen its small-business services.

It's now a buyer's market for Internet services like e-mail, Web hosting, Web site building, and e-commerce. ''The tools are out there for small businesses,'' Boggs said. ''A small business just has to put the pieces together.''

D.C. Denison can be reached at
This story ran on page H2 of the Boston Globe on 12/15/2002.
© Copyright 2002 Globe Newspaper Company.