South Korean Small Businesses

Shrikant has mentioned about what is happening on South Korea in the context of small businesses on more than one occasion. So, it was good to read this story in Business Week – there are lessons in what we need to do in India for us.

After years of digitizing everything from stock trading to gaming to education, [South Korean] officials realized that one group — the country’s nearly 3 million small businesses — remained thoroughly low tech.

Those companies employ two-thirds of the workforce and generate 30% of gross domestic product. So Seoul is spending $75 million over three years to give small businesses online access to the same kind of planning, management, and accounting tools that big companies use. Officials hope the program will not only make small companies more efficient but will also let them more easily hook into bigger companies’ supply chains, which are largely powered by the Internet. “On a national scale, the synergies will be enormous,” says Thomas Yoon, senior vice-president of the state-run National Computerization Agency.

To carry out this ambitious program without breaking the bank, Yoon’s agency has recruited the nation’s telecom companies. They are making room on their computer servers for small-business owners. Software and technology consulting companies then load the telcos’ computers with programs catering to the needs of small companies. The government subsidy pays for development of the programs and for training the small-business owners in using the software. The small businesses have to buy their own PCs and broadband connections to reach the programs on the telecom companies’ servers. “Unless small suppliers become part of the networked systems, you can’t expect industrywide electronic transactions or efficient supply chains,” says Paek Ki Hun, director in charge of Internet policies at the Ministry of Information & Communication. The goal: making 30% of all business transactions electronic by 2005, up from 12% now.

[Small businesses] can buy access to the computer network and basic business-management programs for an average of $15 to $25 per month. More robust software for bigger companies costs $75. The computerization agency has put together customized packages of software for 22 business lines, including real estate brokers, eyeglass shops, beauty parlors, sports clubs, and restaurants. Programs for an additional 36 business types are being developed.

Around 150,000 of South Korean business are connected, and the aim is to reach 500,000 by end of 2004.

In the context of SMEs, the three big technology impacts they are seeing (all pretty much at the same time) are mobiles/wireless, broadband and affordable business applications. A potent combination, indeed.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.