Sage SME Business Sentiment Index 2011


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The Sage SME Business Sentiment Index 2011 is a recent project that BrandMatters worked on for Sage Software Australia, a client of ours for over five years. The project involved an extensive qualitative and quantitative research programme and the development and execution of an integrated communications campaign.

For those of you unaware, Sage is a leading, global business management software specialist, with over six million clients across 29 countries. The Sage SME Business Sentiment Index is based on a comprehensive market research study we ran, involving over 600 business owners, decision makers and business experts across all business sizes and industries in Australia. The SME index is a demonstration of the Sage brand promise – Sage lives and breathes SMEs’ businesses.

The SME Index forms part of a sophisticated, integrated Sage campaign which is currently in market, combining traditional media (TV and print) and digital. The campaign has two objectives – to build the Sage brand profile and to generate high-quality sales leads.

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Sage SME Business Sentiment Index 2011

  1. 1. SageSME BuSinESSSEnTiMEnTindEx2011
  2. 2. Contents01 04 20 This report Introduction Australia versus the World02 05 23 Executive summary Business insights Conclusion03 13 24 The research Technology insights Appendix
  3. 3. This reportAs the business world emerges from the ravages of Based on a comprehensive market research programmethe Global Financial Crisis (GFC), Australian business involving over 600 business owners and decision makersowners are now turning their attention to the future and and multiple in-depth interviews with business owners,considering what this holds for them and their businesses. decision makers and business experts across all business sizes and industries, the report highlights businessFollowing recent years of dire economic news and gloomy feeling about:market conditions, many firms are now moving from amore protective to a more proactive frame of mind in current business confidence levelsanticipation of better times ahead. the real impact of the GFC the business challenges faced in the past 12 monthsIn Australia, the combination of low unemployment and and those that lie ahead during the next 12 monthsa healthy resources sector is serving to sow the seedsof greater confidence for 2011 and beyond. Across the attitudes towards a range of issues including labour,country, many businesses are now starting to brush business planning and management, and key businessthemselves off. investment priorities.This report, commissioned by business management As part of the research, respondents were also quizzedsoftware specialist, Sage, is the first in a regular series. about their attitudes toward business informationAs a leading provider of software to SMEs, the company technology. The objective being to gain an understandingis committed to having a deep understanding of the needs of how vital a role IT and more broadly technology isand issues facing its customers. Sage lives and breathes playing and how recent technical developments are beingbusiness, and this report is an important part of this vision. evaluated and adopted.This report shines a definitive light on what is happening The picture that has emerged is both compellingacross the Australian business landscape. It checks the and complex.pulse of businesses to determine the strength of recoveryand general sentiment around what has happened over Sage believes insights from this report will assistrecent times and, critically, what is to come. businesses in determining how they can best move forward in a post-GFC world. By better understanding the challenges and issues, they can be better prepared for what lies ahead. Sage SME Business Sentiment Index 2011 1
  4. 4. Executive summaryWhile many people believe Australia managed to escape the harshestravages of the GFC, the economic turmoil that reverberated aroundthe world still had a significant impact in this country.Stilted revenue growth, increased competition and Interestingly, more than half of those surveyed said theycash flow problems have resulted in many businesses were planning to increase their use of online softwarereducing investment and curtailing marketing activities. or services and identified better usage of mobile andThree-quarters (75%) of businesses state that their costs handheld devices as a priority for the future. Furthermore,have increased since the GFC, but that revenues haven’t integrated business software was preferred by almostgrown by the same margin. two-thirds of businesses compared with standalone business software. However, two-thirds of businessesWhile Australian businesses believe they are now state they still do not currently have any integration ofperforming better than they did during 2010, in ‘big their business software at all.picture’ terms they don’t feel the economy is completelyrecovering. As a result, confidence levels are only With regards to the internet, 7 in 10 businesses recognisemarginally positive for the year ahead. that having an online presence is essential to the future success of their organisation, however 40% see developingWhen it comes to challenges, rising costs was ranked as such a presence as being too complex or expensive.the number one concern in 2010. Businesses surveyed The research also found that while more than 80% ofbelieve this issue will continue to top the list during 2011. businesses think a website of some sort is relevant to their operations, only 6 in 10 have actually established a siteOther challenges being faced over the next year include of their own, highlighting the lack of optimisation