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Contents lists available at ScienceDirect
Telecommunications Policy
Telecommunications Policy 32 (2008) 422– 435
0308-59
doi:10.1
� Tel.
E-m1 Fo
URL: www.elsevierbusinessandmanagement.com/locate/telpol
Web-hosting market development status and its value as anindicator of a country’s e-readiness
Borka Jerman-Blazic �
Faculty of Economics, University of Ljubljana, Institut Jozef Stefan, Jamova 39, Ljubljana, Slovenia
a r t i c l e i n f o
Keywords:
Web hosting
ICT market assessment
Emerging telecommunications markets
61/$ - see front matter & 2008 Elsevier Ltd
016/j.telpol.2008.04.007
: +386 41678 410; fax: +386 1477 3995.
ail address: [email protected]
r example, the 2005 e-readiness ranking, E
a b s t r a c t
A country’s e-readiness is essentially a measure of its business environment, a collection
of factors that indicate how amenable a market is to Internet-based opportunities. An e-
readiness assessment is based on several quantitative criteria, and among them the ICT
market development indicators are considered as the most influential. Studies in the past
have shown that the well-known indicators used for assessing the level of ICT market
development in countries with emerging economy are not directly applicable. This paper
provides another insight into the level of ICT market development in an emerging
economy by analysing the adoption of web-hosting services in the country’s business
sector. The potential of such assessment to be as an indicator of the level of ICT
development in a country is analysed. The underlying study of the web-hosting
development was carried out as part of the European project WEBHOSTS. The approach
applied and the findings were intended to be used as a decision support in locating and
managing some of the risks in e-business development and potential investment by new
entrants in a region that is accessing the developed part of Europe.
& 2008 Elsevier Ltd. All rights reserved.
1. Introduction
A country’s e-readiness is essentially a measure of its business environment, a collection of factors that indicate howamenable a market is to Internet-based opportunities. An assessment of e-readiness allows a government to gauge thesuccess of its technology initiatives against those of other countries; it also provides companies that wish to invest inonline operations with an insight into promising investment locations such as new and emerging markets. The basictheoretical background for these measurements is the underlying principle proved for well-developed economies, i.e., thatdigital business is a major promoting factor and that for digital transactions to be widely adopted and efficiently used asupportive environment is required (Castells, 2001, 2002). E-readiness is mainly measured by the number of computerservers, websites and mobile phones, as well as broadband access and other indicators of development of the electroniccommunications market. However, recent studies1 consider many more indicators that are used to measure a country’ssocial, political and economic development in addition to the technological metrics used in previous studies (IBM report,2003; SIBIS+ project, 2003) that failed to explain the level of e-readiness development. Recent studies include the citizen’sability to utilise technology skilfully, the transparency of a country’s business and legal systems, and the extent to whichgovernments encourage the use of digital technologies.
. All rights reserved.
IU in cooperation with IBM Institute for Business Value.
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B. Jerman-Blazic / Telecommunications Policy 32 (2008) 422–435 423
Spending on information and communication technologies usually contributes to renewed buoyancy in developedmarkets, while in emerging markets the influence is visible in the growth of the Internet connectivity of individuals andcompanies, the heavy usage of voice and data communications and a general growth in the economy. Most of the westernEuropean countries—the so-called ‘‘old’’ member states of the EU—that have adopted national strategies for thedevelopment of broadband-internet access and value-added e-services have also developed sustainable ICT industries. AnICT infrastructure creates a positive-feedback loop: as citizens and institutions become connected to the Internet, theirincreased usage shifts more of the country’s economy towards building technologies and businesses designed to exploit theInternet. Thus, countries become more competitive not just because their citizens and corporations are online, but becausebeing online makes it possible to start up in a high-value technology-oriented business. This is why the measure of acountry’s e-readiness is usually based on the extent of the telecommunications and computer infrastructure, and spendingon IT, which are considered to be the most important indicators for e-readiness determinants (Neff, 2001). E-readinessdeterminants are important because the production of ICT goods and services directly contributes to the aggregate value-added generated in an economy as well as the overall productivity; this has been proven in the cases of the US, Australia,the South Asian countries, and Ireland, Finland and Sweden in Europe (Turner, 2001).
However, some studies (Ifinedo, 2005; Selhofer & Mentrap, 2004) clearly indicated that this model is not alwaysapplicable to emerging markets. A good overall telecommunications infrastructure and high penetration rates for mobiletelephony are not always followed by rapid development in the country’s digital economy. In addition to the influence thatboxes and wires have on e-business development, other important aspects need to be explored in another, more realisticpicture of the emerging market. The situation regarding the development of the digital economy in the emerging marketsof the new members of the EU varies despite the fact that their economies have benefited remarkably from newtelecommunications policies and regulatory coordination within the EU.
The overall growth in the EU sector for 2004 was estimated at 4.6% (EU report on mobile services, 2004).The key drivers are fixed data and mobile services, which respectively showed strong growth of 11.5% and 7% (COM,
2004).Estonia, Slovenia and Czech Republic have seen an enormous growth in the use of mobile telephony, which has now
surpassed the fixed-line plain-old-telephone service as the primary means of voice communication. In fact, the penetrationof mobile phones in these countries exceeds that in many of the old EU member states.
Underlying these general trends are a number of specific developments for the whole region of Central and EasternEurope. According to some recent studies (e.g., NOBEL project, 2005), in countries entering the EU the situation within theICT market is changing more rapidly due to the permanent mismatching of supply and demand in this sector, the rapiddevelopment of the small and medium-sized enterprises’ sector and the opening up of the market. It is expected that thesetrends will continue and that the growth figures will remain high.
The level of development of the electronic communications market is normally analysed using several well-knownindicators from four areas: mobile-telephone services, fixed voice telephony services, fixed data-communication services andCATV services. Other indicators that are considered are local and leased lines data and general Internet penetration (IBMreport, 2003; SIBIS+, 2003; eEurope+, 2003). However, it has become evident (eEurope, 2005; INSEAD, OECD, 2005) that theseindicators are still not sufficient for obtaining an overall picture because a measurement of the level of e-readiness requiresinclusion of more application areas and value-added services appearing in e-commerce, e-government and e-healthapplications, security and trust provision, education, and social inclusion. It is clear that at this stage of development there isno generally adopted approach and agreed method for selecting parameters for a measurement of e-readiness.
