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Small business: a study of technology.



Small businesses are an important part of the American economy; Dun and Bradstreet reports that two-thirds of the jobs in the U.S. are found in firms with 100 or fewer employees, and eighty percent of new job creation is in small businesses. In South Dakota, small businesses are the core of the economy. Based on employee and total revenue figures, only eight businesses in the state are classified as large. To promote the development, growth, and success of small enterprises, the federal government has developed a series of programs primarily administered through the Small Business Administration. The Small Business Development Centers (SBDCs) have had a central role in this process. In South Dakota, the SBDC is attached to the School of Business at the University of South Dakota in Vermillion (Greenfield, 1989). This has reinforced faculty interest and involvement in issues of importance to small businesses. This study of small business computer technology in the state has grown directly out of our perception of the importance of small business to South Dakota and the crucial role computing can play in the success of small businesses.

Over the past several years industry watchers nationally have reported increased computer sales to smaller firms (Tyson, 1985; Owens, 1987). As computer use has become more prevalent in small businesses, SBDCs have provided some training for office computerization and automation and referrals to outside computerization consultants (O'Leary, 1987). There have been very few studies, however, on how computers are actually used in small businesses. A joint study by Stanford University and the National Federation of Independent Businesses indicated that nearly one-half of small businesses use personal computers. By the end of 1985 they estimated that over $33 billion had been invested in such equipment. Almost two-thirds of surveyed professional and personal services indicated use of personal computers. The report was limited, however, to the brand of basic computer hardware and types of applications used (Bell, 1986). Analysis of Anchorage (Alaska) Chamber of Commerce members defined the computerized functions that they were using and planned to use in the future, but did not describe the type of equipment used (Wichmann, 1987). The majority of articles in the popular business and computing press as well as the academic journals emphasize "how to" computerize a business. These are often aimed at particular small business groups and are designed to encourage the entrepreneur to computerize his or her organization (Mahmood, 1982; Blanchard, 1984a and b).

In contrast to these approaches, the purpose of this study was to build a profile of selected small businesses in South Dakota and detail their use of information technology. Information technology includes the traditional use of computing for business functions and also embraces the areas of office automation and telecommunications. The study looked at specific hardware, software, and applications used, regardless of type, and also encompassed questions about office automation and communications equipment.


A sample of small businesses in South Dakota was asked to respond to a written survey. The types of businesses surveyed were selected by Standard Industrial Classification Codes (SICs) which primarily represented business and professional services (see Table 1). The population of businesses fitting these SICs was compiled from the current yellow page listings for the state of South Dakota. The total population of such businesses was 6,607. A random sample of businesses was selected proportional to SIC code population. Physicians, lawyers, and accountants were sampled by professional group and not by individual member.

The questionnaire and cover letter were sent to this group, and results were tabulated and analyzed.


Ninety-six completed questionnaires were received; the following profiles are based on those respondents.


Demographic information shows that the businesses responding are small. Revenue size data is summarized in Table 2. The businesses responding were a cross section of the population with legal services (16.5%), personal services (13.2%) health professionals (12.1%), business services (12.1%), real estate services (12.1%), and insurance services (9.9%) predominating. Responses to a question about the age of the establishment indicate 7.9% had been in business for less than 4 years while 5.6% reported 75 or more years of business activity. The number of employees reported ranged from 0 to 140. Nearly 59% had two or fewer full-time employees; 73.6% had two or fewer part-time workers. Only 15.2% had more than ten full-time employees, and just 4.4% reported more than ten part-time employees.

Sixty-eight percent of those surveyed use computers in their businesses. Of those using computers 81.5% began using them after 1980; in fact, 41.5% have begun their use in the past 4 years. Of the non-users 16% use computer service bureaus. Eighteen percent of all respondents use outside computer services for such things as accounting services (52.9%), tax preparation (47.1%) and payroll preparation (35%). Several use computer service bureaus for other functions such as billing. The services were predominately provided by a computer service bureau or an accountant; some businesses used both sources. Almost 30% of this group plan to computerize some of these functions on their own premises within the next year.


There appears to be no agreement on hardware among the respondents. One hundred fifty-seven machines representing 78 different brands or models of computers and 123 printers of 73 different brands or models were reported by users! Microcomputers predominated, with IBM the major vendor. Apple and Macintosh technology are also evident in this group. Table 3 summarizes some of the major points of hardware. Name brands such as Epson, Tandy, Vax, NCR, Unisys and Wang are all represented.

Printers are the most common peripheral device reported. Epson is the most common brand (28) with Okidata (19), IBM (13), and Hewlett Packard (12) following. Apple and Macintosh systems use Imagewriters or Laserwriters.

Networking and Data Communications:

Ten computer users reported that they have local area networks on their premises. The network size ranges from two to six nodes and eight are used to share data bases or software while four are used to share peripheral devices such as laser printers. Three of the networked systems provide electronic mail. Data communication to or from remote sites was reported by 13 of those surveyed.

Telecommunications Equipment:

With the deregulation of the phone industry over the last decade, businesses have had more opportunity to and responsibility for designing, purchasing and maintaining internal phone systems. Our sample shows great variety in this area also. Respondents reported 34 different brands and models of phone equipment. AT&T predominates with 46% of the phones.