of themanaging cash flow, accessing new markets and internet as both a communication and sales channel.attracting new customers. These are exacerbated byadmitted ‘planning gaps’ within many businesses. They Overall, the research has provided a valuable insight intounderstand the challenges they face but state they do trends and issues facing Australian SMEs, an indicationnot have clear plans with which to tackle them. of how positive they are feeling about the future, and evidence of the plans they are putting into place.Rounding out the list of challenges is the growing shortageof skilled staff. Indeed, 6 in every 10 businesses reportthey are struggling to fill internal vacancies.On the technology front, businesses reported investmentin this area would be the number one priority during thenext one to two years, once more funding was found.2 Sage SME Business Sentiment Index 2011
  5. 5. The researchThe research underpinning the report was gathered Questions used during the research were grouped intothrough a three-stage process and uses input from more four sections, each designed to illicit an accurate picturethan 600 SME businesses across Australia. of business sentiment and future plans. Stage One involved a series of qualitative in-depth Section 1 examined current business confidence interviews conducted with business owners across a levels compared with the previous 12 months, whether range of different industry sectors, using the Australian businesses felt they were recovering and the biggest and New Zealand Standard Industrial Classification challenges being faced. (ANZSIC). This stage was designed to gain in-depth insight into the issues faced by business owners during Section 2 looked at business attitudes since the GFC 2010 and provide material that could be compared to and how these have changed. Topics covered included results found later in the research process. labour and staff, business planning and attitudes towards investment in business technology. Stage Two comprised hypothesis research and involved a series of qualitative in-depth interviews with a Section 3 covered opinions on business software range of business experts. These included a number of including what systems were currently being used, leading academics, journalists and business specialists. plans for upgrades and major concerns regarding The objective of this step was to glean an understanding IT infrastructure. of the medium and long-term business challenges for Australian businesses. Section 4 was used to gather classification information such as the size of each business, their industry sector Stage Three was a nationwide quantitative study and details about the respondents themselves. comprising telephone interviews with 613 business owners and decision makers covering all Australian Information gleaned using these four sections during the business sizes, states and ANZSIC industry categories, three-stage process forms the basis for the findings of conducted across February and March 2011. Results this report. were weighted by employee size, state and industry back to current ABS statistics. This step was designed to validate the issues being faced by business both now and into the future. Sage SME Business Sentiment Index 2011 3
  6. 6. IntroductionAccurately gauging business As a result, businesses are facing Underutilisation of the websentiment is no easy task. While significant challenges as they cope While recognising the importancemedia reports and anecdotal with changing market conditions. of information technology, someevidence provide some insight into 40% of businesses believewhat is occurring, the only way to The challenges include: establishing an online presence iselicit an accurate picture is to speak too complex or expensive. Whiledirectly with businesses across Limited revenue growth 82% see a website as beingthe country. Softer economic conditions relevant to their operations, only combined with increased 63% actually have one in placeThis interview process was used to competition have led to agenerate the content of this report. reduction in real growth for many Poor software integrationThe result is a unique insight into businesses. As a result, many Integrated business software ishow positive Australian businesses have reacted by reducing business the preferred option for two-thirdsare feeling now, their recent activity investment and cutting back on of those surveyed. However,and their plans for investment and promotional spending interestingly, two-thirds of allexpansion during the next 12 months. businesses still do not have any Rising costs integration of business softwareThe research comes at an important Despite a strong Australian dollar, at all.juncture, as the national economy businesses report that costscontinues to be influenced by continue to be their number one Such results paint a mixed picture forsignificant macro-economic forces challenge for 2011. Factors such Australian business. On one hand, asaffecting countries throughout the as wages pressure, rising materials is clearly illustrated within this report,world. While the Australian economy prices and increases in power businesses believe their operation ishas fared better than most, it has not and water charges are all taking performing better compared to thisbeen completely immune from the their toll time last year. On the other hand,fallout of bank collapses, sovereign there are still significant challengesdebt crises and foreign fiscal stimulus Staff shortages that clearly need to be addressed.programs. Furthermore, the spate Of those businesses in expansionof recent local and international mode, many are reporting This report provides detail on thesenatural disasters have only served to difficulties in finding appropriately challenges and offers insight into somecompound the lack of clarity around skilled staff. Three-quarters (76%) of the steps Australian businesses arewhere the economy is really headed. also admit they have not put in taking to address them. place reviews and career plans for every employee during the past 12 months4 Sage SME Business Sentiment Index 2011
