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12/03/2008 Note: Includes additional notes relating to the range and quality of State/Territory outputs included in datacubes - see Explanatory Notes 39 - 41.


EXPLANATORY NOTES


INTRODUCTION

1 This release presents key indicators on business use of information technology (BUIT), as collected by the 2005-06 Business Characteristics Survey (BCS). Previously, these IT use indicators were produced from the separate annual Business Use of IT survey.

CHANGES TO THE SURVEY VEHICLE

2 Collection of these data using the BCS vehicle is part of the Australian Bureau of Statistics' (ABS) Integrated Business Characteristics Strategy (IBCS). This strategy integrates the collection and quality assurance of data required for a wide variety of point in time estimates on BUIT, Innovation and a broad range of other non-financial business characteristics, as well as for input into a Business Longitudinal Database (BLD). A key output of the IBCS is the production of annual BUIT and business innovation indicators, with a more detailed set of items for each of these topics being collected every second year (i.e. in alternating years). The change of survey vehicle has impacted on the comparability of outputs in this release with those released in previous issues. More information is available later in these Explanatory Notes.

3 The BCS is the survey vehicle for the IBCS and is an annual survey. The 2005-06 BCS is the first fully integrated collection and had a focus on BUIT. The 2006-07 BCS will collect detailed innovation information.

4 The purpose of this release is to provide users with detailed results for the BUIT indicators relating to 2005-06 reference period. While this release is almost 18 months after the reference period, this relatively late timing is the result of a phased in approach taken to the introduction of this new collection. The 2005-06 BCS was dispatched in March 2007. By the 2008-09 reference year, the survey is expected to be dispatched immediately after the end of the reference period and the release of key indicators is expected to take place approximately 6 months after this with detailed results for the annual topic shortly thereafter.

5 As a result of implementing IBCS, there has been some impact on comparability of the BUIT data included in this release with that resulting from the previous separate collection. Some of this is as a result of integration including changes to scope and the composition of the sample. Users of these statistics are advised to read these Explanatory Notes carefully to ensure they are aware of, and understand, the impacts.

STATISTICAL UNITS USED

6 Statistical units are those entities from which statistics are collected, or about which statistics are compiled. In ABS economic statistics, the statistical unit is generally the business. The ABS Business Register (ABSBR) is used to record information about statistical units and is used to create the frames for most ABS economic collections.

7 The ABS uses an economic statistics units model on the ABSBR to describe the characteristics of businesses, and the structural relationships between related businesses. Within large, complex and diverse business groups, the units model is used also to define reporting units that can provide data to the ABS at suitable levels of detail.

8 This units model allocates businesses to one of two sub-populations:

• Most businesses and organisations in Australia need to obtain an Australian Business Number (ABN). They are then included on the whole-of-government register of businesses, the Australian Business Register (ABR), which is maintained by the Australian Taxation Office (ATO). Most of these businesses have simple structures; therefore, the unit registered for an ABN will satisfy ABS statistical requirements. For these businesses, the ABS has aligned its statistical units structure with the ABN unit. The businesses with simple structures constitute the ATO maintained population (ATOMP), and the ABN unit is used as the statistical unit for all ABS economic collections.
• For the population of businesses where the ABN unit is not suitable for ABS statistical requirements, the ABS maintains its own units structure through direct contact with the business. These businesses constitute the ABS maintained population (ABSMP). This population consists typically of large, complex and diverse businesses. For businesses in the ABSMP, statistical units comprise the Enterprise Group, the Enterprise and the Type of Activity Unit (TAU). The range of activities across the Enterprise Group can be very diverse. The TAU represents a grouping of one or more business entities within the Enterprise that cover all of the operations within an industry sub-division and for which a basic set of financial data, production and employment can be reported.

10 The current economic statistics units model was introduced into the ABS in mid 2002, to better use the information available as a result of The New Tax System (TNTS), for more information please refer to Information Paper: Improvements in ABS Economic Statistics [Arising from the New Tax System], (cat. no. 1372.0).