Knowledge about a country’s infrastructure and the intentions of its population to embrace the new economy—var-iously known as the network or Internet economy (Hart, 2003), the knowledge economy (Neff, 2001), the informationeconomy (Turner, 2001), or the Internet-based economy (Castells, 2001)—does not directly provide answers regarding thestate of adoption of value-added services in the major building blocks of these countries’ economies, i.e., small- andmedium-sized enterprises (SMEs) that dominate the region of Central and Eastern Europe. E-readiness measurement of thecreation, diffusion, adoption and use of the various components of a country’s network economy is usually required byrelevant policy makers, who need a detailed assessment of a country’s economic competitiveness relative to internationalcompetitors in the digital era (Ifinedo, 2005).
In this paper, the Slovenian case—as an example of a rapidly emerging market that is typical of countries in theregion—is analysed through an assessment of the prospects of the value-added services market in the SME business sector.There is a firm belief among experts that these services contribute to the advancement of businesses in countries withemerging markets (Turner, 2001). This belief is based on the perceived potential of the Internet to reduce transaction andmarketing costs by bypassing some, if not all, of the intermediary and facilitating linkages to global supply chains. In orderto take advantage of this potential, businesses are expected to adopt relevant value-added services and e-commerceapplications. However, the diffusion of these services in some countries with emerging markets has fallen far belowexpectations (UNCTAD report, 2003). Several studies have attempted to explain the facilitators and/or inhibitors (Davis,1999; Enns & Huff, 1999; Jennex & Amoroso, 2002; Mukti, 2000; Travica, 2002). Predominantly, these studies have tried toidentify the physical, technological, institutional, and socio-economic impediments that discourage an Internet-basedeconomy. Here, another insight into the value-added services market development in Slovenia is provided by an analysis ofthe adoption of web-hosting services by the Slovenian SME sector. In this paper, the term ‘‘perceived e-readiness’’ isunderstood as an organisation’s assessment of value-added service usage, in managerial, organisational, and environmental
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situations in making decisions about its adoption and further use. In the past, the situation in Slovenia and other countrieswith an emerging economy was incorrectly assessed by most of the foreign companies engaged in providing an assessmentof the country’s e-readiness. The main problems were related to counting and explaining the number of PCs orcommunication lines per inhabitant and the number of Internet users, as these numbers did not match the expected levelof country e-readiness. The period of the first major Internet penetration in Slovenia occurred in the years 1994–1997; thiswas followed by years of slow growth. In Slovenia, the growth of the number of Internet users was predominantly due togovernmental policy regarding free Internet access granted to all university students and scholars, students in primary andsecondary schools and employees of cultural institutions, e.g., museums, galleries, libraries, etc. The very rapid adoption ofthese technologies in other countries was usually followed by a period of stagnation, and then the next wave of rapidadoption appeared. However, this did not happen in Slovenia. In this paper, some of the reasons for this late start up areinvestigated and explained. The approach applied was aimed at identifying the imperatives that influenced the currentlevel of development through a study of the adoption of web-hosting services by the SME market sector. Web-hosting inthis paper is considered as a value-added service that may contribute to the overall picture of the country’s e-readiness asthis service is closely related to the basic Internet connectivity service purchased by an SME and usually leads towards theuse of more complex electronic commerce applications and services. This web-hosting study was partly funded by theEuropean Commission’s WEBHOSTS project (http://www.web-host.org).
2. Theoretical background
The literature on the adoption of innovation where e-services and e-commerce adoption are concerned promotesseveral dominant perspectives for understanding the process: managerial (Harrison, Mykytyn, & Rieenenschneider, 1997;Lakhanpal, 1994); organisational (Moreton, 1995); technological (Rogers, 1983), environmental (Montealegre, 1999a, 1999b;Munene, 1995); and interactionist (Orlikowski, 1993; Orlikowski & Robey, 1991). Technological imperative models, such asthe diffusion of innovation (DOI) (Rogers, 1983) and technology acceptance (TAM) (Davis, 1999) consider the complexity,compatibility, relative advantage, ease of use, usefulness and other attributes as the key drivers of adoption. Managerialimperative models seek to explain innovation adoption based on the innovation attributes of managers, their commitmentto the innovation and ICT background (Cloete, Courtney, & Fintz, 2002). Organisational imperative models assert that thekey determinants of adoption reside within the internal context of an organisation. As a result, they look at organisationalcharacteristics such as specialisation, functional differentiation, formalisation, centralisation, readiness, risk-takingpropensity, and innovativeness as the major determinants of adoption (Chwelos, Benbasat, & Dexter, 2001). Environmentalimperative models, on the other hand, tend to focus on external influences (Damanapour, 1991). External pressure frommarket forces, inter-organisational relationships, institutional and socio-economic forces are some of the environmentalfactors likely to affect innovation adoption, especially those innovations that cut across organisation boundaries (King et al.,1994; Mann, 2000). The fifth approach—interactionism—allows the treatment of all these forces and their interaction inone dynamic framework. This assumes a co-influence among the forces of the innovation, the external environment andthe internal organisation (including managers) such that the external environment determines the internal organisation,which by articulating a problem or formulating a solution or unintentional actions affects the conditions outside theorganisation (Larvenpaa & Leidener, 2002). The model tries to explain the marked differences in the performance oforganisations in identical contextual situations (Montealegre, 1999a, 1999b). In addition, it suggests why certain kinds ofinnovations are successful in a given organisation while other innovations are not. A review of the literature reveals theexplanatory power of adoption models that are based on the interactionism perspective. For instance, Kuan & Chau (2001)have suggested a model of EDI adoption based on a technology–organisation–environment framework. Other studies(Mehtens, Cragg, & Mills, 2001) have also mixed innovation, organisational, and environmental imperatives, henceadopting an interactionism perspective to explain the differences in e-commerce adoption. However, almost all these arebased on developed countries and none is based on the notion of e-readiness. On the other hand, recently a number ofe-readiness assessment approaches have been developed and many countries have been assessed for their e-readiness(BRIDGES project, 2005). The environmental imperative idea in these studies constitutes the underlying framework.However, the enquiries and the surveys have not sufficiently explained the variation in e-commerce adoptionamong organisations operating in the same context, e.g., in regions or countries with similar economic systems or similarlevels of development. In addition, studies have not discriminated adopters from non-adopters or the degree of adoption.They also have lacked rigour and focus to guide governments in developing appropriate strategic plans and actions andbusinesses in exploiting specific opportunities (Choucri, Maugis, Madnick, & Siegel, 2003; eEurope, 2005; eStrategies,2005).