  7. 7. Business insights The research uncovered a range of key insights which serve to create a clear picture of the mood and activity of Australian businesses. They cover a range of areas from overall confidence and optimism through to attitudes towards planning, staffing and investment. Sage SME Business Sentiment Index 2011 5
  8. 8. Australian businesses feel they are now performingbetter than in 2010, but in ‘big picture’ terms theydon’t believe the economy is recovering to thesame degree.Insight 01Business confidence levels marginally improvingOverall, Australian businesses feel Looking ahead, 33% of those Total confidence for business inthey are performing better now surveyed reported feeling more year ahead compared to this timethan they did in 2010, buoyed by confident about the year ahead while last year by business sizerelatively stable economic conditions 28% said they were less confidentand a gradually improving macro- than they had been in the previouseconomic climate. Indeed, 38% 12 months. This represented a net 37%of those surveyed reported better 5% improvement from the previousperformance this year with just 17% 12-month period. By business sizesaying things had become worse. the picture differed quite considerably, with micro businesses less confidentHowever, when it comes to the overall but small, medium and largeAustralian economy as a whole,31% said they believed things were businesses conversely feeling more 33% 28% bullish about the next 12 monthsrecovering, compared with 30% compared to this time last year.who felt it was continuing to decline. 2%This represented a 1% improvementwhen compared with the previous No different No opinion12 months, showing a negligible Less confident More confidentincline rate.Confidence for business in year aheadcompared to this time last year by business size Micro Small Medium Large % businesses businesses businesses businesses More confident 30 51 48 49 No different 39 25 28 23 Less confident 29 23 23 27 No opinion 2 1 1 16 Sage SME Business Sentiment Index 2011
  9. 9. The GFC had a significant impact on Since the GFCbusiness in Australia. Many have reacted 75 said costs increased, % but revenues hadn’t byby reducing reinvestment and cutting the same marginback on advertising and marketing. 62 report customers % demanding lower prices 60 report greater cash % flow issues than beforeInsight 02The GFC is still bitingDespite significant fiscal stimulus To make matters worse, 6 in 10 So, while economic conditionsactivity by the Australian Federal (62%) businesses report customers appear to have stabilisedGovernment, the country has not have been demanding lower prices more recently, the effects ofbeen immune to the challenges for the same goods or services the GFC continue to be feltcreated by the GFC. since the GFC, putting an even by Australian businesses. greater squeeze on profit margins.While Australia has not witnessed This, in turn, has led to 60% of Furthermore, when breaking downthe financial and property sector businesses reporting they’re the data by state (as detailed in themeltdowns that have occurred experiencing greater cash flow table below), the effects of thein other countries, businesses issues than in pre-GFC conditions. GFC appear to have been felthere have still felt the chill winds more by businesses in the state ofof economic turmoil. Soberingly, 43% of businesses report Queensland, but relatively less so they have not reinvested as much by those in Victoria/Tasmania.Of those surveyed, 75% of money back into their businessesbusinesses said their costs had as in the previous 12 months,increased since the GFC, however while 42% say they have reducedrevenues had failed to keep pace their spending on advertising andover the same period. promotional activities.Reported issues compared to pre-gFC by state % Who agree Total NSW/ACT VIC/TAS QLD SA/NT WA Costs have increased since gFC, but 75 78 64 84 67 85 revenues haven’t by the same margin Customers demanding lower prices 62 62 51 76 55 62 for same product or service Had more cash flow issues than before 60 60 44 83 60 59 the gFC Haven’t reinvested as much money back 43 53 32 42 26 55 into the business since gFC Reduced advertising and other promotional spend to save money 42 40 33 42 70 53 since the gFC Sage SME Business Sentiment Index 2011 7
  10. 10. Margin pressure seems to be everywhere as the rising cost ofenergy, commodities and other inputs hit manufacturers, as frugalcustomers and price deflation put a squeeze on retail margins andas the strong Australian dollar hampered just about everyone else.Victoria Tait, Online Stocks Editor, Morningstar (7th March 2011).Insight 03Rising costs not being counteredby business planningWhen it comes to operating will have a compounding effect on Total rising costs in 2010, 2011,costs, 47% of survey respondents profits if revenues are not realised planned for and planning gap (%)identified it as the biggest business this year.challenge of 2010 while 39% saidit remained top of the list in 2011,ranking it equal first alongside Furthermore, the table below highlights how gender and state 47gaining new customers. differs around this issue of rising 39 costs. Of particular note is: 33However, while acknowledging thatrising costs represent a significant the degree to which rising costschallenge, only a third (33%) of are an issue in the resourceAustralian businesses say they have rich states of Queensland,documented