SCOPE AND COVERAGE

11 The businesses that contribute to the statistics in this publication are classified:

• by institutional sector, in accordance with the Standard Institutional Sector Classification of Australia (SISCA), which is detailed in Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0)
• by industry, in accordance with the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition (cat. no. 1292.0).

• SISCA 3000 General government
• SISCA 6000 Rest of the world
• ANZSIC Division A Agriculture, forestry and fishing
• ANZSIC Division M Government administration and defence
• ANZSIC Division N Education
• ANZSIC Sub-division 97 Private households employing staff
• ANZSIC Class 7340 Financial asset investors
• ANZSIC Class 7412 Superannuation funds
• ANZSIC Class 9610 Religious organisations

14 The frame for the Business Characteristics Survey is a subset of the ABS Business Register and includes employing business only. These are defined as those business which register for the ATO's Pay As You Go Withholding (PAYGW) scheme. It is not unusual for some of these 'employing businesses' to have zero employment at various times during the reporting period. The frame is updated quarterly to take account of new businesses, businesses which have ceased employing, changes in employment levels, changes in industry and other general business changes. Businesses which have ceased employing are identified when the ATO cancels their Australian Business Number (ABN) and/or PAYGW registration. In addition, businesses with less than 50 employees which did not remit under the PAYGW scheme in each of the previous five quarters are removed from the frame. The estimates in this publication include an allowance for the time it takes a newly registered business to be included in the survey frame.

SURVEY METHODOLOGY

15 The sample design for this survey is complex due to serving dual purposes, which include collection of characteristics data for the ABS Business Longitudinal Database and production of point in time estimates for a range of non-financial business characteristics. While there are scope differences between the BLD and point in time estimates, the intention is to maximise the number of businesses selected for which the data collected can contribute to both purposes. More information about the BLD is contained in the Discussion paper: The first iteration of the Business Longitudinal Database, 2004-05 (cat. no. 8164.0). The explanation given in the following paragraphs has been simplified to provide a summary explanation of the design of the sample used to produce the estimates included in this release. If you require further information on the survey methodology for the BCS, please email your query to innovation.technology@abs.gov.au.

16 Collection of data included in this release was undertaken based on a random sample of approximately 8,800 businesses using a mail out questionnaire. The sample was stratified by industry and an employment based size indicator. All businesses on the ABS Business Register identified as having 200 or more employees were included in the sample.

17 Apart from the scope differences, the main change in the sample design of the 2005-06 BCS compared to the most recent BUIT survey is the loss of state or territory as a stratification variable. The loss of state or territory stratification may impact on the quality of state or territory estimates that are expected to be included in future related releases for the 2005-06 BCS.

18 In an effort to reduce load on individual businesses, standard practice in most ABS business surveys is to each year, rotate out one third of sampled businesses. This normally results in around 66% of sampled businesses being common between cycles and minimises impact on outputs resulting from new businesses being included. In previous BUIT surveys, higher rates of rotation have impacted on the comparability of estimates for some output classifications. As the 2005-06 BCS was the first integrated collection and incorporated a new sample design, it was not possible to control the rate of sample rotation.

19 To minimise this potential effect, efforts were made to maximise the overlap of businesses selected in the 2005-06 BCS sample with those included previous BUIT surveys. However, to meet all of the requirements for the dual purpose of the BCS (i.e. both longitudinal and point in time), only relatively low levels of overlap were ultimately possible. There were also resource and provider load constraints impacting on this. Approximately 16% of businesses included in the sampled component of the 2004-05 BUIT survey are common to the sampled component of the 2005-06 BCS. The impacts of this relatively low level of sample overlap on comparability with previously released BUIT data are outlined later in these Explanatory Notes. The common sample rate for subsequent surveys will be higher.

REFERENCE PERIOD

20 The reference period for most of the characteristics items included in the 2005-06 Business Characteristics Survey is the year ended 30 June 2006. Financial data relates to the most recent financial year ended on or before 30 September 2006.

