Tuesday, November 09, 2004

The lethal 13 % solution -from SME to BRK?

Sorry for getting around to this after the fact, but there were amusing telecoms stories to tell. The Latvian Information Technology and Telecommunications Association (LITTA) reported on October 26 that Latvian software companies recorded only 13 % of their sales as being to small and medium-sized enterprises (SMEs). The average for Eastern Europe is 42 %. Even accounting for a high rate of "unofficially obtained" software, this means that the use of IT at SMEs is at best well below the average for the region (i.e. assuming about 50 % use IT, but don't have licences, bringing the uptake rate to 26 %).
To my mind, IT plays the role of electricity say, 110 years ago. Companies in the 1890s are said to have had vice-presidents for electricity, some had their own generators and power plants. Now, asking whether a company runs on electricity will qualify you as an idiot in Latvia and anywhere else. Yet information processed by IT systems is the electricity of business since the 1980s at least. It certainly is in the 2000s, and the pace of change is much faster than when businesses electrified more than a century ago.
Some years ago I met some Swedish businessmen from the wood processing sector. One said that he had one and only one initial question for any potential Latvian partner: can you work with numerically driven machine tool files? In other words, FORGET IT if you do not have an IT driven, networked production line where I can stick in a diskette in Stockholm and have tabletops machined Latvia and delivered, say, a week later.
No amount of craftsmanship, no hard working best practice Latvian handicraft will get you past that. Unfortunately, the figures show that Latvian SMEs are at best, good mid-1950s small businesses by global and EU standards. Do we see any 50s-style businesses around anymore? No!
These indicators of SME IT use in Latvia are a signal that in the EU/global market, a very large number of Latvian SMEs are going to be business road kill (BRK) very soon. For readers who don't know American slang, road kill are the flat squashed remains of animals who, if there is any expression left, look like they don't know what hit them.


Anonymous said...

LITTA reported on October

Juris Kaža said...

A correction has been posted.