plans in place to deal Western Australia and alsowith this issue. for female business owners -6It therefore comes as somewhat how much of the planning Rising costs a key challenge in 2010of a surprise that such a significant gap comes from Queensland Rising costs a key challenge in 2011‘planning gap’ exists for the majority (and to some degree from Prepared or planned for rising costsof businesses. It is likely that this gap New South Wales/Australian Capital Territory), but not Western Planning gap (minus score represents a gap) Australia, Victoria, South Australia or Northern Territory.Rising costs by gender and state Male business Female business % Who said owners owners NSW/ACT VIC/TAS QLD SA/NT WA Rising costs a key challenge 43 58 42 48 52 38 63 in 2010 Rising costs a key challenge 37 46 34 33 52 36 51 in 2011 Prepared or planned for 31 38 29 36 25 38 54 rising costs Planning gap (minus score -6 -8 -5 +3 -27 +2 +3 represents a gap)8 Sage SME Business Sentiment Index 2011
  11. 11. For the next year 39 identified new customers % and rising costs as key challenges 34 identified cash flow as % a key business challengeInsight 04Gaining new customers and managing cash flowkey focus for 2011As businesses continue to grapple When compared with the previous However, for key business issueswith a range of ongoing challenges, 12-month period, gaining new such as recruiting employees andthe way in which those challenges customers and cash flow have lack of funding, businesses reportare ranked is changing over time. increased as challenges (up 4% having gaps in their planning. and 3% respectively), possiblyOf those surveyed, 39% identified in response to the rising costs Clearly, businesses are struggling togaining new customers and rising they faced in 2010. Furthermore, find solutions to staff shortages andcosts as the key challenges they will businesses appear to have planned the ongoing lack of credit available.face over the next year. This was for gaining new customers andfollowed by managing cash flow managing cash flow.(34%) and maintaining or growingrevenue (33%). Key business challenges for Australia – Past year Next year Change Clear plans in place for Planning gap past year, next year and planned for % % % % % Rising costs 47 39 -8 33 -6 Maintaining or growing revenue 37 33 -4 41 +8 gaining new customers/accessing markets 35 39 +4 39 0 Managing cash flow 31 34 +3 44 +10 Recruiting employees 25 25 0 22 -3 Lack of funding/access to capital 25 24 -1 17 -7 Increased competition 17 14 -3 22 +8 Investing in technology 10 10 0 23 +13 Investing in innovative products and services 6 9 +3 18 +9 None of these 5 6 +1 28 +22 Sage SME Business Sentiment Index 2011 9
  12. 12. Business planning... we haven’t sat down andevaluated and planned the business. We don’thave time to look at how to ‘work the business’and how to work it better.Construction SME.Insight 05Business planning seen as critical but underutilisedProper planning is fundamental To exacerbate this situation, justto business success, ensuring an 1 in 5 (20%) of businesses saidorganisation has a clear picture of they had consulted a businesswhere it is headed and what needs expert or consultant to help withto be done to get it there. Indeed, the planning process and only 36%three-quarters (76%) of australian had conducted any sort of formalbusinesses surveyed for this report research to better understand whatsaid they believed formal written their customers needed in the pastbusiness planning was critical to 12 months.the future success of their business. Such results are of considerableBut despite this awareness, more concern as a lack of properthan half (53%) of participants said planning leads to inefficienciesthey didn’t have the time needed and lost develop regular formal businessplans each year. Indeed, only However, a group who emerged40% had managed to implement as being more likely to conducta business plan during the past regular formal business plans12 months. were technology focused business owners. In particular, they were more likely to see formal written business planning as essential to the future success of their business and were more likely to have implemented a business plan during the past 12 months.10 Sage SME Business Sentiment Index 2011
  13. 13. I have had one guy approach me ‘can I 60 struggle to find % skilled staffhave a wage increase’ and you don’t wantto say ‘no’. You don’t want to refuse them 31 report existing staff % demand wage increasesbecause you don’t want them to walkbecause it is so hard to get staff. 47 have increased payManufacturing SME. % during the last 12 monthsInsight 06Staff shortages evident and retention measures lackingAcross Australia, the research But, while businesses clearly These results show a clear gapfound the majority of businesses understand the importance of between what is required and what(60%) are struggling to find retaining existing staff, surprisingly is actually happening within manysufficient numbers of skilled staff to few have structures in place to businesses. Should this gap not bemeet their requirements, an issue help this occur. Although 58% addressed, the challenges of findingthat unsurprisingly increases for of businesses state that yearly and retaining quality staff will belarger businesses. staff reviews are a critical part of further exacerbated in the future. keeping staff engaged, only 24%This trend is being exacerbated have undertaken and implementedby the fact that 3 in 10 (31%) of reviews and career developmentbusinesses report existing staff plans for every employee in the pastare beginning to make demands 12 months. Furthermore, whilst largerfor wage increases. As a result, businesses are more likely to carryalmost half (47%) say they have out these HR related tasks, the gap isincreased pay levels during the clearly evident at all business levels.past 12 months. Again, this issuebecomes more pronouncedas business size increases.Staff issues by business size Micro Small Medium Large % Who agree Total businesses businesses businesses businesses Struggling to find skilled staff 60 58 75 76 80 Staff beginning to make more wage demands 31 29 38 48 54 Have increased pay levels in the past 12 months 47 44 56 68 77 Yearly written reviews and career development plans 58 55 69 85 92 are essential to keep staff engaged Written and implemented clear reviews and development 24 22 30 41 57 plans for every employee in past 12 months Sage SME Business Sentiment Index 2011 11
