IT Adoption by Small and Medium Enterprises - Literature review Example

?Information Technology Adoption by Small and Medium Enterprises (SMEs) Information Technology (IT) is crucial to the success of any business and hasto be induced in one or the other form to achieve and sustain business objectives. Small and Medium Enterprise (SMEs) are no exception to this phenomenon. Although, there is no universal definition for SMEs and businesses are usually gauged in terms of turnover and number of employees to define their size and nature of business. In United Kingdom a small enterprise is supposed to comprise of maximum 25 employees with a turnover of around ?6.5 million and a medium enterprise can have up to 250 employees with a turnover of ?25.9 million. (BIS, 2011). SMEs are not only playing a significant role in the economy of United Kingdom but they are also major contributor in reducing the unemployment in the country. “Small and medium sized enterprises (SMEs) are an important part of UK economy. Out of nation 4.3 million business enterprises 99% are SMEs, accounting for well over half of the employment (58.9%) and turnover (51.9%).” (Dyerson & Hari, 2008, p. 139). Today, adoption of IT or Information and Communication Technology (ICT) by SMEs is not an option but a compulsion and business requirement. Businesses cannot afford to live and exit in isolation rather they have to integrate themselves with all new technologies that happened to exist and prevail in the society. The impact of information technology on the society has instigated new domains and horizons of information technology in the SMEs businesses and awareness has begin to increased among European states some two decades back with the invent of internet and information explosion. “Earlier EU policies in support of Small and Medium Enterprises (SMEs) tended to focus on their role in creating employment. Over the past decade, there has been a pronounced shift to encourage greater SME participation in the information society and increased policy interest in the role that SME may play in innovation.” (Stanford-Smith, Enrica & Mireille, 2002, p.987). Apart from the size of an SME, the significance of an information technology framework is unquestionable for its existence, operation and growth. The role of IT in any business is multi faceted and it may range from internal operations and data repositories to eMarketing and eCommerce. The globalization of businesses has necessitated the induction of tools and trade of information technology into the SMEs all over the world. The strategic importance of SMEs in the economic growth of a country has grown multi times and governments try to enhance and boost economic escalation through the growth of SMEs to achieve sustainable economic strength. The adoption of information technology by SMEs is the tactical side of this strategic objective. Therefore, the governments not only encourage the use of technology but also enforce the use of these technologies to ensure better management and to guard public interest through IT enabled services by SMEs. These efforts were not limited to individual states but were also collaborated internationally by organizations like OECD. An early example of these steps includes the establishment of “Technology Development Centers (TEKES) in order to assist SMEs in planning development programs which include new technology and international cooperation.” (OECD, 1998, p. 82). United Kingdom being a member of OECD has been playing a pivotal role in the growth of SMEs and thereafter in the strengthening process of the SMEs which includes but not limited to the adoption and encouragement of information technologies in these businesses. “Here again the operations are concentrated on the OECD countries and the main sectors include: technical and engineering studies, agro foods, chemicals, parachemicals and pharmaceuticals, information technology and electronics.” (OECD, 1998, p. 83). Threats and challenges always come bundled with the adoption of any technology and the information technology is no exception. This critical review will investigate the adoption of ICT by SMEs in general and manufacturing firms of United Kingdom in particular, specially the challenges and threats of ICT faced by these firms. The availability of trained technical manpower to handle the IT infrastructures within SMEs, the security of information and infrastructure and availability of information to all facets of the internationalized businesses are other major challenges faced by the industry. A major segment of the SMEs is comprised of manufacturing sector. IT can contribute in many different ways to manufacturing sector and can reduce the overall cost while ensuring the efficient use of available resources and the premium quality productions. The manufacturing industries have a great room for ICT related innovations. The automation of production, design automation, inventory support, supply change system and other support information systems can bring the strategic and competitive advantages to a manufacturing firm. The use of eCommerce and eMarketing can contribute substantially towards viable business growth. The SMEs in manufacturing industries confronted a little confusion early on over the cost they incurs in setting up IT infrastructures and the value it brings to them. Lately, but surely this uncertainty has now vanished and information technology budget are getting bigger and have been accepted as purely business oriented spending with definite results and implications. Today, the issue is not of ICT acceptability in manufacturing industries as a business requirement rather the issues are largely pertinent to the ICT industry itself. Manufacturing sector implement ICT infrastructures through hired consultants from