Small Business & Modern Technology
Modern technology, information technology in particular, has been changing at breakneck pace for years. In many cases small businesses have been in a better position to take advantage of, and contribute to, these changes than larger firms. A few small businesses have been able to parley their nimbleness and the advantages that modern technology gave them to join the ranks of the most profitable companies in the world.
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Innovation
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Venture capitalists have made an entire industry of investing in small technology start-ups, hoping to be involved in the next big idea. Josh Lerner's research at Harvard University has found that small firms are particularly important in emerging industries because these firms are better able to apply new technologies to meet customers' needs. But as these new technologies become accepted and larger firms enter the field, small companies' technological advantage is reduced.
Potential
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Some of the largest technology firms started small. Microsoft made its start when it sold MS-DOS to IBM, Google was just one of many competing search engines in the 1990s and eBay was once an ambitious start-up. Of course this rise to prominence is not always permanent. Many multi-million dollar firms, such as Kozmo and pets.com, that tried to use the Internet to create new business models went bankrupt in the late 1990s when investments dried up, and they were unable to produce substantial profits.
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Benefits
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Technical innovations have also benefited small businesses outside the tech industry. The Internet has given small businesses a global reach that was once reserved for multi-nationals. Niche businesses that may not have found an adequate consumer base in any single location, can now use social media and viral marketing to find customers. Business models that use the Internet to sell very specialized merchandise are sometimes called "long tail" businesses because they target customers who are far from the mainstream -- visualized as being the long, skinny tail on either side of a bell curve distribution.
Cost Savings
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Modern technology can also benefit small companies by reducing overhead costs. Cloud computing, for example, allows a company to pay for memory and computing power, as well as technical support services, without setting up an internal IT department. This guarantees that the company only pays for resources that it actually uses. Open source programming can also save small companies money. The Apache web server, developed by a large number of small businesses and independent programmers, is open source, free to use and considered to be one of the best web servers on the market.
Considerations
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Small businesses developing new technology sometimes come up against patent law, which, for them, can be a double-edged sword. As patent law has been reformed in favor of patent holders, it has protected small businesses' intellectual property rights, but it has also made small businesses vulnerable to lawsuits from larger corporations. Even if the small business does not believe it has infringed on the larger company's patents, it may settle out of court to avoid the expense of an extended trial. Lerner notes that the number of patents awarded to US companies annually increased fifty percent during the 1990s and that firms were more likely to resolve patent disputes in the courts.
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References
Resources
- Photo Credit technology image by Stanisa Martinovic from Fotolia.com