In this paper, the interactionism approach is taken as theoretical background. This approach provides a multi-perspective audit of the organisation’s structure, ICT level of adoption such as the type of department in the organisationthat is using the ICT and the ICT supported services used in billing, customer support, maintenance, general management,human resource management and training. In addition to that, special ICT issues such as security and external contextualissues that influence particular service adoption are considered as well. The concept of composite indicators has beenutilised in representing the organisation’s approach to the studied service, meaning that managerial and organisationalaspects are considered when the organisation is making decisions about its adoption and further use (Neff, 2001).
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3. Research methodology
3.1. Slovenia’s environmental data
Before the selection of the research instrument, the country-relevant environmental data were examined. Slovenia in EUterms is classified as a small country with a population of 2 million people but the telecommunications market, accordingto several studies (Economic Intelligence Unit, The 2005 e-readiness ranking, 2005) with 515 Million EUR, is considered asmedium-sized among the new EU member states.
The growth of the communication service market between 2001 and 2002 was 8% and is one of the highest in theregion, with 90 subscribers (mobile and fixed telephony service) per 100 inhabitants. This was driven mainly by the mobilesegment, with a 52% market share in 2003. The fixed segment is relatively stable, represented by a household penetrationof 98.59% by the end of 2004. The usage of advanced technologies (Integrated Services Digital Network (ISDN) andAsynchronous Digital Subscription Line (ADSL)) is widespread, as 65% of business and 20% of residential lines are ISDN-based, which is by far the highest ratio among the new member states (NMS). Fixed voice telephony was liberalised in mid-2001 and currently 7 years later only one alternative fixed operator in addition to the incumbent operator is operating inthe country. Telecom Slovenia is only facing competition in the market for international calls, where 12 alternative VoIP(Voice over Internet Protocol) operators are present in the market. The incumbent operator is largely owned by the state(53% Republic of Slovenia, 25% National Property Fund, the remaining 32% of the shares are public). The prices of nationalcalls are low compared to the EU OMS average (2005); however, the price levels of monthly rentals and metered calls arevery similar to the EU average (SIBIS+ project, 2003).
The Internet is a very well-developed area in terms of high penetration (51%, the highest among the NMS), householdInternet-access penetration (49%), the number of ISPs (Internet Service Providers) is 12, and the number of hosts perinhabitant is good (20 hosts per 1000 inhabitants). Dial-up Internet-access costs for residential users are high due to highcharges levied by the ISPs, but ADSL technology is relatively cheap and affordable, and the first services based on FFTH(Fibre to the Home) technology are available as well. The bundling of the ISDN (Integrated Services Digital Network)subscription with ADSL (Asynchronous Digital Subscriber Line), provided by the incumbent operator, was recentlyabandoned at the request of the national regulator. The current shares of ADSL and cable access are 63% and 37%. There isonly one provider of public WLAN (Wireless Local Area Network) access. Existing surveys (SIBIS+, 2003; NOBEL project,2005) have also shown that Slovenia has 3.96 million web pages, with a rate of increase of 13% per year. The time spent onweb pages is also still growing, e.g., in the first 6 months of 2006 the growth was 16%. Most of the web documents are intextual form (around 2 million) or composed of images (1.41 million). The main TLD (Internet Top Level Domain) used is thenational one is .SI. Of the generic TLDs, .NET is by far the most common. The most popular language is Slovene; this isfollowed by English and then other European languages. As elsewhere, Slovenian customers are mainly interested inInternet services, shopping, sex, travel, learning, education, automobiles and music.
The explanation for the high figures associated with telecommunications infrastructure development in Slovenia isrelated to the traditionally high level of interest of Slovenes in any advanced technologies. This is reflected in the earlyexistence of a PSDN (Packet Switched Data Network) service based on the X.25 protocol in the early 1980s and therelatively early introduction of Internet services in the early 1990s by the academic sector. Slovenian GDP annual growth isamong the highest in the EU region (in 2006 this was 5.5, in 2007 it was estimated at 6.3%) and the average GDP perinhabitant in 2006 was 15 167 EUR (this number was the highest among the NMS in the EU (eEurope, 2006).
On the other hand, general indicators used for the assessment of the country’s e-readiness when value-added serviceadoption is included show a slightly different picture. Several studies (e.g., Connecting Europe, 2004) have shown that thepercentage of the population interested in e-services is higher in Slovenia than in the EU MS by a factor of almost 50%. Thisis particularly true for interest in online consumer rights, online consulting of medical doctors, online travel plans andtelework. The Digital Divide Index (DIDIX) (SIBIS+, 2003) calculated according to these measured indicators, where a valueof 100 means no gap, is 45% for Slovenia. This is slightly lower than in the old member states of the EU (53%), and meansthat 45% of the population in Slovenia is likely to use a PC, the Internet and have access at home. Slovenian users also preferto interact with governmental services over the Internet rather than in the traditional manner (see Fig. 1). This is also truefor customs declarations, electronic banking and online purchasing without a direct online payment system.