The most recent major trend in telecommunications has been the use of facsimile (fax) machines. The cost of this technology has dropped dramatically in the past year, and now machines are priced within the reach of many small businesses. Ten businesses in our sample reported owning fax equipment. One-third have Canon equipment and another third possess Ricoh machines. Sharp, Minolta and Olympia account for the others.

Other Office Automation Equipment:

The survey contained an open question to find other types of office automation equipment that these small businesses might be using. Copiers were a popular choice. Since there was no specific question in the survey for copier use, these may have been underreported.

Software applications and uses:

The majority (66%) of small businesses in this group acquired prepackaged software from vendors rather than writing their programs themselves (14%) or hiring a computer consultant (14%).

Businesses were surveyed about using computers for word processing, database, electronic spreadsheets, electronic calendars, and accounting functions.

Word Processing:

Forty-seven businesses reported that they used word processing. This is the most commonly used computer application. These businesses use 33 different packages or versions of word processing software. The questionnaire asked for both word processing and multi-functional (integrated) software that performed word processing. Users have been word processing for an average of 3.2 years. Those systems that can be identified as dedicated word processing systems have been in use for an average of 5.9 years. Twenty percent of microcomputer-based systems are WordPerfect. Microsoft products (both single and multi-functional) represent 15.6% of the packages used.

Database or Filing:

Database applications were used by 21 respondents. Only the database function in Appleworks had more than one user. Several database applications appeared to be specifically developed for an industry or business. For example, one respondent used National Data Corporation's Pharmacy Package. Many of the reported packages are integrated, i.e., packages that combine several functions such as word processing, spreadsheet, database and communications. Businesses averaged 2.8 years of database use.

Electronic Spreadsheet:

Thirty businesses in the survey used electronic spreadsheets. Nineteen different packages were reported used for an average of 3.1 years. Multi-functional packages dominated this area with 66.7% of the market. Lotus 1-2-3, a stand-alone package, was the choice of 22.5% of all users; this represent 70% of single function spreadsheet users.

Electronic Calendars:

Six users reported the use of electronic calendars for an average of 0.8 years. Only one user reported a stand-alone calendar function; the others use the function within an integrated package. Clearly this is not yet a widely accepted function for small businesses in South Dakota.

Accounting Packages:

There are 34 users of accounting software in this sample. Twenty-nine different packages are used. This group has used the software for an average of 3.1 years. Only 10.8% of these applications are based on an integrated system.


Sixty-eight percent of the South Dakota businesses who responded to the survey have computers in house while eighteen percent make use of computer service bureaus. This is a higher percentage of computer use than reported in other studies of small businesses. This seems to support other authors' contentions that small business is a growth area for the computer industry. There are, however, some important aspects of small business computer use that need to be noted.

This profile of selected small businesses in South Dakota shows another version of the "land of infinite variety!" There appears to be wide agreement among users that the important computer functions for small businesses are word processing, accounting, and electronic spreadsheet use. Database is a less widely used application; electronic calendars are still quite rare. A truly interesting finding is the complete lack of agreement on the means by which these functions are computerized. There is absolutely no consensus on hardware or software among small business people. Although IBM has the largest market share of hardware, the IBM compatible microcomputers outnumber IBM 5 to 1. In software, the only predictor of brand are those imposed by incompatible machine type. For example, the Apple and Macintosh users did not use software developed for IBM type systems.

The survey also showed extensive use of integrated packages. These packages have the advantage of requiring only one purchase for a range of processes. The functions generally include word processing, spreadsheet, database, telecommunications, and, often, electronic calendars. An additional advantage is that a uniform set of commands or keystrokes is used in all functions; learning the full range is not as difficult as mastering three or four different software packages. The disadvantage is often not apparent to beginning users. When functions are integrated, each is often not as powerful or flexible as when the functions are in stand-alone packages. It will be interesting to see if users move away from such integrated packages as their needs become more sophisticated. An alternative solution may be found with the new more powerful generations of microcomputers. Their increased memory, speed, and storage capabilities will permit each individual function in an integrated package to approximate the power of the stand-alone.

This paper is the first phase of a comprehensive study of small business computing in South Dakota. This profile indicates that most businesses are using computers and computing for task automation and productivity improvement activities. In future studies, we will investigate more fully how these activities contribute to the success of small businesses. [Tabular Data 1 to 3 Omitted]

Jacqueline R. Dunn, Ph.D., is Director of the Graduate Program and Associate Professor of MIS at the School of Business, The University of South Dakota. David H. Moen, Ph.D., is Associate Professor of Statistics at the School of Business, The University of South Dakota. John E. Powell, D.B.A., is Professor of Business Quantitative Analysis at the School of Business, The University of South Dakota, Vermillion, South Dakota.
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Author:Dunn, Jacquelin R.; Moen, David H.; Powell, John E.
Publication:South Dakota Business Review
Date:Mar 1, 1990
Previous Article:Trend of business.
Next Article:Economic development in South Dakota.

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