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Internet services offer big boost to non-IT firms: report

Companies outside the technology sector that make more extensive use of internet services are six percent more productive than average firms in their industry, while greater use of such services by firms currently making only low use could add $34 billion in productivity impacts, a new report says.

Sapere Research Group interviewed companies in tourism and retail, dairy farming and others in the agriculture industry and professional services firms, and gathered estimates of the impacts of internet services on productivity from Statistics New Zealand’s Business Operations Survey. That survey covers economically significant private sector firms with six or more employees and GST turnover of more than $30,000 that have been operating for more than a year.

The report uncovered a diverse range of impact examples, from people using the internet for precision irrigation on farms, collaboration tools between engineers in different countries and an online accommodation booking system to a virtual law library and online community building for retail.

“Sizeable impacts from the internet are unsurprising since the internet is now a crucial business tool,” the report says. “Because of its general purpose nature, its usefulness and its ubiquity, the internet has a very broad range of impacts. For example, on the customer-facing side of business, it can enable firms to find new customers, to improve business data gathering and market targeting, or to facilitate customer interaction with real-time online service.

“From an operations point of view, firms can get speedy and cheap access to sophisticated cloud-based business tools, transform their supply chains with leaner processes and access to a global talent pool for skills, or transform the nature of the firm itself with more diverse organisational forms enabled by speedy and cheap information sharing.”

There were no or only small differences in productivity for firms that had a website or made online purchases, other variables revealed big differences.

They included the fact that firms that made substantial online sales were up to 25 percent more productive than the average firm in their industry, and that firms with almost all staff online were as much as 16 percent more productive. In addition, companies that used fibre connectivity were up to 12 percent more productive.

Ninety-six percent of Kiwi firms had internet access, but the report authors warn that how well firms make use of the internet is more important than being connected.

“Around three quarters of firms use the internet to interact with the government (it must help that GST returns and other common tax processes are online), and about the same number use the Internet to buy goods and services.

“Firms are much less developed in receiving orders online, with 45 percent reporting doing so in 2012 (most of which is by email) and only 11 percent reporting that online sales contributed 10 percent or more of total sales.

Only 10 percent of firms report any sales to customers outside New Zealand, 19 percent allow ordering of goods and services via their websites and 12 percent of businesses accept online payments.” 

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