3.2. The instrument
The finding that from a statistical point of view the country exhibits very good results influenced the selection of theresearch instrument in the study. The Usage Attitude and Investigation (UAI) instrument (Iacovou, Benbasat, & Deter, 1995)was selected for the study rather than the usual methods applied for an assessment of emerging markets regarding countrye-readiness. The most important decision was the selection of the service(s) to be investigated. Policy makers, regulators,suppliers, and often market facilitators, usually need detailed information about consumer demand that a complete UAIprovides. When conducting a complete UAI it is advisable to study only one, fairly narrowly defined, type of service(Miehlbradt & Chua, 2000). The choice of ‘‘information and communication technology services’’ is too broad to meet thestudy’s objectives and would make the UAI study complicated and too long. It was obvious that the study needed to be
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Preferred way of interacting with government services (Average number out of 7 services)
0.0
1.0
2.0
3.0
4.0
5.0
RO FI SI A L D D
K S NL E I E
UK
HU B EL
SK
CZ
IRL
NA F LV LT EE P PL
BG
CH
US
Internet traditional way
Fig. 1. Preferred way of interacting with government services (source: SIBIS+, 2003).
B. Jerman-Blazic / Telecommunications Policy 32 (2008) 422–435426
limited to one or just a few services in this service category. Beyond defining the service(s) to be investigated, it wasimportant for the service features to be well-known and understood, such as information concerning from where the SMEsobtain the service and how they use it. As part of the instrument design process it was also important to know who amongthe SMEs population would be interviewed. A UAI survey can include either the general population of SMEs in a given areaor the users of the particular service in question. Market-penetration data is particularly relevant for those interested inmarket development because it provides a baseline against which to monitor progress. However, most of the questions in aUAI study relate to the use of the service by the SME, and much of the useful information should be collected from relevantemployees. In case of ICT related service this is, typically, the head of the ICT department or the CEO if the SME is small. Thenumber of SMEs and business sectors of the SMEs population to be approached was decided after considering a number offactors. If only a small proportion of the SMEs in the general population of SMEs of the country are users of the service thatis the subject of investigation, then by interviewing only these entities no information about the attitudes of the potentialnew customers or adopters of the service could be gathered. This includes SMEs running the service in house by the ICTdepartment. These business entities were treated as potential customers that may consider a decision to switch from an in-house service to a professional service provider. A similar group of entities are SMEs that plan to enter the Internet spaceand are looking for appropriate decisions regarding their web site. The study additionally should ensure that enough users,e.g., SMEs employees are interviewed without making the sample size too large (Miehlbradt & Chua, 2000).
The UAI as an instrument uses survey methodology. Because survey methods are described in detail elsewhere (Molla &Licker, 2005; Molla & Licker, 2002; Wang & Tang, 2001), the description of how the UAI study was conducted focuses on thedesign of the survey questionnaire and the analysis of the survey results.
4. The study
4.1. Initial instrument preparation
The service selected for the study was web hosting. This service was selected because it is a key feature in the start up ofany SME that enters the Internet-based economy and because this service was found to be insufficiently studied in thiscontext. Web hosting provides an opportunity for new entrepreneurs to enter an emerging market. From the functionalpoint of view, web-hosting services cover the provision of storage and the servers’ Internet connectivity on which thecustomers’ web-based applications are deployed. These offerings might be extended to the offering of space andconnectivity for customers hosting their own servers and systems for their websites and the provisioning of applicationservices at the hosting provider’s data-centres, e.g., storage, maintenance, a DNS (Domain Name System) service (includingdomain-name registration), and marketing. Hosting-service providers offer managed services for the maintenance,administration and monitoring of customers’ servers and their sites and applications. These services are also offered tocustomers using shared servers. Web-hosting services can be distinguished as shared, dedicated and collocation hostingservices. This division corresponds to different business needs and may be not covered by the same set of providers.
Clearly, the need for a presence on the Internet and to inform clients is the main reason for most European enterprises toplace web pages on the Internet. According to data from the Nobel project (Source: EuroStat, 2003), 64% of small, 80% ofmedium and 85% of large European companies using the Internet had a corporate website. The most popular use of theInternet for European enterprises was to use it as a key means for marketing products (81%). The proportion of enterprisesoffering particular services on the Internet generally increases as a function of the size of the enterprise or as a function ofthe expanded business that follows after the appearance of the enterprise web page on the Internet. Other uses of thewebsite are to provide catalogues and price lists or after-sales support. There are no large differences in terms of the size ofthe company, as is evident from Fig. 2.
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0
10
20
30
40
50
60
70
80
90
MarketProducts
Provide accessto cataloguesand price lists
Deliver digitalproducts
Provide aftersales support
Provide mobileInternerservices
SmallMediumLarge
Fig. 2. Enterprises with a website or homepage: proportion providing Internet services by size, MS (%). (Source: EuroStat, December 2003.)
B. Jerman-Blazic / Telecommunications Policy 32 (2008) 422–435 427
The appearance of multi-media and other technologies that enable linking to existing business-data processing unitscontributed to a number of web-based services such as online-transaction and after-sales activities rising rapidly incountries with a well-developed Internet economy. Later, the focus moved to the complete integration of web applicationswith internal data processing in a single business process in the enterprises, most frequently recognised as enterprise webservices. The findings of the Eurostat study and the SIBIS+ project (EuroStat, 2003; SIBIS+, 2003) influenced the selection inthis paper of web-hosting services’ adoption for the study of the ICT market development and its assessment as anindicator of the country’s e-readiness.
According to the Forrester research report (Castells, 2001) for developed countries, web hosting may enable savings of25–80% from all company funds spent on ICT. In the same report, 30% of enterprises declared that they planned to cut backon web-hosting services and 28% planned to change service provider for different reasons (Wu & Wang, 2005). Taking intoaccount this and other relevant findings, it was decided, by evaluating the web-hosting service market in Slovenia, toconfirm or reject the following hypotheses:
H1. The web-hosting-service market in Slovenia is still not well developed and is not addressing the needs of the SMEbusiness sector.
H2. The e-services offered are not designed to meet the needs of SMEs whose business is closely related to theirappearance on the WWW.
H3. The decision makers in most of the SMEs would pay and order the service if the quality of services provided by theservice provider is high and deemed satisfactory.
H4. Price is not the determining factor in decision making for use of web-hosting services among the SMEs in an emergingmarket.
H5. The absence of a competitive and well-developed web-hosting market is also an indicator that attracted low marks interms of the development of the ICT value-added services market and the e-readiness of the country.