  14. 14. Key differences are seen by size in terms of attitudesregarding business priorities, if budget is available.Employee training is the number one issue for small,medium and large businesses.Insight 07Different business size = different prioritiesAlthough discretionary spending is Interestingly, the area of employee Key priority for greater investment,clearly constrained due to ongoing training (nominated by 28% of all if more budget available (%)challenges and economic conditions, businesses) increases in importanceAustralian businesses still have a as the size of the business grows.clear picture of where extra funds It was nominated by 45% of small 36would be spent if and when they businesses and 52% of largebecome available. businesses as a key priority. 35 33While, understandably, priorities Information technology followed a 32vary depending on the size of the similar pattern, being nominated 28business (micro, small, medium and by 28% of small businesses butlarge), certain consistencies emerged by 51% of large businesses. The 26from the research. results clearly show how attitudes 26 to business priorities change as 9When asked to nominate the key businesses grow.priorities for investment should morebudget become available, information Technologytechnology was nominated by more Marketingthan a third (36%) of all businesses, Recruitment of staffclosely followed by marketing (35%) Web presenceand staff recruitment (33%). Employee training Premises/infrastructure Sales Export markets12 Sage SME Business Sentiment Index 2011
  15. 15. Technology insights The research conducted for this report also uncovered some interesting insights intoattitudes and plans concerning information technology. A keyingredient in modern business, IT plays a vital role within organisations of all sizes. Sage SME Business Sentiment Index 2011 13
  16. 16. Clearly, as business assets, technology #1 technology seen as number 1 priority forand the web are now regarded by business greater investmentdecision makers as being critical. 54 plan to increase online % software and services women are more predisposed towards technology business ownersInsight 08Technology a key investment priorityWhen it comes to technology within next 12 months. Allied to this, 60% business owners appear to be morebusinesses, owners clearly regard said they believed it would be critical predisposed towards technology,information technology as crucial for employees to have access to this the use of online software andto business success. As shown software from mobile devices. services and having a web presenceearlier, 36% said technology was a compared to their male counterparts.key priority for greater investment In terms of the internet as a business Possibly a function of their greaterover the next one to two years, if tool, businesses clearly see continued involvement with retail and relatedthey had more budget for business investment in a web presence for businesses, it clearly demonstratesdevelopment. This topped other their operation as critical. It was the heightened awareness womenpriorities such as marketing (35%) ranked 4th as a key priority behind have for the opportunities forstaff recruitment (nominated by 33% technology, marketing and staff technological and IT relatedof businesses), employee training recruitment, if budget was available. business solutions.(28%) and also sales (26%). These results clearly reiterate theFurthermore, more than half of all essential role that business ownersbusinesses (54%) said they were see IT and technology now playing inplanning to increase their use of day-to-day business software and services in the Interestingly, as seen below, womenTechnology use by gender % Who said Total Male business owners Female business owners See investing in technology as a key priority 36 31 48 for investment, if more budget available Plan to increase use of online software and 54 51 62 services in next 12 months See investing in web presence as a key priority 32 28 43 for investment, if more budget available14 Sage SME Business Sentiment Index 2011
  17. 17. Until recently we had two systems that 63 agreed that integrated % software would helpwere not integrated, one for payroll and efficiencyone for job costing. It was so frustrating 67 said they don’t have %and time consuming. integrated softwareDistribution and logistics SME.Insight 09Integrated business software preferred but not usedAs organisations grow, they often But despite this acknowledgement, Integration attitudes andsupport that expansion through 67% of businesses said they did behaviour by business size (%)the adoption of business software. not currently have any integratedThese are frequently selected to software in place. Indeed, only Integrated rather than standaloneperform a particular task and are 17% currently had an integrated business software really helpspurchased at varying times from HR/payroll and ERP/accounting businesses run more efficientlydifferent vendors. However, such software platform, and only 14%purchases are often made without had integrated their ERP/accountingan overriding software integration and CRM software. Furthermore, 63plan which can make it more difficult 4 in 10 large businesses stated 59to share communal business data, they did not currently have any 78help streamline workflows and thus integrated software in their business, 80create greater efficiencies. a surprisingly high score. 85For this reason, almost two-thirds There is clearly a disparity(63%) of all surveyed businesses between the acknowledgedagreed that integrated (rather than benefits of integrated software Proportion who do not currently have integrated software at allstandalone) software would help and its level of usage across allthem to operate more efficiently. Australian businesses. 67 70 52 52 39 Total Micro businesses Small businesses Medium businesses Large businesses Sage SME Business Sentiment Index 2011 15
