News Column

Time for an Upgrade

June 2002, HISPANIC BUSINESS magazine

Derek Reveron

--> Technology had a rough ride in 2001, but middle-size companies may end up the beneficiaries. According to Edward Leamer, an economist at the University of California at Los Angeles, the national recession occurred because businesses invested too much in new technology without seeing quick returns on the investment. Since middle-market companies – those with revenues between $5 million and $50 million, such as most of the Hispanic Business 500® – lag behind corporate behemoths in technology acquisition, they can now play catch-up at a much lower price.

“It’s hard for [middle-market companies] to buy technology, even hardware and software upgrades, unless they get a return on investment in a reasonable length of time,” says Miguel Rios Jr., CEO of Orion International Technologies, the number 277 company on the Hispanic Business 500.

For example, until recently, most mid-size firms couldn’t afford online conferencing and video conferencing capabilities because of equipment prices and the need for trained operators, according to Joshua Feinberg, a technology consultant. But as the equipment becomes less expensive and easier to handle, companies will be more willing to invest in it.

“Several years ago, most large companies had remote access to computer systems, desktop e-mail, and Web browsing,” continues Mr. Feinberg. “But small firms started doing it only a few years ago, and many are still catching up.”

More than 40 percent of small companies plan to invest in computers, printers, or scanners this year, according to a study by American Express. Among the Hispanic Business 500, 61.4 percent of CEOs surveyed said they plan to spend more this year on Internet technology.

During the next round of tech investment, integration will emerge as a market driver at small firms. “[CEOs] still run their operations with basic phone systems and faxes,” says Reinaldo Pabon, president of Technical Telephone Systems Inc., a telephony integration firm that ranks 348 on the Hispanic Business 500. “One day it will get to the point where small businesses have to do it [become more tech savvy], whether they want to or not, in order to succeed.”

Concurrent with the drop in computer prices, major manufacturers such as IBM, Microsoft, and Oracle are producing more products geared specifically for mid-size businesses, and they have expanded their sales networks by teaming with providers to reach that market. IBM, for instance, has such a relationship with Orion International Technologies, Mr. Rios says.

As for the Internet, many small and mid-size companies now have a Web presence but not a Web business model, experts say. Even if managers go online for travel planning, office purchases, or market research, they generally don’t interact with customers or suppliers through the Internet. Although 83 percent of the Hispanic Business 500 companies have Web sites, only 34 percent say they provide customer service online and less than 20 percent have e-commerce capability. Most of the sites function as online sales brochures. Nationally, only 10 percent of small companies handle at least half of their business operations on the Internet, according to research firm Gartner Inc.

“If you collect cards … at a chamber of commerce function, you find that many of their Web-site addresses don’t match the e-mail addresses,” Mr. Feinberg says. “That means they’re not really using the site as a marketing and branding tool.”

Source: HISPANIC BUSINESS magazine

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