The questionnaire for the study was prepared by grouping the questions into six major groups. The first group ofquestions addressed the SME and the business process within a particular enterprise. The second group of questionsaddressed the purpose of the website. The third group addressed the use and the evaluation of the web-hosting servicewith questions such as: What features should the service have to deliver the benefits that customers want? Does theservice have features that customers find important? Are they satisfied with those features they find important? The fourthgroup of questions were general questions regarding web use and hosting, and about where customers would come topurchase a service. The fifth group of questions addressed enterprises with an Internet connection but without a website,i.e., are customers aware of the service and the benefits it can offer? How do customers learn about the suppliers of theservice? The final group asked the question: What will customers pay for a particular service? Will they pay up-front or do
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Table 1Six main topics that were addressed in the questionnaire
Business-related questions Type of the business sector, employment, turnover, the size of the company, its position in the market, the type
of company regarding the products or services deployed or marked facilities, infrastructure, investment, ITC,
usage of internet, number of PCs, working stations, industrial robots, network components, etc.
ICT-related questions Computerisation and the use of ICT systems: information about computer technology and information system
used, purpose of the website, frequency of use, number of customer hits per day, type of services provided, etc.
Use and evaluation of Internet and web-
hosting service
Type and speed of IP connection, procedures for changing the web-hosting services, indication of the
importance of criteria in the selection of web-hosting service, such as price, privacy protection, security, help
desk, consultation services, etc.
Internet connection but no website Type of department that is using the ICT, e.g., marketing/advertisement, sales, CRM/customer support, Billing,
R&D, production, purchasing, maintenance, general management, administration/finance, HR management/
payments and training. Importance of the ICT in a particular department was also asked to be specified, reason,
plans for launching website
The content and importance of having a
website
Questions about maintenance of the site, number of visitors, influence on their business enlargement, etc.
General web-hosting questions Knowledge about web-hosting services, budget allocated for these types of services, criteria for outsourcing
web-based services, benefits, assessment of the future of these services regarding market and usage.
5% 5%
21%
16%11%
26%
5%11%
Manufacturing
Transport
Commerce
Education and counselling
Finance and banking
ICT
Health and insurance
Other
Fig. 3. Distribution of the different business sectors represented in the study.
B. Jerman-Blazic / Telecommunications Policy 32 (2008) 422–435428
they demand instalment plans or services on credit? More details about the questions are presented in Table 1 and in theAnnex of the paper.2
4.2. The study
Face-to-face interviewing was conducted in the spring of 2005 by a team of qualified interviewers. The interviews wereconducted with CEOs in SMES with 1–10 employees or the heads of the ICT departments in SMEs with higher number ofemployees. The total number of contacted SMEs was 60 and 42 questionnaires were completed by the respondents. Theresponse rate was 70% the selection of the SMEs was made in such a way as to enable a representative sample of thepopulation of the business sector under investigation. The number of employees in the SMEs questioned as part ofthe study ranged from 1 to 67. (In Slovenia, an SME is classified as having up to 70 employees.) Among the respondentsthere was only one SME that had only one employee, and three SMEs indicated that they had employees working outsidethe country as tele-workers. The business sector addressed in the study covered almost all the important sectors ofbusiness activity. The distribution of different business sectors among the respondents was as follows: manufacturing 5%,transport 5%, commerce 21%, education and counselling 16%, finance and banking 11%, ICT 26%, and insurance (health) 5%.The income per employee was in the range h0.55–0.05 m, which is considered to be in the upper half of the income range ofthe Slovenian SMEs sector. The distribution of the business sector addressed is presented in Fig. 3.
The second group of questions addressed the ICT used within the company itself or its associated branches. Informationabout the computer technology and information system used and information about the number of PCs, workstations,industrial robots, network components, etc., was requested from the SMEs as well. Most of the SMEs enjoy relatively goodcoverage with ICT equipment; however, the SMEs in the IT sector were above average, which is self-explanatory. Thenumber of PCs per employee ranged from five to one PC per employee. Other numbers are as follows: 23.1% hadmainframes or mini computers, all of them had PCs and workstations, 69.2% were using local area network technology, 92%of them had modems and 23.1% were owners of computer-aided design tools. Most of the SMEs (69%) were planning toinvest further in ICT, and 92% of them were connected to the Internet but 17% of them did not have their own web page.Another question in this group asked about the type of department(s) that was (were) using ICT. The following
2 The full content of the questionnaire will be provided on request.
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departments were mentioned: marketing/advertisement, sales, CRM/customer support, billing, R&D, production,purchasing, maintenance, general management, administration/finance, HR management/payments and training. Theimportance of ICT in a particular department also required to be specified. The answers provided information confirmingthat ICT equipment was present and widely used and that ICT infrastructure was well-developed in the country’s SMEsector.
The third group of questions addressed the Internet and web facilities. SMEs were asked to answer questions dealingwith access to the Internet, type of access, bandwidth, cost of the service, etc. The type of Internet connection variedconsiderably, from a T1 connection as a leased line to dial-up connections (18%). ISDN connectivity was present in 27% ofthe respondents, and ADSL in 37%. The rest used leased lines or connectivity through a cable operator. The speed ofconnectivity was close to 0.5 Mb/s.
More than half of the interviewed SMEs were planning to introduce a higher bandwidth connection in the following 6months. In this group of questions, the SMEs were also asked to assess the performance of their service provider. Theassessment was based on the satisfaction of the users regarding the following service characteristics: cost, support, contentand overall performance. In the range of 1–10 points, the average score for cost was 6.0 points; support achieved a slightlyhigher value, i.e., 6.2 points; the lowest score was given to the content, with an average of 5.67 points; and the highestobtained was for performance, with 7.2 points.