  18. 18. Many businesses see online solutions as critical 82 said having a website % would be relevantto their future, however costs and complexityare hampering uptake. The online channel is 63 said they have %not being optimally used by businesses to a website in placehelp sell or market their business.Insight 10Online presence seen as critical to success of organisationWith the internet becoming an Yet, 40% also believed that creating only 34% actually had such a siteincreasingly important business tool, an online presence would be too in place. Additionally, having aAustralian companies are developing expensive or complex for them to site which allowed customers toa strong understanding of how it can consider. Furthermore, consistent purchase goods and services onlinebe used as part of their operations. with women’s greater current was seen as being of potential predisposition towards technology benefit by 31% of respondents,As well as an efficient and web presence, more women however only 20% actually hadcommunications conduit, they see business owners and decision such a site up and running.the ways in which IT can be put to makers tended to see having anwork as a mechanism for improving online presence as critical to the Clearly there are significant localcustomer awareness and driving future of their business. (and global) opportunities beingsales revenue for their operations. lost by Australian businesses When it comes to having a website through the lack of adoption ofOf those surveyed, almost 7 in 10 in place, more than half of all online technologies. Addressing(68%) of businesses nominated surveyed (51%) said having a site this shortfall could potentially havehaving an online presence as critical with details of their products and a demonstrable impact on manyto the success of their operation. services would be of benefit, yet business’s bottom lines.Online presence by gender Male business Female business % Who said Total owners owners Having an online presence is critical to the future success of our business 68 66 73 Developing an online business solution too expensive or complex to consider 40 39 43 Way in which web is more relevant to business Having a website with products/services shown but customers can’t order or buy from 51 51 51 Having a website with products/services shown where customers can order or buy from 31 29 35 Neither of these 18 20 14 Current web presence Do not have a website 37 35 41 Have a website that just features contact details 10 10 10 Have website with products/services shown, but customers can’t order from 34 37 25 Have website with products/services shown, where customers can also order from 20 18 24 Have a website – total 63 65 5916 Sage SME Business Sentiment Index 2011
  19. 19. The main concerns for business when it comesto IT infrastructure are maintenance, security,backup and recovery and overall costs.Insight 11Maintenance, security and backup seen as essentialWhile having an IT infrastructure Overall costs were mentioned by The results show maintenance andin place is one thing, ensuring it just 19% of those questioned, but security are clearly the most pressingcontinues to reliably support business was more of an issue for small IT issues for business. This goesactivity is another. businesses particularly. hand in hand with the critical role that an IT infrastructure plays in businessWhen asked to spontaneously Of the issues much further down the core activities.nominate their chief concerns priority list, 8% named the ability toregarding their business’s maximise return from IT infrastructureIT infrastructure, 29% mentioned and compliance, 4% deployment,maintenance, 24% security, and 20% 3% vendor relationships andpointed to backup and recovery. By 2% data leakage.subgroup, maintenance emergesas the biggest issue for microbusinesses, but drops away forthe larger businesses, with securitybecoming the most critical issuefor them.Main IT infrastructure concerns by business size and gender % Main business concerns Male Female regarding business’s IT infrastructure Micro Small Medium Large business business (spontaneous response) Total businesses businesses businesses businesses owners owners Maintenance 29 31 21 18 21 27 35 Security 24 22 37 30 35 24 26 Backup and recovery 20 19 25 27 33 24 11 Overall costs 19 18 26 17 12 15 29 Capacity to maximise 8 8 11 15 16 7 13 IT infrastructure potential Compliance 8 7 14 11 13 6 12 Deployment 4 4 3 2 9 5 2 Vendor relationship 3 2 9 5 3 3 3 Data leakage 2 2 6 8 10 2 3 None of these 26 27 21 15 11 25 28 Sage SME Business Sentiment Index 2011 17
