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Small businesses lag far behind their larger counterparts at proportional investments in technology, even though they use PCs and the Internet more than ever before.

A recent U.S. Commerce Department study shows that small and medium-sized firms spend the same proportion of their investment budget on information technology, but small businesses invest less than half of what larger businesses do on PCs and Internet access for each employee.

For example, companies with fewer than 25 employees spent US$367 per employee on PCs in 1998, while firms with 500 or more workers spent $1147 during that period, according to the report.

Varied hurdles

More than 70 percent of small and medium-size firms use computers in their business, Undersecretary for Economic Affairs Kathleen Cooper told the House Committee on Small Business on Thursday. The committee also heard testimony from small business owners, who related some of the factors that hold back technology investment.

"For many small business owners, especially those who have spent years running their businesses 'the old fashioned way,' technology can be a daunting prospect," said Steve Pequigney, president of Integrated Imaging.

These more conservative and sometimes overlooked buying patterns of small businesses in turn prompt technology companies to not pursue the market, pointed out Per Hugh Jensen, who owns a chain of small retail stores in Virginia.

"Most small and medium-size businesses will never have enough technological knowledge to stay abreast of technological change," Jensen said. "That is why we are not perceived as a great market by many of the large supplier companies in the market."

The fear that technology would soon be obsolete or need to be upgraded also made the costs seem more prohibitive, Jensen added.

In addition, the small-business owners said that many of the firms have large part-time workforces, and that training those workers could be prohibitively expensive.

Help for the farm

For many small businesses in rural areas, bandwidth and connectivity are scarce, making their adoption in agriculture more difficult, said Timothy Aughenbaugh, president of Agricultural Information Technologies. Increased availability of technology could open up the outside world to rural communities, creating opportunities for people in the community without leaving home, he added.

"Technology may play a key role in slowing or perhaps reversing the youthful energy drain from our rural communities," Aughenbaugh said.

Even though they are behind in technology use compared with big companies, the small business owners said technology has come to play a crucial role in their businesses. In particular, it can help them drive down operating costs. For instance, Jensen said retailers are now asking for e-mail addresses and sending out promotional messages over the Internet, reducing advertising costs.

"I think the overwhelming objective must be to provide education and resources that allow small business owners to see the value of technology to their bottom lines and to assist them in analyzing, purchasing, ... and utilizing technology," Pequigney said.

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