Questions regarding the web-site of the respondents addressed the content and importance of having a website. Therewere also questions addressing problems regarding the maintenance of the site, number of web-site visitors, influence ofthe SMEs’ Internet presence on their business growth, etc. Eighty-five percent of the contacted SMEs had their own webpage; the maintenance of the page was outsourced in 47% of cases. Web hosting on a ‘‘shared’’ server was present in thesample in 31% of the respondents, and 38% had their own host server. The website was developed outside the company for47% of the respondents, whereas 37% undertook the development themselves. A total of 46.2% used their web presence formarketing, 27.8% for sales, 15.1% for communication and data interchange, 8% also used it for user support and after-salesactivities, and 2.8% were using the website for some other purposes. This distribution of usage is illustrated in Fig. 4.Ninety-two percent of the received answers claimed that the content of their SME’s website was well aligned to thebusiness of the company. The relationship between active and non-active web pages was 50–50. Average satisfaction withweb page provision was assessed using the same indicators as for Internet connection (performance, cost, support andcontent). The numbers here were lower, with the lowest score given to the content of the page. For an illustration see Fig. 5.
46%
28%
15%8% 3%
Marketing
Sales
Communication and datainterchangeUser support
Other purposes
Fig. 4. The use of the SMEs’ web pages.
6.60
6.10
6.40
6.00
6.20
6.30
6.50
6.70
6.80
SMEs
sat
isfic
atio
n w
ith th
ew
eb-h
ost s
ervi
ce
Performance Costs ContentSupport
Overall average of the four characteristics is 6,57
Fig. 5. Assessment of the importance of particular characteristics of the web-hosting service.
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Table 2Importance of the criteria in selecting ISP/web-hosting provider
Pricing 8.23
Data security 8.43Flexibility and scalability 7.43
Network connectivity 8.0
Performance 8.14System availability 7.71
Customer care/help desk 7.71
24�7 support 6.86
Possibility of adding new/additional functionalities 7.71
One-stop-shopping bundle offerings (Internet access and hosting) 7.74
Service quality (SLAs) 7.57
State-of-the-art hardware 7.29
Usage of new software 6.69
Monitoring 7.43
Transparency of offerings 7.00
Economic stability 7.14
Size of provider 6.57
Expertise and reputation 7.43
Geographical location 5.71
Systems integration services 6.86
Information and consultancy services 6.86
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The way the web page was marketed differed for the various respondents. The largest number (41%) were using theInternet and the available Slovenian Internet directories; the press was used in 11% of cases, and radio and TV, in 7% ofcases. The rest were using their business partners or related companies’ web pages.
The most relevant part of the study addressed was web hosting. The questions were prepared in order to provideanswers regarding the need for web-hosting-service adoption as this was one of the main motivations for the study. TheSMEs were asked to provide information about decision making in terms of the selection of the web-service provider andthe SME’s vision regarding web-hosting usage and satisfaction. The SMEs were also asked to specify the exact purpose oftheir website, which type of services were provided by the web-hosting provider, e.g., e-mail, contact forms, information,software downloads, online shopping, e-learning, and after-sales activities. This group of questions also embraced anenquiry about how often the site was updated, who developed the site and who took care of future website development.The respondents were asked to report any difficulties associated with locating the website in the company itself orexternally at the web-hosting provider, about plans to develop a site with internal resources or to use a web-hostingservice, etc. Each SME was asked to rank a group of criteria in the range 1–10 in terms of the importance of the criteria fortheir usage of the website. They were also asked to assess the importance of these criteria and the influence they mighthave on the selection of the web-hosting service provider. The criteria and the collected scores are summarised in Table 2.
The SMEs that did not have a website but had access to the Internet were asked to provide information regarding thereason why they did not provide web information. They were offered a choice of six different answers: ‘‘this is tooexpensive’’, ‘‘it is not relevant for us’’, ‘‘we have security concerns’’, ‘‘we have a lack of staff’’, ‘‘we have a lack of hardware’’and ‘‘we have never thought of it’’. Due to the small number of this type of SME, the overall distribution was not consideredto be important.
5. Assessment of the results and the evaluation
5.1. General analysis
The number of web-hosting providers in Slovenia at the time of the study was relatively low—around 20. Their offersdiffered in terms of the cost of service, the type of servers used and the additional services available to the consumers. Thecost of web hosting varied from h5 to h50 per month. This range reflected the content of the services, i.e., the amount ofmemory capacity, the quantity of the transferred data per month, the number of e-mail boxes, malicious code protection,the number of sub-domains registered and maintained, the number of available databases, security technology provision[SSL (Secure Socket Layer), data protection, etc.], software support (e.g., CGI, Common Gateway Interface); PHP, ScriptingLanguage for web pages; Perl, Programming Language). The three most popular web hosting providers in the country werecompared. Table 3 gives a comparison of the services they offered and related service features. It is evident from Table 3that most of the services were common to all offers; however, it is also evident that there were some minor differences. Thenumber of offered services did not significantly influence the cost of the overall service.
The SMEs studied were not a homogeneous group regarding the business sector to which they belonged, but theyrepresented an accurate sample of the overall Slovenian SME population. Personal and business informations about thesurvey’s respondents were used to determine the type of SMEs that used the service. The study revealed that the majorityof SMEs using the web-hosting service belonged to the following business sectors: leisure, education and trading. The
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Table 3Web hosting offers
Type of service Provider No.1 Provider No.2 Provider No.3
Space ’ ’ ’
Sub-domain registration ’ ’ ’
POP3 e-mail box ’ ’ ’
PGP mail support & &
E-mail forwarding & &
E-mail access over WWW &
Online chat &
Archiving tool &
FTP server ’ ’ ’
MySQL DB ’ ’ ’
128-bit SSL secure server & ’
E-mail pseudonymous ’ ’ ’
Auto-responder & &
Internal mailing list & &
Undelivered mail tool ’ ’ ’
Spam filter & &
Virus protection ’ ’ ’
PHP4 ’ ’ ’
Perl5 ’ ’ ’
CGI ’ ’ ’
SSI ’ ’ ’
Javascript & &
VB script & &
C &
WAP ’ ’ ’
Shockwave ext. &
FrontPage support & &
Monitoring table ’ & &
Web statistics ’ ’ ’
Saved CGI scripts & &
Directory protection with password ’ ’ ’
Error log file ’ ’ ’
Daily backup & &
UPS & &
Server video monitoring &
Service availability & &
Help desk & &
Entry in Slovenian directories & &
DNS ’ ’ ’
Web page installation &
Monthly rate h10–50 (depending of the selection) h20–80 (depending on the selection) h10–30 (depending on the selection)
‘’’ indicate same component from all three providers.
