Small Business Gets Wired in a Big Way

From mechanics to hairdressers, Koreans surge to high tech

Seoul auto-repair shop owner Youn Sang Won gets as greasy as any other mechanic when he's deep in the engine of a customer's car. But these days, he's wiping his hands more often to take on a more delicate task: firing up his computer to keep track of inventory, do his billing, and send out gentle reminders to drivers in need of a tune-up or oil change. Since last summer, when he signed up for the service delivered over the Internet, Youn says his business has increased by 40%. "It's great," says Youn. "It has everything a car-repair center wants."

Best of all for Youn, he didn't have to lift a finger to get the system up and running. Instead, he took advantage of a government program designed to boost South Korea's lead as the world's most wired nation. After years of digitizing everything from stock trading to gaming to education, 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.

The biggest beneficiaries are owners of small businesses such as Youn. They 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.

The drive to get small-biz online, like everything else in Korea that's digital, has been a hit. Some 120,000 small-business owners have signed up since the program was launched in January, 2002. The goal is to attract 300,000 by the end of this year and 500,000 by 2004. Once this critical mass is reached, tech companies offering the programs through KT Corp., Hanaro Telecom, and Thrunet should be profitable without government subsidies, figures the Computerization Agency. Better yet, the remaining 2.5 million small businesses will have an incentive to sign up to prevent their competitors from gaining a business advantage.

Telecom operators believe the new services will ultimately pay rich dividends. Chae Jong Jin, managing director of KT, the company that services half the nation's 10.7 million broadband subscribers, says the small-business initiative is "accelerating our transformation" into an Internet powerhouse. And it's certain to transform the business of Korea's mechanics, hairdressers, and other small-business people in the process.

By Moon Ihlwan in Seoul

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