Stephen Timms MP

Work Foundation Breakfast Meeting

All of us are users of ICT, though some of us will have it more deeply integrated in our organisations than others. The challenge for Government is to help more businesses understand the benefits of exploiting ICT to deliver sustained business improvement.

The full benefit of e-enabling a business requires the use of ICT to be integrated throughout the organisation and within the supply chain. This is deeper and more integrated use of ICT and it offers a more sustained return on investment. But it also poses new challenges. A business which integrates ICT effectively to become an e-Business needs not only to identify its technology needs, it needs also to ensure that its strategy addresses business processes, people, organisation, culture. If the focus is only on the technology, then the benefits will be much less than expected, or even nil. But done successfully, e-business can increase productivity, enhance competitiveness and stimulate innovation.

And that is why e-business is so important. We have a longstanding and persistent lag behind key competitors on productivity. My Department has productivity at the top of its agenda. E-business has an important part to play. The evidence is becoming clearer. For example, earlier this year, a report by London Economics, commissioned by Cisco Systems, found that in the decade 1992 - 2002, ICT investment made an important contribution to UK output growth - 25% of the total - and a big contribution to labour productivity growth. The British Chambers of Commerce carried out a productivity survey in March, which identified investment in ICT as the most important factor in improving the performance of businesses over the past five years.

If we are to improve overall, we need to be more effective in our take up and use of ICT than other countries. So, how well is the UK doing in comparison with its international competitors?

A report on the e-Economy of Nations produced by Booz Allen Hamilton towards the end of last year showed that the UK had the second best environment in the world for e-commerce in 2002, behind only the USA. The 2003 report on e-readiness by the Economist Intelligence Unit ranked the UK third in the world, level with the USA. And this year's DTI International Benchmarking Study, which is shortly to be published, will show that UK businesses are making a more sophisticated use of ICT than ever before. All this is encouraging.

But there are also other messages coming through that we need to keep improving our use of ICT, and to accelerate the pace of improvement, if we are to keep up with the leading countries in the world for e-business.

The DTI has begun to broaden its activities to address these more complex issues. Working with private sector partners, colleagues in other Government Departments and the wider public sector, we are focussing on providing tools to assist effective implementation of ICT. For example, we have already made available a framework document for Managing Directors on doing e-business and have produced a suite of content around supply chain issues. We will be working to ensure that businesses understand the ways in which existing and emerging technology, like broadband and wireless, can underpin their business improvements. Some good progress is being made and there are now some 3 million broadband users in the UK, increasing by over 150,000 new connections every month. Broadband via ADSL, cable or wireless is now available to 80% of the population. It will be 90% next year, and I called last week for 100% by 2005 - a call to which BT responded very positively on Monday of this week.

There are a lot of other things going on:

• During this year and the next two years, public services will be spending £1 billion on broadband connectivity and the Regional Development Agencies will be spending or committing a further £235 million to broadband development by 2006.
  
• We are providing £1.25 billion by 2005/6 for science, engineering and technology, to boost the UK's economic performance and to raise levels of innovation and growth
  
• Between 1998-2004, the government has made available over £1.8bn to increase access to ICT in schools, providing a solid foundation for additional investments in skills more broadly and lifelong learning
  
• DfES, supported by DTI, are overseeing the creation of a new network of Sector Skills Councils - E-Skills UK, as the Skills Council for IT, telecoms and Contact Centres sector was one of the first to gain a licence in April 2003
  
• We will continue to modernise the regulatory and legal frameworks to meet the needs of the e-economy through the creation of OFCOM. OFCOM will shortly become fully operational and will have a strategic overview of the communications sector
  
• We are working to improve the delivery of public services and achieve long term cost savings by joining up online government services around the needs of customers, ensuring that all government services are available electronically by 2005, with key services achieving high levels of use.

But there is still a long way to go.

And today's study raises a host of issues and we have turned our attention to some of them. On spam, for example, I announced on 18th September new moves to tackle the problem. From 11 December, it will be illegal for UK companies to send junk messages to individuals who are not already customers or who have not given prior permission. Infringement of the law could result in a £5,000 fine.

I thought it was interesting that the report emphasises the issue of 'low tech equilibrium in the UK'. A large part of UK business is making very effective use of ICT, but it is also true that for many firms a low level usage does apply. Hence DTI's interest in persuading business to use ICT in a more effective and productive way.

It is a fact of life that some people will not change their approach to doing things until there is a compelling reason to do so. A current, compelling case for investment in ICT by SMEs is presented, for example, by the drive to achieve savings through e-procurement by Local Authorities. Local Councils represent a huge market opportunity for local businesses. My local authority, Newham is a case in point, with 30% of small local suppliers dependant on the Council for over 20% of their annual turnover. Local Authorities have an e-Government requirement to be fully capable of trading electronically by 2005; in fact, in Newham's case, the deadline is 2004. Therefore those SMEs who fail to become in any way e-enabled risk being excluded from real commercial opportunities. Businesses need to be aware of the changing environment and there are lessons here too for others, including the legal profession, mentioned in the report.

I agree fully with the findings of the report that technology is not transformational on its own and that the pace of ICT investment is likely to slacken unless the low-tech equilibrium is broken. The solutions cannot come simply in the form of technical fixes; people and processes must also come together to make it all work.

So, I welcome the contribution this report makes and I hope we can all work together towards the goal that the UK is the best place in the world for e-business.

Thank you.