Personally, I think that monitoring software nurtures a corporate ecosystem that small business would do well to avoid.
The last time I was at a company who buttered their bread with stuff like that; the corporate atmosphere had degraded horribly. Management spent more time playing big brother than they did advancing the interests of the company. Also there was great dissension between employees and management, which in turn damaged overall worker throughput and the turnover rate was through the roof (which can be tough for a small business). For me those software system got in the way of my normal workflow constantly, because I live and die by researching for information on the web and would have to go the the sysadmin to get a site unblocked all of the time.
I do think that they can be used appropriately with a light touch, but in general I am more of a reward/incentive model over a rule/punishment model.
Here at Insivia we have never looked into things like that and instead take an approach of embracing the outside interests of our staff because we realize the overall value of an interested and engaged workforce. Also if we can help them be happy and successful people, it will reflect well on our company as well. I would say from my experience both as a worker and a leader for Insivia this it one the greatest things about my job.
In fact what is now a central part of our software codebase that we use for a number of our products, started as a personal project by one of our developers. This is something that he had been working on a good year before he came to Insivia and was happy to integrate it because we showed interest it and gave him time to grow it in his first year.
