Are SMEs ready for big data?

picture of SMEs ready fot big data 

Recent explorative research conducted by Statistics Netherlands (CBS) shows that only a fraction of Dutch small and medium-sized enterprises (SMEs) is ready for the application of big data in their business processes. This research was commissioned by the Dutch ‘Platform for the Information Society’ (ECP) and the Dutch Ministry of Economic Affairs.

CBS conducted this research in the context of the ministry’s Big Data Breakthrough project. Explorative in nature, it focused mainly on defining a suitable method to establish potential big data users among the SMEs. The results are therefore provisional as more in-depth research is necessary.

Criteria for potential big data users

In order to predict whether companies are ready for big data, a main criterion was set by CBS’ clients, namely that a company should display at least three out of the four following characteristics: be financially healthy, be innovative, be visibly engaged in online activities, and have recent experience with a transition process. No distinction was made in this study between companies for which big data might be useful and companies which are currently deemed unsuitable for big data applications.

Method

In order to answer the research question, CBS operationalised the four abovementioned characteristics using multiple data sources. These definitions (and part of the sources) have never before been used in official statistics and as such are not official CBS definitions. The ensuing results were broken down by company size, business sector and province.

All of the 1.5 million Dutch SMEs – companies which employ fewer than 250 employees – registered in the General Business Register were included in the analyses. In order to assess a company’s financial health, the statistic ‘Finances of Non-Financial Corporations’ was consulted. Based on this statistic, the solvency ratio (net equity divided by total equity) and the current ratio (current assets divided by current liabilities) were determined for each corporate group. A company is considered financially healthy if the solvency ratio of the corresponding corporate group falls between 0.25 and 0.40 percent and the current ratio is at least 1.

A company is regarded as being innovative when it falls into either of the following two categories: it is active in one of the Top Consortia for Knowledge and Innovation (TKIs) as identified in 2014 or it made use of tax incentives under the Research and Development Promotion Act (WBSO) in 2015. Other ways to measure innovativeness could include the number of patent applications or the percentage of company turnover which is spent on R&D. These more commonly used measures for innovation are often not available for SMEs, however.

To determine the level of online activity of an SME, researchers applied the same classification as was used in a previous study, ‘Measuring the internet economy in the Netherlands’. A company has a high level of online activity if it has an interactive website or webshop, specialises in online services or engages in internet-related activities. A more directly measurable indicator would be having (access to) an advanced IT infrastructure. However, such data are currently not available.

To find out whether a company was recently in transition, data were analysed to see if there was a change in company activity (Standard Industrial Classification ) between 2012 and 2015, an acquisition, a merger or a reorganisation.

Validation

The results were validated by examining the companies included in CBS’ sample survey on ICT use at companies (2015). All companies indicating in this survey that they were using big data were analysed to determine whether they matched the four listed characteristics. The same was done for companies indicating they had not started working with big data. It emerged that especially the two characteristics online activity and innovativeness are connected with the actual use of big data. This means these two characteristics are likely good predictors in this investigation.

Larger SMEs more likely to be ready for big data

Nearly 60 percent of SMEs are financially healthy, 1 percent are innovative, 6 percent are in transition and 8 percent have a high level of online activity. Less than 1 percent of SMEs met the criterion of displaying at least three of these characteristics and are therefore ready for big data. The larger the company, the higher this percentage: from 0 percent among one-man businesses to 8 percent among SMEs with 50 up to 250 employees.

Three business sectors stand out for having relatively more big data users among companies: telecommunications, IT services and R&D. No differences were found between the provinces; there is no indication of a particular area in the Netherlands which might take a lead in application of big data.

Applications

The research described here complements a previously published study, ‘Measuring the internet economy in the Netherlands’. The main purpose of this research was to obtain an overview of big data opportunities for the Dutch economy, a key objective of the Big Data Breakthrough project. This project may be extended with future research aimed at developing more direct indicators of the readiness among companies to deploy big data; this could involve IT infrastructure and business processes, for example. What might also be helpful would be improving the measurement of the companies’ degree of innovativeness and willingness to innovate.