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remaining SMEs were in the production or manufacturing sectors. This led to the conclusion that service-oriented SMEs aremore interested in offering their services over the Internet with the help of a qualified service provider.
After analysing and interpreting the collected data, the following responses to the hypotheses set out in Section 2 wereformulated:
H1. The web-hosting-service market in Slovenia is still not well-developed and is not addressing the needs of the SMEbusiness sector.
Confirmed: The SMEs were not satisfied with the service provision and with the quality of their web pages. The scores forcontent were the lowest (Fig. 5). Satisfaction with service provision depended on the service features offered by the serviceproviders and the benefits that an SME obtained from the service. The service features determined whether SMEs woulduse the service and, given a choice, from whom it would be purchased. The study provided two types of information thatfacilitated analysis of the features regarding the adoption of the service. The first offered an insight into the importance ofthe various service features for the SMEs. The second was the satisfaction rating of the SMEs regarding particular featuresand satisfaction with the provider. The dominant criteria for the selection of a web-hosting provider and the mostimportant service features can be identified from the scores given to particular indicators presented in Table 2. They are, inascending order: security of operation and data protection, the performance of the provider, connectivity and availability ofthe system, and support provided to users and a help desk. In general, the SMEs responded that they would go to a web-hosting provider instead of using an in-house solution in cases when the provider(s) offered more reliability and betterquality of service. This was in line with current statistics regarding the usage of web-hosting services in the studied
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sample: a good half of the SMEs were developing and maintaining their pages in-house. They used the web pages mainlyfor advertising, as the other service applications were not very well represented and deployed. This was especially true fore-shopping, e-payment and e-learning types of services.
H2. The e-services offered were not designed to meet the needs of SMEs whose business is closely related to theirappearance on the WWW.
Confirmed: The satisfaction with the content and the design of the web pages was low, especially in terms of SMEbusiness applications. The score for web page content was the lowest (see Fig. 5). Web-hosting service providers did notprovide sufficiently effective and appealing offers for companies with demanding business and markets such as web pagedesign in line with the SME business and needs.
An assessment of a service market requires knowledge about the service’s so-called ‘awareness ratio’ as well asknowledge of the ‘reach ratio’ (an indicator that provides an estimation of the consumers that have tried and used theservice) and finally ‘the retention ratio’, which provides information about the consumers that have tried the service andwho continue to use it regularly. In the case of the study of the Slovenian web-hosting market within the SME sector, itappeared from the respondents’ answers that the awareness ratio was 100%, the reach ratio was 87% and the retention ratiowas 42%. The relatively low retention ratio suggests that the e-services offered on the ICT market are not satisfactory andare not designed to meet the needs of the SMEs.
H3. Decision makers in most of the SMEs would pay and order the service, if the quality of the service provided by theprovider was high and deemed satisfactory.
Confirmed: Most of the SMEs answered that they would change web-hosting provider if another appeared on the marketoffering better quality of service. SMEs ranked as the most important part of the web-hosting service the effective design ofthe web page. The next ranked web-hosting service properties regarding their importance for the SME were the quality ofservice maintenance, and the level of customer counselling or user support provided. The SMEs’ decision makers wereinterested in good service meaning responsiveness to user needs and user requirements. The type of server and theoperating system (OS) in the offer was not considered by the SMEs as important. The type of server and operating systemwere considered to be part of service provision and reflected in the quality of the service. The SMEs gave highest rankings tothe performance of the provider (8.14), the connectivity/availability of the system (7.71), the network connectivity/bandwidth (8.0) and the customer help desk (7.71), among all criteria that influence service provider selection.
H4. Price was not a dominant factor in the decision to use web-hosting services.
Confirmed: The indicators regarding the selection of web-host providers were ranked according to their importance forSME business needs. The cost of the service was not ranked high compared to the indicators regarding performance,availability, connectivity, user support and security.
H5. The absence of a competitive and well-developed web-hosting market was an indicator given relatively low marksregarding the e-readiness of the country.
Confirmed: Slovenia is quite well-ranked regarding its electronic communication indicators in most international studies(Connecting Europe at high speed, 2004). However, in terms of the competitiveness of the economic entities and theenvironmental conditions for investment Slovenia is ranked rather low at 63rd place among the 100 countries studied(Economist Intelligence Unit, E-readiness ranking, 2005).
6. Findings and conclusion
It is widely believed that the growth of the web-hosting market in general terms is governed by the presence of severalenvironmental characteristics that are also indicators used for measuring a country’s e-readiness (Economist IntelligenceUnit, E-readiness ranking, 2005): effective penetration of the Internet, the number of TLD domains and web pages, the useof computer technology and high levels of development of the electronic communications’ market. Considering all theseenvironmental characteristics for Slovenia and the outcomes of the web-hosting study, it can be said that in the case ofSlovenia this is not true. The electronic communications’ market indicators are high, the penetration of the Internet issatisfactory, but the value-added ICT service market is not well-developed. The answers collected through the web-hostingstudy have shown a rather low level of development of this market segment. The same holds for other importantsupporting value-added ICT services that characterise a well-developed Internet economy, such as:
�
availability of e-business technical support services, � ease of registering a new business, � government financial support of Internet infrastructure projects and on-line public services, � effectiveness of the traditional legal framework, � quality of logistics and delivery systems, � appropriate regulation of the ICT market,
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�
degree of entrepreneurship, and most importantly, � degree of innovation.These characteristics exhibit low marks for Slovenia and are also one of the reasons why web-hosting services are notwidely adopted (eEurope, 2005; SIBIS+ project, 2003). Another recent study based on a survey of other value-added service(Online availability, Capgemini, 2005) in EU member states has shown similar findings, e.g., Slovenia was ranked higherthan the EU 25 MS average for full on line availability of the services but the ranking regarding on-line servicesophistication was much lower. Slovenia was ranked at the end of the 25 EU Member States list that ranked the statesaccording to the level of development of on-line services that enable income generation.
