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Behind the curve

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Hispanic small-business owners often shy away from technology. In today’s economy, that’s a high-risk posture.

By Teresa Talerico
May 2002

Frank Dominguez, president and CEO of Imperial Construction in Elizabeth, New Jersey, remembers when his employees punched an old-fashioned time clock and scheduled projects by scribbling them on sheets of legal paper. Like most small businesses starting out in the mid-1980s, his company handled many office tasks manually. Today, Imperial uses the software program Microsoft Project. The company has 60 Compaq Presario computers, a T1 line, and its own Web site. Stuck in morning traffic on the turnpike, Mr. Dominguez uses a wireless Palm VII to keep tabs on workers – whether they’re in Massachusetts, Louisiana, or Florida. Recently, he began using CamClock, a mobile, digital time clock that lets employees punch in from their construction sites around the country. “This technology has definitely improved my profitability,” says Mr. Dominguez. “This combination of the Palm Pilot and the CamClock has reduced my cost of labor massively.” Though some Hispanic-owned small businesses have embraced technology, many still lag behind. Less than 6 percent of Hispanic small-business owners have an e-commerce strategy, compared with 35 percent of non-minority small businesses, according to a study sponsored by Microsoft Corp. A 2001 Tomás Rivera Policy Institute study found that only 52 percent of Hispanic companies used computers and information technology, compared with 71 percent of African-American companies. The same study showed that Hispanic-owned businesses were less likely to have a Web site – 42 percent compared with 56 percent of their African-American competitors. “Hispanic small businesses are a little bit behind the times right now,” agrees Victor Cabral, vice-president of government and Hispanic affairs at Verizon Communications and co-chair of the IBM Hispanic Digital Divide Task Force. The reasons are myriad and can even be traced to early childhood access to technology. Experts say training, education, and incentives are vital to narrow the gap, especially since Hispanic small businesses are mushrooming. So why is there still a digital divide? Some businesses don’t have Web sites because they assume customers aren’t online. Or they say a niche business doesn’t lend itself to e-commerce. Carlos Garcia, co-owner of Endpak, a global paper bag manufacturer in Pico Rivera, California, says his company’s Web site is still under construction. He says his very specific market focus – Endpak manufactures industrial packaging for can companies – doesn’t warrant a large-scale site. “We don’t think it’ll be that effective a form of marketing, because of our niche market,” he says. “It’s a very limited number of customers. We haven’t pursued our Web site more aggressively because of that.” Carmen Fuentes, owner of Carmen’s Jewelry in Moline, Illinois, says Internet service is costly, and she relies on word of mouth from local customers. “I don’t have a computer in my business,” she says. “The Internet sends you a lot of bills. For now, I’m doing OK with what I’ve got.” Ms. Fuentes says she hopes to have a business computer next year, however, and concedes that an Internet site would enable her to advertise. Such situations are not uncommon, according to Michael Verchot, director of the Business and Economic Development Program at the University of Washington’s School of Business. His program assists small businesses in Seattle’s economically distressed communities; many of the businesses are minority-owned. In the last few years, the program has spent an increasing amount of time helping them with technology. Mr. Verchot sees a “significantly lower use of technology for marketing purposes and lower use of technology for internal operations.” “[One reason] is a perception that their customers don’t use the Web,” he says. “The second is their lack of understanding of how to develop and manage Web sites – how to choose a service provider, how to build a Web site, how to update it when they need to. That’s not unexpected. Small-business owners are not technology gurus. Running a small business is probably one of the hardest things to do. You’ve got to be an expert in resources, an expert in marketing, an expert in operations. And now you’ve got to be an expert in technology.” Indeed, technology-guru duties at Imperial Construction have fallen to the company’s CFO, who attends workshops to stay on top of the latest advances in technology. “It makes your business known throughout the nation,” says Mr. Dominguez, Imperial’s CEO. “Second, the efficiency is unbelievable. It’s hard sometimes to do business with people who aren’t up to speed.” Many small businesses that do have technology fail to upgrade hardware and software regularly. Only 7 percent of African-American and Hispanic small-business owners have upgraded to new hardware or software, according to the Microsoft research. In fact, 67 percent use 5-year-old versions of Microsoft Windows and Office. “It’s not exactly a fear of technology,” says Fernando Cornejo, a seminar presenter for Microsoft’s Build Your Business tour, which helps minority-owned small businesses integrate technology into their operations. “It’s not taking the time to upgrade. Hispanic owners are still running old applications.” For some small businesses, cost is the primary hurdle. “Some of the companies can’t afford it,” affirms Janet Meza, vice-president of communications for the San Antonio Hispanic Chamber of Commerce. “Which is why we encourage them to attend events like Build Your Business, because they teach them how to do it in an affordable manner. We have businesses now that still don’t have fax numbers or e-mail. We’re trying to get them technologically upgraded.” But affordability is only part of the problem. For many Hispanics, the small-business digital divide begins very early, says Maria Villar, vice-president of IBM’s e-Business Transformation Planning and co-chair of IBM’s Hispanic Digital Divide Task Force, which commissioned a 2002 Tomás Rivera Policy Institute report, “Latinos and Information Technology: The Promise and the Challenge.” “We found it starts when a [technological] foundation is not established early on in their education,” she says. “That ultimately drives their comfort level with the technology as they grow older and get into their own businesses.” She says Hispanic communities must introduce children to technology early and provide role models and mentors in that field. Training programs for small-business owners also are essential, Ms. Villar adds. “It isn’t just access to computers or driving down the cost of computers,” she says. “You’ve got to drive the training and education as well.” To that end, government agencies, nonprofit groups, and private corporations have stepped forward to help. IBM and Microsoft have sponsored studies to examine the problem. In February, Hispanic activists voiced support for the Internet Freedom and Broadband Deployment Act, which would deregulate the Internet and high-speed data services. The Verizon Foundation has funded Web-site development for some inner-city Seattle businesses. Last year, Microsoft launched the Build Your Business Tour, with seminars across the country. Mr. Cornejo says businesses must keep up with the times. “We live in a very dynamic world with regard to technology,” he says. “Unless you keep up with things, it’s likely that other businesses will just run over you.” He and Mr. Verchot recommend, at a minimum, the following basic technology for small businesses: •A good operating system •A computer network •High-speed Internet access •Computerized accounting, financial, and billing systems •A good database program and a spreadsheet tool Many Hispanic-owned businesses can attest to the benefits of technology. Not so long ago, Seattle aerospace manufacturer Frank Valenzuela painstakingly wrote out bid proposals using technology no more sophisticated than a pencil and some sheets of paper. Today, Mr. Valenzuela, co-owner of Shedd’s A.C. Tool Co., uses his custom-made Microsoft Access program. What once took him three hours now takes 15 minutes. “If we didn’t have the programming that we have, we wouldn’t be open,” he says. “We couldn’t compete with other companies.” “The ability to provide these technologies can really be a competitive advantage for small-business owners,” affirms Ms. Villar. “And it drives down their costs because they can automate many of the things that they’ve had to do manually. There are a lot of compelling reasons why it’s important for the Latino community to step up to the challenge. It’s a challenge for communities, for families, for businesses, and for the government to put a comprehensive agenda in place to address the gap.”

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