Case Study - Turkish Program Removes ICT Roadblocks for Small and Medium-Sized Manufacturers
Case StudyTurkey Manufacturing SuccessIntel World Ahead Program Turkish Program Removes ICT Roadblocks for Small and Medium-Sized Manufacturers The Turkish government’s Target: ICT for SME initiative, with support from the Intel World Ahead Program, is helping smaller manufacturers use information and communications technology (ICT) to build capacity, compete more effectively, and address national policy objectives such as improving labor productivity.What is an SME? Introduction: Overcoming Obstacles to ICT AdoptionWhat is a small or medium- Small and medium-sized enterprises (SMEs) are the backbone of any nation’s economy, and helping themsized enterprise? While adopt ICT can expand their success and enhance economic vitality. But SMEs face numerous barriers tothe definition varies, one technology adoption:of the most commonly • Lack of funding to invest in ICTaccepted frameworks isthat of the European • Incomplete understanding of the value and benefits of ICTUnion, which defines asmall enterprise as one • Complex technology choices and a lack of in-house ICT resourceswith fewer than 50 • Limited time to learn about and support ICTemployees, and a medium-sized enterprise as one • Limited access to training and supportwith 250 or fewer.1 In theUS and Canada, an SME is Turkey’s government leaders are taking steps to overcome these obstacles. The Ministry of Industrya company with fewer and Trade and the SME Development Organization (Küçük ve Orta Ölçekli Sanayi Gelistirme vethan 500 employees. Destekleme Idaresi Baskanligi or KOSGEB) have established Target: ICT for SME, a practical initiative that helps small and medium-sized manufacturers acquire and use effective technologies. This two- year program, with hands-on assistance from the Intel World Ahead Program, is being welcomed by Turkish SMEs and is already having an impact. Since the program began in January 2007: 1. See SME Definition, http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm
• In the manufacturing sector, which has approximately 20,000 Raising productivity. The government is eager to increase labor SMEs, over 1,021 companies have already participated through force productivity, which in 2004 was about 40 percent project stakeholders. of the EU-25 average.5 Since SMEs form such a large part of the economy, helping them use ICT to improve business processes• Program participants have gained access to over 30,000 servers, is an important way to raise the nation’s overall business-class PCs, and laptops, which are enabling them to labor force productivity. expand their business capabilities by running business-critical applications and becoming part of the Internet economy. Spurring growth throughout the nation. Turkey’s wealth is Applications acquired through program stakeholders range from clustered in its urban regions. In the four poorest provinces, GDP enterprise resource planning (ERP) software to fleet tracking and per person is less than one-third of the national average, while logistics applications. It is believed that with this program, per capita in the wealthiest province it is triple the average.6 By Turkey’s SMEs achieved 4 percent ERP penetration as of the end increasing SMEs’ use of ICT across the country, the government of 2007, starting basically from .5 percent. can help address the income disparities between urban and rural provinces and enable SMEs to compete beyond their• Turkey’s local IT industry has been strengthened—approximately local geographies. 60 percent of systems delivered through the program are manufactured by Turkish companies. “We have called all small businesses and entrepreneursWhile many factors drive demand, PC purchases by Turkish SMEs to action on the subject of using the latest technologyincreased approximately 45 percent during 2007. That was more in their business,” Zafer Caglayan, Turkey’s Minister ofthan double the previous year’s growth rate of 20 percent, and the Trade and Industry, has said. “This is an important way2007 average growth rate for Europe, the Middle East, and Africa, for them to increase operational efficiency, and it is awhich was also 20 percent.2 necessity if they are going to become competitive or remain competitive in the world arena.”Addressing Policy Objectives byEnabling SMEsTurkey has 1.9 million SMEs that together constitute 99 The Turkish Planning Organization’s SME Strategy calls for achievingpercent of the nation’s businesses and generate 70 percent the following goals for the nation’s SMEs by 2010:of its industrial jobs.3 In an increasingly global and knowledge- • Increase PC penetration to 95 percentbased economy, KOSGEB and the Ministry say ICT can enableSMEs to streamline business operations, collaborate with • Raise ADSL penetration to 75 percentlarger businesses, and reach broader markets for their • Conduct 15 percent of overall commerce via e-Commerceproducts. Increased use of ICT can also help the governmentaddress important national policy objectives: • Expand the use of ERP software to 15 percentEvolving the economy. Turkey has had great success in shifting • Increase the use of customer-relationship management softwarefrom a primarily agricultural base to a more diversified economy. and other modern applicationsNow, the government wants to move from the current reliance onlabor-intensive jobs to one based more on knowledge, technology, The Turkish Parliament is considering legislation that would requireand innovation. Helping SMEs adopt ICT and use it effectively can SMEs to establish a Web presence identifying products and servicesbe crucial to achieving this objective and enabling SMEs to compete and providing financial information. This requirement, if passed, ismore effectively in a global economy. Turkish SMEs’ contribution to intended to promote the expansion of Turkey’s SMEs, increase theirGDP is limited to 38 percent, whereas in the EU it is over 50 use of ICT, and enhance transparency.percent.42. IDC EMEA PC Market Regional & Country Analysis – Q1 2008.3. OECD Centre for Private Sector Development, Istanbul: A Framework for the Development and Financing of Dynamic Small and Medium Sized Enterprises in Turkey, July 2005.4. KOSGEB 2007 Datasheet 5. International Organization for Knowledge Economy and Enterprise Development, Strengthening Innovation and Technology Policies for SME Development in Turkey, Dec. 2004.6. Strengthening Innovation and Technology Policies for SME Development.