The findings of the web-hosting study raise questions about the importance of macro-level technological indicators inan assessment of a country’s ICT market development. For instance, the extent of value-added service adoption in othermarkets (OECD, 2005), where the environments were relatively conducive (Selhofer & Mentrap, 2004; Yao, 2004), led to theconclusion that these indicators should not be considered as the sole determinants. Previous studies of developed countriessuggest also that the role of management, organisational and legal frameworks, level of logistics and other relatedconsiderations in the development of the Internet-based economy is are very important (Beatty, Shim, & Jones, 2001). Someauthors (Han & Noh, 1999), e.g., have emphasised another indicator of relevance: organisational readiness, defined as thedecision to implement business-attractive developments of the networked economy such as e-commerce and related on-line governmental services (Grandon & Pearson, 2004). Contextual differences do not support the generalisability ofdeveloped country models and their application to other markets. It is reasonable to expect that country-specific factors inaddition to traditional indicators affect a country’s e-readiness for paving the way to an Internet-based economy. Therefore,in this context it is important to understand how countries with emerging markets could overcome the environmental andorganisational impediments of the ICT market in terms of dealing with specific (idiosyncratic) obstacles. Governmentaldecision makers along with the business sector face challenges different from those in developed countries. The latter haveemployed relatively well-developed, accessible and affordable services, while in most of the countries with emergingmarkets these services have either not reached the required quality level or are not affordable. A factor that is taken forgranted in developed countries is the tradition of working and doing business in an open market economy, which wasintroduced to countries such as Slovenia a mere decade or so ago. A typical example how this works in an open marketeconomy with mature institutions of governance is the introduction of e-government services for the business sector in theUnited Kingdom. The readiness of institutions to effectively govern and properly regulate this type of value-added service isalso an essential element as trust in the service is necessary for conducting e-business (IBM report, 2003; Munene 1991;Oxley & Yeung, 2001). The web-host study has revealed a similar outcome as the SMEs in assessing the importance ofparticular characteristics gave the highest scores to the security and data-protection indicators. In Slovenia, many continueto blame poor government policy for slowness in the development of on-line services and lower scores of e-readiness.There is some truth in this. The deregulation of the telecommunication market has been very slow; the stimulation of thebusiness sector to utilise e-services has been low and the market has remained dominated by an incumbent operator grouptoo long (6 years after the adoption of the legal framework that enabled liberalisation). The first period of rapid Internetpenetration was due to convenient and almost free-of-charge access to the Internet provided by the government-ownedacademic network that offers services to all educational, cultural and health systems. As indicated earlier, most studentsfrom elementary level up to university postgraduate level, employees in cultural and artistic institutions obtained free ofcharge access via the academic network. The only charged cost was the local telephone line with relatively lowcommunication charges. The stagnation period in Internet penetration followed after this first period of rapid penetration(SIBIS+, 2003) and the business sector was effectively retarded as new affordable value-added services were not developedon the market The slow development of the market was due to a low take up of the e-government services and non-coordinated and awkward developments in key online shopping segments, i.e., music, books and groceries (Onlineavailability, Capgemini, 2005). Online payment systems in e-shopping malls are the exception rather than regular practice.The banking system also reacted too slowly and only recently enabled the use of credit cards on Slovenian websites.Another identified factor that influenced the e-readiness picture was the restricted domain registration of the national TLD,the .SI. Recently, the restriction was relaxed with the introduction of competition through accredited registrars that startedto operate on the Slovenian market in 2005. Language can also be considered as a limiting factor in the slow start up, but itis not dominant, as the inhabitants are accustomed to foreign languages. The market is also too small to support thedevelopment of expensive content on the web.
In addition, most businesses in Slovenia are small. Their lack of complexity can facilitate the adoption of value-addedservices, but this also means a lack of adequate resources to invest in IS and IT and absorb possible failure (Goode & Stevens,2000; Mann, 2000). The cost of human, technological, and business resources compared to the benefit of adoption ofoffered services need to be considered when making decisions (Humphrey, Mansell, Pare, & Schmitz, 2003). The practice ofdoing business electronically, dealing with non-cash payments, anonymous and electronic-based intra- and inter-businessrelations, all of which are an important part of the Internet economy, is being established in the countries that only recentlyentered the open market economy. In addition, most, if not all, businesses in Slovenia tend to have a highly centralisedstructure (Vreede, Jones, & Mgaya, 1999). This suggests that the perception of managers about their organisation,innovation, and environment is likely to be critical and requires changes towards a less hierarchical managerial
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organisation more adaptable to the exigencies of the Internet economy. This observation applies not only in Slovenia butequally to most of the Central and Eastern European countries.
In conclusion, it can be said that there are no general and ready to use models for faster development and improvementof a country’s e-readiness as each country has its own pace of development and own environmental imperatives (BREADproject, 2005). However, there are features that hold generally true especially in regions with a shared past regarding thesocio-economic system such as Central and Eastern Europe. The Slovenian study has shown that value-added services suchas the web-hosting service are effective indicators in the assessment of country e-readiness as the major findings of thisstudy are in line with others (Online availability, Capgemini, 2005). Environmental data such as leased lines, PC numbersper 100 inhabitants, fixed data telecommunication services, and internet penetration that reflect the technologicaldevelopment and the country’s ICT adoption are not sufficient on their own for understanding the country’s ICT market andthe way Internet economy is developing (Composite indicators, DGJRC, 2005). Other groups of indicators should beconsidered such as the on-line availability of public services and the level of ICT market liberalisation. Effective regulationsand their implementation especially regarding trust and quality in business sector development, good ICT infrastructure,quality of human capital, innovative entrepreneurship environment, flexibility of the labour market and the productmarket, macro-economic stability, effectiveness of the legal system, and the extent of competition policy are certainlyamong the environmental data that must be taken in account when a particular region or country is considered. In general,it can be concluded that ICT and related market developments in emerging economies need to be examined in parallel withother organisational and economic changes in order that factors governing Internet economy developments can be betterunderstood and fully and positively exploited.
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