  20. 20. Larger businesses clearly see the potentialbenefits of web access for employees tobusiness software.Insight 12Accessibility of software via the Insight 13 Upgrading* softwareweb important for larger businesses high on the priority listWhen asked about staff accessibility to software via When it comes to undertaking software upgrades,the internet, an impressive 7 in 10 (69%) believed it was ensuring that this software is current is high on theimportant that they could access CRM systems via priority list for many businesses.this channel. Whilst this statistic is derived from thosebusinesses that use such software, the findings are The software area most likely to have been recentlyconsistent across all business sizes. refreshed is the Customer Relationship Management (CRM) system. 53% said they had undertaken a majorAdditionally, almost one-third (32%) suggested CRM upgrade during the past 12 months while aHR/payroll software, one-quarter (25%) suggested further 35% said they had done so sometime within theERP/accounts software and 1 in 9 (11%) suggested past one to four years. Just 11% admitted that it hadpayroll only software was important to access via the web. been more than four years since a CRM upgrade hadThe major differences for these software types comes been undertaken.when looking at medium and larger businesses, who weremuch more predisposed to the potential of accessing During the past 12 months, the majority of businessesthis software via the web. This clearly highlights the quite sampled had also upgraded their payroll (51%) or HRdifferentiated needs that businesses have towards the and payroll (50%) systems. ERP and accounting systemsvarying software types. had been upgraded by 48% of respondents in the past 12 months.Importance of web access to business software by business size % Who see access to business software Micro Small Medium Large via web as important Total businesses businesses businesses businesses CRM software 69 69 66 77 79 HR/payroll software 32 31 16 44 75 eRP/accounting software 25 22 25 50 62 Payroll only software 11 10 14 25 48* upgrading software was described to respondents as where a business had either paid for a new version or changed their software entirely.18 Sage SME Business Sentiment Index 2011
  21. 21. Most businesses ideally prefer to buy their own software,however large businesses are significantly more likely toprefer to rent, compared to the total. Most businessesprefer to have their software installed on their owninfrastructure, and this does not differ for large businesses.Insight 14Owning software currently the preferred optionWhile topics such as cloud That said, large businesses are The clear implication is that whilecomputing and Software-as- considerably more likely to prefer the future of IT and technologya-Service (SaaS) are capturing to rent software compared with the is obviously gearing towardssignificant attention within the total who prefer to rent. processes such as cloud and SaaS,IT sector, when asked, the majority australian businesses appear to beof businesses still prefer to given the option of running treading cautiously. The reasonspurchase their own applications as the packages on their own for this are perhaps a result ofopposed to renting them from their infrastructure or opting for a hosting a current lack of awareness orsoftware supplier. partner, the results were similarly knowledge around how it will work skewed. asked whether they in practice, underpinned by theWhen questioned whether they would prefer using their installed current main IT concerns identifiedwould prefer to buy or rent their infrastructure, 91% said yes when earlier around maintenance (will itpayroll application, 95% of all it came to eRP and accounts, still work smoothly if I do this) andbusinesses opted to buy. This 89% for Payroll, 83% for HR and security (is it as safe as how weremained at 88% for eRP and payroll and 80% for CRM. currently do it). Until these concernsaccounts packages, 84% for are demonstrably addressed,HR and payroll and 73% for The results changed slightly for businesses will remain circumspect.CRM software. larger businesses, but the trend of purchasing software and running it internally remains very strong. Sage SME Business Sentiment Index 2011 19
  22. 22. Australia versus the World While research for this report provides insights into the challenges faced in 2010 and going forward into 2011 within Australia, it’s also interesting to contrast some of these findings with other countries. Sage conducted a similar global market research programme* to Australia’s study across a number of countries, including the USA, UK, Germany, France and Canada. A snapshot of the challenges facing businesses across the developed world in 2010 and 2011 is included on the next couple of pages and serves at a broad level to illustrate the similarities and differences across some core developed economies.* The Sage global research programme was conducted as an online self completion study amongst customers of the Sage business in each country. Replicated questions from this global study were used where appropriate in the australian research programme to ensure comparable findings. The sample sizes in each country were: UK (1510), US (663), Canada (584), France (2096), germany (1602). The research was conducted in November and December 2010.20 Sage SME Business Sentiment Index 2011