IT industry and there is a dearth of technical hands that can put thing into effect meaningfully so as to achieve business objectives. The manufacturing industries are exposed to a serious challenge of getting the ICT experts, who can skillfully realize the requirements and demands of their specific domain and then propose a cost effective solution which can address both; the demands of the domain and c the standards of ICT. The domain experts of manufacturing industries are relying heavily on the competencies of the ICT experts and are facing serious dilemma in coordination and team managements. “SMEs appear to be encountering knowledge competency gaps related to ICT. They may be too small to be able to employ a dedicated ICT expert and lack the experience to have confidence in its reliability of consultancy advice. They often have limited experience in selecting, implementing and evaluating suggested ICT solutions.” (Dyerson & Hari, 2008, p. 139). Another important consideration while investigating the role of ICT in manufacturing SMEs is the size of the firm itself. Usually, smaller firms find is difficult to implement a full scale ICT infrastructure but in the increasingly diversifying global market economy they cannot completely avoid the technology and innovation because it may cause serious damage to its operations and even the existence. “If a firm cannot adapt itself to the emerging technological changes it will inevitably shrink out of existence.” (Analoui & Azhdar, 2003, p. 80). There are serious infrastructural flaws in majority o f ICT implementations in the industry because they were neither planned nor integrated into the businesses properly. The manufacturing firms usually tends to implement their ICT setups on “as and when required” basis therefore, the overall impact of the technology is not fully realized in their businesses. The owners are usually reluctant and only adopt the technological advancement per force. These implementations are usually instigated owing to the difficulties encounter while interacting with fully ICT enabled firms within their supply chain or there may be situations where web presence of the firm is found inevitable to interact with customers and client at large scale. However, this responsive approach of implementing ICT results in several infrastructural flaws and the real impact corresponding to investment is often found missing. “This tends to make UK SMEs as a group of reactive to technology adoption rather than proactive.” (Dyerson & Hari, 2008, p. 140). The SMEs of manufacturing industries are often reluctant to enhance the ICT facilities they are managing and the expense in ICT is not considered an operational requirement of the business. The other side of this picture is the ever emerging technological advancement in the field of ICT and keeping pace with these advancements is yet another dilemma for the SME owners and managers. Ensuring the basic Return on Investment (ROI) principal of economics seems to be all the most difficult while deciding on the adoption of a technological advancement or otherwise. There is a need to boost the confidence of investors in ICT infrastructure through various initiatives and educational programs to introduce the benefits of the technological advancements by the state agencies. “Increased awareness of the available internet technologies and development of low cost solutions tailored to the needs of SME is very crucial for the competitive business benefit in the NE region and in the UK.” (Cheng, Webb & Marsh, 2004, p. 90). Today, technology adoption is still a concern for both the SMEs of all sectors including the manufacturing sector and the government. Keeping pace with the technological advancement is a serious concern for the various small and medium sized businesses. Governments are trying hard to work out some sort of all encompassing policy initiatives that can bridge the gap between the technology advancements and its adoption by SMEs. Multiple technology adoption models are available and applied by government and corporate sector but there is still a fair margin of improvements in all such endeavors. SMEs are now well aware of the business objectives that can be achieved by employing the ICT in a befitting manner and trying hard to overcome the complexities and issues. They are conscious of the fact that business and technology both have to go hand in hand for any meaningful achievement in this age of information and web based societies. References Analoui Farhad & Azhdar Karami 2003, Strategic management in small and medium enterprises, Thomson Learning, London. Business Innovation & Skills 2011, A National Archive, Department for Business Innovation & Skills (2011), United Kingdom, viewed 12th March, 2011, . Cheng K, Webb D & Marsh R 2004, Advances in e-Engineering and the digital enterprise technology, The Cromwell Press, UK. Dhilon Gurpreet, Bernd Carsten Stahl & Richard Baskerville 2009, Information systems – creativity and innovation in small and medium sized enterprises,IFIP WG 8.2 Internation Conferrence, CreativeSME 2009 Conference, UK. Dyerson Romano & G. ‘Hari’ Harindranath 2008, 2nd European conference on information management and evaluation 11-12 September 2008, Academic Publishers, UK. Khusro-Pour Mehdi, 2006, Emerging Trends and Challenges in information technology management, Idea Group, UK. Levi Margi & Philip Powell 2005, Strategies for growth in SMEs: The role of information and information systems, Elsevier Limited, UK. Organization for Economic Co-operation and Development 1998, Globalization and small and medium enterprises (SMEs) Vol. 2 OECD, France. Standford-Smith Brian, Enrica Chiozza & Mireille Edin 2002, Challenges and achievements in E-business and E-Work, Part. 2, IOS Press, The Netherlands. Read More