Small companies up and down the land will be tempted to reduce their spending on information technology for the foreseeable future - for two seductive reasons.

First, the pricking of the dot.com bubble has taken a lot of the rationale away from embracing online technologies. Two years ago companies were being warned that if they didn't adopt the internet then, new web-only companies would snatch their businesses away from them. Now, two years later, the traditional companies are still here, while many of the web start-ups have evaporated into cyberspace.

The second - and more important - reason for postponing spending is the growing evidence of a serious recession not just in the United States but in the UK as well. Britain has probably already entered a recession (defined as two successive quarters of negative growth) already. But we can't be certain yet because figures for the growth of gross domestic product (GDP) are published months in arrears - and no one knows the full effects of the events of September 11.

So what is the point, many small companies will be asking themselves, of spending more money to expand online activities when there the market won't be there at the end of it and online activities have lost their shine?

Or have they? The dot.com collapse must be put into the right context. Never forget the normal attrition rate of small companies. According to Dun and Bradsteet statistics, 50% of all new companies die after four years.

What was new this time was not that the statistics changed but that the normal birth and death rituals of small companies was, for the first time, played out in the national media instead of privately with no publicity.

What is happening now is that bad companies have gone under, though they will survive in some form even if it is only their assets being taken over at a knock-down price. Meanwhile, the successful ones carry on. The normal rhythms of capitalism rule, OK?

Andrew Graham, master of Balliol College, Oxford, writing in the Oxford Review of Economic Policy, says the internet has been moving through phases that "bear a resemblance to those of earlier technological revolutions, like electricity".

The first stage is pure research, often in universities; the second is when experiments are made because no one really knows how to use the new discoveries. This is the phase we have been through, which is particularly suited to small firms and venture capitalists. It is the time when many firms are born and many die.

The third stage (now underway?) is when the market consolidates and large firms with superior marketing facilities take the lion's share.

The unanswered question, which small companies must address, is whether the nature of the internet - which can bring the whole world to your website - will change how the end game is played out this time.

Recession or no recession, the application of the web and new technologies to business will go on. Small companies can't afford to ignore it, otherwise they will lose competitiveness to those that do not. Staying competitive involves many things, including making sure that your company has a website that is strong on speed (ie with a broadband connection), that scores highly on usability (being simple, uncongested and quick to download) and is appropriate to the kind of company you are running. Recent research by the Department of Trade and Industry suggests 49% of customers will give up on websites that take more than 15 seconds to download. Do you know how long it takes your own site to download?

Not everyone can be like EasyJet with the majority of its bookings coming online. At the very least your website should be a shop window for your products, with links to sales and marketing. At best it will have up to date facilities, including a secure payments system, to enable potential customers to have their orders processed automatically even when the office is closed.

One of the key problems is simply getting your website known to potential customers. This is not easy and one of the lessons of the first few years is that big spending on television or poster sites to tell people your site exists is much less cost-effective than exploring techniques that have sprung out of the special nature of the internet. These include viral and affiliate marketing, in which your site establishes cheap or free links with other similar sites to mutual advantage. And, of course, email.

Justin Hunt's article on The Fabulous Bakin' Boys in this issue is a good example of using web techniques as a marketing tool, while Walé Azeez explains the symbiotic relationship between web businesses and traditional bricks-and-mortar companies.

The firms that should be most worried are those that still think they can survive without email let alone expertise in computers and the web. A recent Dun & Bradstreet survey found 80% of small companies had at least one computer on site and that two-thirds had internet access (half of which also had a website). That sounds fine.

But it also means that up to 20% of small companies don't even have a computer and a third don't have web access - and presumably no email facility either. One thing is certain, there's still a lot to play for.