39% of the responding companies have their own websites. 28% plan to be present on the internet within a year. The remaining 33% of the firms in the survey have no intentions to publish any company information on the World Wide Web.
Report on the internet economy
In association with Webigen Inc. and Sun Microsystems Hungary, GKIeNET conducts quarterly surveys on internet usage and the development of the electronic economy in Hungary. The following is a summary of the most crucial results of the 2001 third quarter survey.
As in numerous other research projects of GKI Economic Research Co., the results of this survey are synthesized in one index, called the GKI-Webigen Internet Economy Index. This sentiment index, representing the expectations of certain segments of the economy regarding the impact of internet use and web-based applications on their market, is comprised of responses to four questions. The questions relate to the following issues: expectations regarding online sales and procurement, the impact of the internet on the market of the company as well as the utilization of the internet in the present and in the future. In the third quarter of 2001, the GKI-Webigen Internet Economy Index was at 10.2.
The index, representing short-term expectations about the internet’s role in business operations, dropped almost five points from the previous quarter (15.1). Compared with the second quarter of 2001, expectations for prospects in the internet economy over the next twelve months deteriorated in all segments except tourism. The financial sector saw the sharpest decline in sentiment. Nevertheless, businesses in the financial sector still have the strongest expectations that the internet will be a major market-shaping force in the coming period. Only tourism-related businesses showed more optimism in this survey.
The index is made up of the following figures in the individual segments (with the previous quarter’s values in parentheses): general corporate segment 12.3 (19.7), financial sector 17.9 (31.5), retail and wholesale 3.1 (7.0 ), tourism 7.3 (2.2).
The following section will outline the key findings of the general corporate survey. The survey targeted incorporated and non-incorporated entities with five or more employees in September 2001.
The 2,222 responding corporations represent the sectors under investigation at 22% in terms of revenues and at 17.2% in terms of employment.
GKI-Webigen Corporate Internet Usage Index has the following subindexes in the general corporate segment:
The internet impact subindex, describing the role of the internet in shaping the company’s market, was -14.0 in the third quarter of 2001 (compared with -4.3 in the previous quarter. The balance decreased from the figures of the previous quarter, indicating that companies generally attribute less importance to the market influence of internet-based applications than previously. Company size continues to be a determining factor in the assessments: larger corporations believe more strongly that the advance of the internet and its applications will generate major changes in their markets.
The internet potential subindex describes the ability of companies to take advantage of the opportunities provided by the internet. This subindex was at 23.6. Compared with the figure of 26.1 in the previous quarter, this value reflects a slight decline in expectations, indicating that respondents are somewhat less confident than in the previous quarter that they could adequately utilize the internet over the next twelve months. The expectations of larger corporations generally reveal more optimism in terms of future prospects.
The e-sales subindex expresses the expected ratio of online sales to total sales at individual companies over the next twelve months. Its value was 15.9 (compared with 25.9 in the previous quarter). Once again, mostly companies with higher revenues expect to see an increase in the percentage of internet sales. However, the variation in responses based on company size diminished, given that smaller companies gave more optimistic responses while larger firms expect a smaller rise in the percentage of online sales than in the previous quarter.
The fourth component is the e-procurement subindex, which, similarly to the e-sales subindex, expresses the expected ratio of online procurement to total procurement at individual companies over the next twelve months. The index value was 23.7 (31.4 in the previous quarter). This field has seen similar changes in expectations as the area of electronic sales: the more favorable assessments of smaller businesses and the somewhat increasing pessimism of larger corporations did diminish the differences compared with the previous quarter, but large companies are still taking a more optimistic stance regarding their e-procurement prospects.
The GKI-Webigen Corporate Internet Usage Index is the mathematical average of the above subindexes. In the third quarter of 2001 the index value was 12.3 (compared with 19.7 in the previous quarter). Most of all, the expectations of larger corporations declined, projecting a slower advance in online transactions than previously seen. The subdued optimism of high-revenue companies is a general phenomenon across the board, affecting all subindexes. We believe that the softer expectations are in line with the economic situation, given that several sectors have experienced a slowdown.
There is significant variation in internet access within the corporate segment depending on sectors and company sizes. Almost all large corporations (with over 300 employees) have access to the internet (97%). Medium-sized companies (50 to 300 employees) show a lower rate, 84% on average. The responses of micro and small businesses reveal similar rates in internet access: 72% in businesses with 5-10 employees, 73% in firms with 10-20 employees and 76% in companies with 20-50 employees.