DEFINING "INTERNET ORDERS" AND "INTERNET INCOME"

21 In both the BCS and past BUIT surveys, the ABS has used the Organisation for Economic Co-operation and Development (OECD) definitions of e-commerce transactions when collecting data on Internet orders and Internet income. The OECD defines an Internet transaction as the sale or purchase of goods or services conducted over the Internet. The goods and services are ordered over the Internet, but the payment and the ultimate delivery of the good or service may be conducted on or off-line. Internet income is, therefore, defined as income resulting from goods and services ordered over the Internet.

22 ABS experience in collecting data for receipt of orders via the Internet and Internet income highlights the difficulty of defining an Internet commerce transaction in a way which is (i) understood by businesses, and (ii) suits all forms of Internet commerce. For instance, for some businesses, the Internet transaction initiates and completes the purchase, while for others the Internet transaction finalises details of a purchase which was initiated by a non-Internet based agreement or contract. In order to apply consistent treatment in the collecting and editing Internet orders and Internet income data, over several cycles of the BUIT survey the ABS refined the definition of an "Internet order" to include only those transactions where the final commitment to purchase occurs via the Internet or web. An important element of the definition remains that payment and the ultimate delivery of the good or service is not relevant, that is, either or both may be conducted off-line. This definition still holds for the 2005-06 BCS and the Internet orders and Internet income data presented in this release. The definition has also been adopted by the OECD for inclusion in the ICT Use by Businesses: Revised OECD Model Survey.

23 It then follows that the concept of Internet income presented in this release relates to income resulting from orders received via the Internet or web for goods or services, where an order is a commitment to purchase. Like previous BUIT surveys, the 2005-06 BCS has highlighted issues which affect the quality and interpretation of estimates of Internet income and the proportion of businesses receiving orders for goods and services via the Internet or web. Readers should consider these issues when using these estimates.

24 Some orders for goods and services are initiated over the Internet and are then subject to ongoing payments. Ongoing payments may occur over a long period of time and via non-Internet based media. For consistency in compiling the income measure and to ensure that it covers all income flowing from the initial order over the Internet, the ABS would ideally like to include ongoing payments via the Internet, but recognises that most businesses are unable to track these payments. Estimates of Internet income resulting from the 2005-06 BCS and previous BUIT surveys may be understated due to this measurement issue.

25 As in previous BUIT surveys, many businesses in the 2005-06 BCS did not maintain records on the basis of the Internet income measure as defined and, therefore, needed to estimate its value. For some large businesses, the estimation of Internet income continues to be difficult and in some instances responses were inconsistent with those of previous surveys. While the ABS has reduced this error through analysis of responses and consultation with businesses, this form of error cannot be completely eliminated.

IMPACT ON BUSINESS USE OF IT OUTPUTS ARISING FROM THE IMPLEMENTATION OF THE IBCS

26 From 1999-2000 to 2004-05, the BUIT survey was conducted on an annual basis. Prior to 1999-2000, the BUIT survey was only conducted twice, in respect of the 1993-94 and 1997-98 financial years. The survey had a set of core items for which data was collected each year. The remainder of survey content was dynamic and updated each survey cycle to reflect emerging and changing uses of IT. Annual collection of core items continues through the BCS vehicle, however the remainder of BUIT content (i.e. the dynamic component) is collected biennially rather than annually.

27 Collection of items through a different survey vehicle alone can have some impact on resulting data due to context effect, e.g. having multiple topics covered in one survey form can often change the interpretation of questions based on the context set by earlier topics and questions, compared to an entire survey on a single topic. Changes to question wording can also change the way a question is interpreted. Testing of survey forms aims to ensure such effects are minimised. A majority of the BUIT survey content was moved to the BCS vehicle with no change to question wording. Quality assurance of key BUIT outputs indicates that the change of survey vehicle including a predominantly new sample has had minimal impact on the estimates at the Australian level. However, the impact on estimates at lower levels of output, such as by employment size and industry, has been more noticeable.