Removing Roadblocks • Helped IT companies create pre-validated solutions that are easyWith the Target: ICT for SME program, KOSGEB and the for SMEs to set up and runMinistry are collaborating with private-sector leaders, such • Assisted retailers and resellers in developing new approaches toas the Intel World Ahead Program, on comprehensive efforts delivering effective post-sales service and supportto remove roadblocks to ICT adoption. KOSGEB is a publicagency that provides a broad range of training and • Aided in developing webcasts and live training sessions for SMEsconsultancy services for SMEs. throughout TurkeyAffordability Program complexityLack of available financing is a significant hindrance to Complex bureaucratic procedures can reduce SME participation.technological improvement for Turkey’s SMEs.7 With the Target Intel helped design straightforward procedures that areprogram, VakifBank offers SMEs a zero-interest, 24-month convenient for SMEs and meet the needs of governmentloan for purchasing ICT equipment and software. VakifBank workers and IT companies. Intel also supported development ofis Turkey’s fifth largest bank. Loans are available for up an easy-to-use online portal where SMEs can learn about theto approximately USD 40,000. KOSGEB has budgeted program and take advantage of its services.approximately USD 6.5 million to pay the interest onthose loans. Distance The government wanted the program’s benefits to reach SMEsComprehensive solutions across the country. Intel worked with Turkish retailers, originalKOSGEB wanted to ensure that SMEs obtained useful and equipment manufacturers (OEMs), software leaders, andrelevant technologies, as well as help them with the task of KOSGEB to design educational sessions that were conducted insorting through the huge universe of potential technology eight Turkish cities.choices. The Target program worked with the private sector todevelop comprehensive solutions that combined business- Program awarenesscritical applications with relevant hardware platforms. Software The government needed cost-effective ways to make SMEscovered under the program ranges from basic word processing aware of the program and encourage them to participate. Inand e-mail programs, to sophisticated ERP and CRM applications. addition to the traveling educational sessions, Intel providedSMEs can also use their credit to purchase or upgrade their PCs, marketing support to help the government design a logo andlaptops, servers, network equipment, and peripherals. produce other materials that created an “identity” for the program. A press event announcing the program was attendedConnectivity by more than 60 representatives of national newspapers,PCs, servers, and software deliver more value when they are magazines, and media outlets.paired with high-speed Internet access. As part of the Targetprogram, Turk Telecom, Turkey’s leading telecommunicationsprovider, offers two months of free ADSL connectivity and a Turkey at a Glancefree modem to SMEs who subscribe to a 24-month service. Turkey is a constitutional republic whose strengths include a diverse and growing economy, a location at theTraining, service, and support crossroads of Europe and Asia, and a labor force of over 25SMEs are focused on running their businesses, not mastering million people. The world’s 15th largest economy, Turkey’snew technologies, and they generally lack dedicated ICT staff. gross domestic product (GDP) rose 6.9 percent annually forIntel offered training and expertise to Turkish IT companies so 2003-2007, reaching USD 665 billion for 2007 (purchasingthey could more effectively assist their SME customers in power parity).8 & 9 Turkey has applied for full membership inadopting or upgrading ICT. For example, Intel: the European Union (EU), and is working to satisfy EU requirements by 2013.7. Growth Plans of Small Businesses in Turkey: Individual and Environmental Influences, Journal of Small Business Management, January 2006.8. www.invest.gov.tr9. Economist Intelligence Unit, Country Profile: Turkey, April 10, 2008.