Based on the expectations, micro and small businesses will likely catch up with larger corporations in terms of internet access in the coming period. In the above three categories, respectively, 16%, 13% and 10% of businesses are looking to get internet service within a year.
The highest prevalence of internet access (approximately 90%) is in the following sectors: real estate transactions, business services, education, and miscellaneous community and personal services. Internet access is at average levels (68%-79%) at manufacturing companies, in the electricity, gas, heating and water supply sector, in the construction sector, as well as in businesses related to transport, storage and postal services. Agriculture, hunting and forestry, fishing and the hospitality sector are well below the average, with rates of 43-46%.
The most widespread internet connection types are ISDN lines and dial-up modem connections. ADSL and cable TV connections were marked by 2% and 5% of the respondents, respectively, while 2% of the companies access the internet using microwave technology for wireless data transfer. The use of leased lines with constant bandwidth, providing faster communication and allowing more users, was reported by 10%.
The prevalence of leased lines or microwave internet connections increases in line with the number of employees, while ISDN connections are gradually losing popularity in larger corporations.
39% of the responding companies have their own websites. Another 28% are planning to be present on the internet within a year, while 33% have no information sites on the World Wide Web, nor the intention to publish one.
In a breakdown by number of employees, large corporations (with over 300 employees) are the most likely to have their own websites, at 66%. Somewhat lower, but still above-average rates can be seen in two groups: companies with 10-19 employees (41%) and companies with 50-299 employees (44%). Micro businesses are the least interested in launching their own websites. Although we expect a dynamic increase in this category in the future, this segment contains the highest number of companies that have no intentions to set up a website in the near future.
In a breakdown by sectors, it is obvious that companies in the services sector have their own websites at an above-average rate. Apart from the services sector, manufacturing businesses also have websites of their own remarkably often. Agriculture and fishing are way below the average, as website operation is generally not part of their business activities. Small agricultural producers and cooperations do not even plan to be present on the World Wide Web.
Hungarian companies rarely take advantage of web-based applications in the areas of sales, procurement and customer relationship management. As low as 1-2% of the responding firms indicated that they had implemented such solutions. However, expectations are favorable, as a significantly greater percentage plans to launch similar projects in the coming period. Consequently, only a small percentage of Hungarian firms provide online sales, and apart from a few exceptions, online sales revenues make up only a fraction of total sales. The sum of the sectoral e-sales figures published by companies totaled 29 billion forints in the first quarter of 2001, accounting for less than 0.3% of the estimated total revenues of the sectors under investigation (not the entire economy!). Information technology professionals are obviously employed at higher rates in the segments of real estate transactions and business services (at 13%), which includes IT services, followed by education.
In the majority of sectors, IT professionals make up 1-3% of the staff, with even lower percentages in agriculture, hunting and forestry, fishing and mining. Most Hungarian companies are content with the ratio of IT professionals on their staff, along with their expertise, which is generally rated even more favorably. Manufacturing companies as well as businesses in the restaurants sector rated both factors below average, while companies in education, transport, storage and postal services, healthcare, social services, real estate and business services gave more positive responses.
The highest rates of employees working on PCs can be seen in education and in the area of real estate and business services (80% and 75%, respectively). These sectors also have the highest rates of employees working on computers with internet access (53% and 47%, respectively. In terms of the percentage of employees required to work on personal computers, the second tier includes additional services companies in the following three areas: (1) transport, storage and postal services, (2) healthcare and social services, (3) miscellaneous community and personal services, with rates of 48%, 57% and 41%, respectively. With the exception of the area of healthcare and social services, the percentage of internet users is also above-average in this sector (26% and 32%, respectively).
In the industry (manufacturing, electricity/gas/heat/water supply as well as construction), one out of three employees need PCs for their work. In the three above sectors, the percentages of employees working on PCs connected to the internet are 18%, 15% and 20%, respectively. Agriculture, hunting and forestry, fishing, mining and restaurants are at the end of the list, as their activities require relatively little personal computer use (or there are no available internal or external resources necessary for technological development). These segments show the lowest percentages of internet subscriptions and employees with access to the internet.
In the majority of sectors, the larger the number of employees, the smaller the chance that a job requires computer or internet use. In the synthesized results this trend is also bolstered by variations in the composition: categories with larger staffs are dominated by industrial companies with weaker parameters, while services companies are represented at a higher rate in the group of micro and small businesses.