  23. 23. Insight 01Consistency across developed countries regardingtop four challenges facing business in 2010When it comes to the key issues that For example, the challenge of dealing Comparison of the issuesfaced businesses in 2010, there was with rising costs ranked top of between countries is interesting asa remarkable consistency across business lists in Australia, the USA, it brings home the point that manythe globe in terms of the rank order Canada and the UK. In Germany it business concerns are shared byof the issues that they faced last ranked at number two while in France businesses despite being in veryyear. Despite being in economies it was number three. different geographic locations andin different stages of recovery, it the results also tend to underpin theappears as though the majority of Understandably, growing revenue commonly accepted concept of thebusinesses shared similar challenges, ranked as the number two concern ‘global economy’.highlighting some common pressing in Australia, the USA, Canada,issues facing businesses across but topped the list in France andthe world. Germany. In the UK it was listed at number three. AUS USA CAN UK FRA GER % Who state issue as a key challenge last year % Rank % Rank % Rank % Rank % Rank % Rank Rising costs 47 1 50 1 53 1 51 1 35 3 45 2 Maintaining or growing 37 2 45 2 39 2 38 3 52 1 48 1 revenue gaining new customers/ 35 3 38 3 30 3 37 4 28 4 34 4 accessing markets Managing cash flow 31 4 34 4 29 4 51 2 47 2 38 3 Recruiting employees 25 5 12 7 27 5 12 7 24 6 23 6 Lack of funding/ 25 6 20 5 17 6 20 5 16 7 11 7 access to capital Increased competition 17 7 16 6 16 7 19 6 26 5 26 5 Investing in technology 10 8 8 8 7 8 6 8 9 8 8 8 Investing in innovative 6 9 5 9 4 9 4 9 8 9 8 9 products and services Sage SME Business Sentiment Index 2011 21
  24. 24. Insight 02Consistency continues into 2011,but European countries differ somewhatLooking at 2011, there is again broad Other issues that made the top ofconsistency when it comes to listing the lists in each surveyed countrythe top four key business challenges included gaining new customers,across the surveyed countries. managing cash flow and maintaining or growing revenues.Inflationary pressures around risingcosts continues to top the list inAustralia, the USA, Canada and theUK with French businesses puttingit at number four and German firmsat number three. AUS USA CAN UK FRA GER % Who state issue as a key challenge next year % Rank % Rank % Rank % Rank % Rank % Rank Rising costs 39 1 53 1 49 1 50 1 29 4 36 3 gaining new customers/ 39 2 40 3 33 3 42 4 36 3 45 2 accessing markets Managing cash flow 34 3 32 4 25 4 45 3 40 2 35 4 Maintaining or growing 33 4 47 2 48 2 48 2 61 1 59 1 revenue Recruiting employees 25 5 13 7 23 5 10 7 22 6 23 6 Lack of funding/ 24 6 19 5 14 7 19 5 10 9 5 9 access to capital Increased competition 14 7 17 6 19 6 18 6 23 5 25 5 Investing in technology 10 8 7 8 10 8 7 8 11 8 8 8 Investing in innovative 9 9 4 9 5 9 6 9 13 7 13 7 products and services22 Sage SME Business Sentiment Index 2011
  25. 25. ConclusionThe results drawn from the research provide compelling insights into currentattitudes and behaviours among Australian businesses and how they arereacting to and changing as a result of recent conditions.While there is evidence that Australia Across the country, businesses are There is also interest in the emergingescaped the worst of the GFC, also concerned with finding new areas of Software as a Service (SaaS)it remains clear that businesses customers, managing cash flow and and hosting platforms as ways toin this country did not avoid its attracting sufficiently skilled staff. A glean more value from IT investments.effects entirely. key concern here is that many admit However, the research shows that they don’t have comprehensive plans adoption of these technologies is stillEncouragingly, confidence levels that in place to tackle these challenges, relatively low.sagged during 2009 and 2010 have leaving them exposed should marketrisen, but still lag the levels enjoyed conditions toughen in the year ahead. Overall, the research paints a pictureprior to the global crisis. Individual of a business community that isbusinesses say they are feeling more On the technology front, businesses increasingly positive, but also realisespositive, but that they don’t believe understand the important role there are significant challenges thatthe broader national economy has IT infrastructure plays in their still remain in the year ahead. Thesefully recovered. operations, but also realise more challenges will be examined in the needs to be done. While maintenance next Sage Business Sentiment IndexWhen it comes to current challenges, and security rank high on priority lists, Survey report scheduled for 2012.continually rising costs remain at the many are also keen to make bettertop of the list for large numbers of use of the internet as a business tool.businesses. This is understandableas services such as power and wateras well as component materialscontinue to increase in price. Sage SME Business Sentiment Index 2011 23
  26. 26. AppendixThe researchThis report is based on interviews with 613 businesses across Australia.Results were weighted to ABS statistics to ensure accurate representationof states, industries and business size.Sample sizes and weighting approach State Sample size Business population sizeNSW/aCT 211 704,814VIC/TaS 184 554,184QLD 85 419,401Sa/NT 70 158,300Wa 63 213,446 Total 613 2,051,085 No of Employees Sample size Business population sizeUp to 4 employees 160 1,727,3805-19 employees 177 233,95720-199 employees 196 89,748200-999 employees 80 Total 613 2,051,085Industry weighting approach Industry Sample size Business population sizeagriculture, Forestry, Fishing, Mining 51 211,762Manufacturing 84 91,840electricity, gas, Water 3 5,570Construction 76 341,622Wholesale Trade 31 76,300Retail Trade 72 139,611accommodation, Cafes, Restaurants 28 77,107Transport and Storage 28 133,265Communication Services 9 17,988Finance and Insurance 15 149,643Property, Business, Professional and 68 448,922Technical Servicesgovernment, admin and education 55 108,168Health and Community 58 92,389arts, Recreation and Other Services 35 112,966 Total 613 2,007,15324 Sage SME Business Sentiment Index 2011
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  28. 28. FOR FURTHER INFORMATION CONTACT:Elena EspositoSage Software Australia Pty Ltd374 Scarborough Beach RdInnaloo WA 6018+61 (0)8 9245© Sage Software Australia Pty Ltd 2011