Andy Grove: Small businesses facing digital divide

WASHINGTON -- U.S. small businesses have been too slow to invest in IT infrastructure and adapt their businesses to the Internet, and as a result they are staring into a growing business technology digital divide, Intel Corp. Chairman Andy Grove said Tuesday.

Speaking at the 20th anniversary dinner of the Washington-based World Affairs Council, Grove said only about one-eighth of the small businesses in the U.S. do at least 5 percent of their business on the Internet, according to a recent study.

"That is a phenomenally small percentage, particularly compared to Intel, which does 90 percent of its business on the Internet," Grove said. "It is practically zero penetration of electronic business involvement (among small businesses)."

This is a problem that should be resolved even if it means government-imposed measures such as federal tax incentives, Grove said. Small businesses, which he classified as those with 100 or fewer employees, have not made near the investment that large businesses have over the past decade, fueling the economy in the process.

"Small businesses are becoming increasingly marginalized as the differences between the haves and the have-nots increase," Grove said. "I submit to you that the real digital divide in the U.S. economy is between small businesses where people have not invested and large businesses that have and continue to make large investments."

The Intel chairman said this is especially critical now because the economy has reached an "inflection point" and is "dimming as the lights in California do," and investment in IT by small business could help pick up the slack.

Grove suggested that as the government considers President George W. Bush tax cut proposal, it also help with the situation small businesses are in. This could be done by ensuring that a portion of any business tax cut included in the package allows for a tax credit for small business aimed at spurring their investment in IT, including things like broadband connectivity.

"I would like to see a small part of (a tax cut) correct the business technology divide," Grove said. "I think it is going to do more good for the economy, dollar for dollar, and is going to be a longer-lasting good, dollar for dollar, than if the whole thing were put into individual consumption or individual tax cuts."

Grove also said the U.S. should again change its policy toward foreign nationals who study and graduate from U.S. universities so that more of them have an option to remain in the U.S.

Congress addressed this issue in its recent revision of the H-1B visa program for foreign employees, many of whom are technology workers. But there is still a need for more graduates to fill technology openings, Grove said.

Another suggestion he made is that the U.S. government double federal spending on university-level research and development.

This story, "Andy Grove: Small businesses facing digital divide" was originally published by Network World.

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