Small businesses must join IT revolution: white paper

Small and medium-size enterprises must embrace the information technology revolution to survive in a rapidly changing environment, according to a draft white paper presented to a Liberal Democratic Party panel Wednesday by the Small and Medium Enterprise Agency.

The 2000 White Paper on Small and Medium Enterprises in Japan will be submitted by trade chief Takashi Fukaya to the Cabinet by the end of this month, according to agency officials. It is to be endorsed at a later Cabinet meeting.

It is the first such report under the revised Small and Medium Enterprise Basic Law, which re-evaluates smaller firms as the engine of Japan’s economic vitality and renews policies to promote versatile and dynamic growth of smaller businesses.

“The ‘IT revolution’ is drastically changing the competitive environment surrounding small and medium size firms, while providing them with extensive opportunities to utilize computer networks,” the draft says.

“As information technology innovation is greatly affecting our country’s socioeconomic system, all enterprises, not only venture companies, can no longer remain unconcerned,” the draft says.

Compared with larger firms, however, small and medium enterprises in Japan are not keen on IT-related investment, with more than 10 percent neglecting to make any IT investment, it says.

Even though a greater number of startup firms are actively investing in IT-related areas, the agency warns in the draft that simply pouring money into IT will not lead to a sales increase and investments without a clear purpose will backfire.

“Companies must take great pains over how to proceed with business reforms in advance, as well as to clarify the purpose of their introducing an information system,” it said, citing 85 percent of the firms that have invested in information system-related areas face problems such as lack of specialists.

Compared with their U.S. counterparts, Japanese companies were investing less in human resources that would enable them to use information equipment and software.

“Although the problem of banks’ tight lending practices improved in fiscal 1999, the environment surrounding small and medium-size companies remains severe,” it says.

While there are signs of revitalization in the areas of business startups and managerial innovation, however, smaller firms still lag behind in economic recovery due to their slowness in dealing with structural changes in such areas as IT innovation and capital procurement flows.

Noting the influence IT has had on business, the white paper draft says greater attention must be placed on the constantly changing business environment in accordance with the rapid pace of IT renovation.