28 As noted in previous issues of Business Use of Information Technology (cat. no. 8129.0) estimates of IT use by industry are affected by the nature, number and size of the businesses classified to the individual division. Some industry divisions have large numbers of smaller businesses which can have very different IT use to that of larger businesses. For example, the activity and number of businesses included in the Communication services division ranges from a small number of very large businesses that provide telephony or Internet services (these have high levels of IT use) to a large number of small postal delivery contractors (these have low levels of IT use). The outcome of this diverse range of business activity along with the distribution of the industry's population can be that results for some industry appear to be at odds with what could be expected. As a result of the smaller than usual sample overlap in the 2005-06 BCS, this effect is possibly more pronounced, particularly for estimates by industry or industry by employment size. Comparisons for BUIT output with that published in previous issues of Business Use of Information Technology (cat. no. 8129.0) below the Australian level should only be made with caution.

BUSINESS COUNTS IN THIS RELEASE AND COMPARABILITY WITH OTHERS PUBLISHED BY THE ABS

29 Estimates of the number of businesses operating in Australia can be derived from a number of sources within the ABS. They may relate to a particular point in time or may be presented as an average annual figure. However, these estimates will not always show the same results. Variations will occur because of differing data sources, differing scope and coverage definitions between surveys, as well as variations due to sampling and non-sampling error. More information about business counts can be found in the information paper A Statistical View of Counts of Businesses in Australia (cat. no. 8162.0).

30 The Business Characteristics Survey is not designed to provide high quality estimates of numbers of businesses for any of the output classifications (for example, state and territory or industry) and the number of businesses in this publication are only included to provide contextual information for the user. A more robust source of counts of Australian businesses is available from Counts of Australian Businesses, including Entries and Exits, Jun 2003 to Jun 2006 (cat. no. 8165.0).

OUTPUT CLASSIFICATIONS

31 For output purposes, businesses are classified to employment size ranges based on actual data reported in the survey. For other output groups (industry, capital city/other areas) the classification is drawn from information held about the business on the ABS Business Register.

COMPARISONS WITH OTHER COUNTRIES

32 Data relating to other countries has been provided courtesy of the OECD Science, Technology and Industry Scoreboard, 2007 which is compiled biannually by the OECD from individual country reports. Australian data are from the 2005-06 BCS and the scope has been adjusted to show estimates only for businesses with 10 or more persons employed. See paragraph 3 of these Explanatory Notes for more information about the scope of the 2005-06 BCS.

33 There are different definitions, reference periods and scope for the data included in this table including:

• The ABS defines broadband as an 'always on' Internet connection with an access speed equal to or greater than 256kbps. Most other countries define broadband in terms of access technology (e.g. ADSL, Cable, etc) rather than speed. However, Iceland only includes connections with a bandwidth equal to or greater than 2Mbps.
• Estimates are for businesses with 10 or more employees unless otherwise stated. For most European countries, the following industries are included: Manufacturing, Construction, Wholesale and retail, Hotels and restaurants, Transport, storage & communication, Real estate, renting and business activities and Other community, social and personal service activities. For Canada, Agriculture, fishing, hunting and trapping, and Construction - specialist contractors are excluded. For Japan, data refer to enterprises with 100 or more employees and exclude: Agriculture, forestry, fisheries and Mining. Korea includes: Agriculture & Fisheries, Light Industry, Heavy Industry, Petrochemicals, Construction, Distribution, Finance and Insurance, and Other services. For Mexico, data refer to enterprises with 50 or more employees and include: Manufacturing, Services and Construction. For New Zealand, data exclude Government administration and defence, and Personal and other services; the NZ survey also excludes businesses with fewer than 6 employees (calculated by Rolling Mean Employment) and those with turnover of less than NZD 30 000. For Switzerland, data refer to enterprises with 5 or more employees, and include Manufacturing, Construction, Electricity, gas and water, and Services industries.
• For Table 5.1 - data for Switzerland, Japan and Korea was collected in 2005. For Mexico, data was collected in 2003. For Ireland, data includes Statistical Classification of Economic Activities in the European Community (NACE92 - Recreational, cultural and sporting activities). For United Kingdom, data includes NACE55 - Hotels and restaurants).
• For Table 5.2 - data for Switzerland, Japan and Korea was collected in 2005. For Mexico, data was collected in 2003.

