High Tech Still a Low Priority

With customers queued up, phones ringing and employees needing guidance on matters urgent, James Ogburn, owner of Little Jim & Tim’s auto repair in Los Angeles, has hardly a nanosecond to discuss his e-commerce strategy.

He doesn’t think he has a Web site to promote his 15-year-old business. His assistant corrects him. He does, sort of. It’s part of a larger automotive-services cybermall, on which it’s nearly impossible to find information about Little Jim & Tim’s.

How about getting his own Web site? “We’re still thinking about it,” Ogburn said, noting that such matters would have to wait, because more pressing upgrades are needed around the shop.

While American small business has been struggling to keep the doors open during the economic recession, the rapid development of electronic commerce has raised the stakes for companies such as Ogburn’s that remain ambivalent about investing in technology.

Many large corporations and federal and local governments are aggressively using the Web to conduct transactions and advertise procurement opportunities. Even food stamps are going high tech. California is set to replace the standard paper food vouchers with debit-like cards over the next two years. That means big changes for mom-and-pop shops that do not yet accept ATM or credit cards.

Business owners slow to invest in e-commerce technology are being advised to purchase now or possibly perish from the new cyber-marketplace.

“As more people get connected, the digital divide is worse for the people who are not connected,” said Rachel Anderson, managing editor of the Digital Divide Network at the Washington-based Benton Foundation, which provides information on telecommunications issues. “Because all sorts of civic, commercial and cultural information and resources are finding a new home in that world, the virtual world.”

Studies show that minority-owned and small businesses are investing in technology, but not at the same rate as nonminority firms, and they’re slow to shell out additional dollars for upgrades. They often do not use the technology to its full extent.

A study presented Saturday at a technology conference showed that although 85% of African American small-business owners surveyed used the Internet regularly, less than 2% planned to use the Internet as an integral business tool, such as for e-commerce transactions or data management.

Among Latinos surveyed, 6% said they expect to use the Internet for business, compared with 35% among whites, according to the Merrill Research study commissioned by Microsoft Corp. that surveyed 250 black and Latino small businesses about their use of technology.

The study showed that only 7% of African American and Latino small-business owners upgrade hardware or software annually. That represents a big potential market for firms such as Microsoft and Hewlett-Packard Co. The companies were the largest sponsors of the Blacks in Technology Expo held over the weekend at the Los Angeles Convention Center.

Some minority-business experts said the apparent digital divide between minority and white businesses is caused not by lack of computer ownership or access but by ambivalence about using technology in more sophisticated ways.

“Businesses have had no problem with lack of accessibility,” said Charles DeBow, director of special projects for the Washington-based National Black Chamber of Commerce. “Many did own computers and had Internet access, but they were used primarily for e-mail or by the kids for entertainment purposes.”

Even as recently as two years ago, “there was a void of vehicles acting as a catalyst to draw large numbers of small and minority businesses online and participating in e-commerce,” DeBow said. “There needed to be a reason.”

Today, small-business experts say, the list of reasons grows daily.

DeBow noted that Internet-savvy business owners can join online with other small-business owners for aggregate buying, which can reduce the cost of goods.

And the Commerce Business Daily--a newsletter used by businesses to track government procurement opportunities over $25,000--has been replaced by a Web site, www.fedbizopps.gov, said Henry T. Wilfong Jr., president of the National Assn. of Small Disadvantaged Businesses, and officials with the Commerce Department.

“There was a presumption that most of us could switch over to [the] Web,” said Wilfong, who questions the accuracy of studies that show high rates of regular Net access for minority-owned firms.

“Our interaction with our membership, which is fairly sophisticated, does not show such high usage,” said Wilfong, whose group includes about 300 members, mostly African American business owners in Southern California.

Consider the mom-and-pop grocer, which will be inducted into the digital revolution this summer.

In July, the state will launch the Electronic Benefit Transfer Project, which will do away with paper food stamps and transfer benefits to a debit card. The 5,500 active businesses that accept food stamps in Los Angeles County will join the roll-out in February 2003, with the final counties joining in 2004.

Businesses that don’t already process credit and debit cards will be required to buy equipment to handle the new food-stamp card or resort to processing transactions by hand, according to the state Department of Social Services.

Tony Lee, associate vice president of Dickerson Employee Benefits in Los Angeles, one of the largest African American-owned insurance brokerages in the nation, is willing to upgrade his computer systems because he believes it will be good for the bottom line.

His firm will launch a program that’s part of a $200,000 upgrade to allow its 5,000 independent insurance brokers to go online and receive quotes on employee-benefit packages.

“When we launch the Web site with the online quoting, it should generate a lot more business for us,” Lee said.

But for most small firms on tight budgets, making a substantial investment in technology upgrades is not an easy call.

“It was not a slam-dunk,” said Tony Hatter, an account manager for Marsh Communications Services Inc. in Los Angeles. His company spent about $35,000 on upgrading its computer system, database and 3-year-old Web site.

“There was definitely a discussion about why would we want to spend this kind of money,” Hatter said. Ultimately, he said, the cash outlay was deemed necessary to “bring us toward the new millennium, so we can compete with other companies.”