• Business Use of Information Technology, Australia, 2005-06 (cat no 8129.0) datacubes. These datacubes will include detailed (including some cross classified) industry and employment size data by topic. Any state or territory data which can be released will be included in these datacubes.
• Selected Characteristics of Australian Business, 2005-06 (cat. no. 8167.0). This is a new release scheduled for February 2008. It will include summary characteristics data for a selection of topics including business cooperative arrangements, performance measures, barriers, government financial assistance, finance sought, markets and competition, innovation rates and IT usage. It is possible that there may be additional outputs relating to business characteristics (with some cross classification of characteristics variables) released as data cubes.

• Patterns of Internet Access in Australia, 2006 (cat no. 8146.0.55.001)
• Household Use of Information Technology, Australia, 2005-06 (cat. no. 8146.0)
• Information and Communication Technology, Australia, 2004-2005 (cat.no. 8126.0)
• Internet Activity, Australia, March 2007 (cat. no. 8153.0)
• Summary of IT Use and Innovation in Australian Business, 2005-06 (cat no. 8166.0)
• Use of Information Technology on Farms, Australia, 2004-05 (cat. no. 8150.0)

• Discussion Paper: The first iteration of the Business Longitudinal Database, 2004-05 (cat. no. 8164.0)
• Innovation and Technology Update (Newsletter), June 2007 (cat. no. 8101.0)

DATA AVAILABLE ON REQUEST

38 As well as the statistics included in this publication, the ABS may have relevant data available on request. The availability of more detailed data are subject to confidentiality and quality checks and may incur costs. Inquiries should be made to the National Information and Referral Service on 1300 135 070.

RANGE AND QUALITY OF STATE/TERRITORY OUTPUTS

39 As noted in Explanatory Note 17, the main change in the sample design of the 2005-06 BCS compared to the most recent BUIT survey is the loss of state or territory as a stratification variable. The loss of state or territory stratification has had an impact on the quality of state or territory estimates and the volume of data that can be released.

40 The state or territory data included in this spreadsheet has been produced by the use of post-survey stratification. This involved the allocation of the sample to the state or territory strata required to produce outputs at these levels after the conduct of the survey. The outcome is, that for most of the data items contained in this spreadsheet, sufficient sample are included in most strata to enable the production of estimates of a quality permitting release. This is not the case for all data items, for example, in Table 3.3, the quality of estimates for Tasmania, the Northern Territory and the Australian Capital Territory are of sub-optimum quality and they are, therefore, not available or included in this table. As the patterns of IT usage in each of these smaller states or territories in previous BUIT surveys has been different, a decision was made not to produce output for an amalgamation of these states or territories. The methodology used also precludes the release of business counts for any state or territory.

41 Based on an assessment of quality, the ABS has also determined that state or territory outputs will not be released for data items that are not included in these data cubes, but have been released at the Australian level in the Business Use of Information Technology, 2005-06 publication (PDF) version.

ROUNDING

42 Estimates of proportions shown in the tables are rounded to one tenth of a percentage point. Where figures have been rounded, discrepancies may occur between the sum of the component items and the total. In addition, percentages have been calculated using the unrounded figures.

COMMENTS

43 The ABS welcomes comments and suggestions from users regarding ICT and innovation statistics. These comments should be addressed to the Director, Innovation and Technology Business Statistics Centre, Australian Bureau of Statistics, GPO Box K881, Perth, WA, 6842, or email innovation.technology@abs.gov.au.