Small and Medium Enterprises and ICT/Overview

Small and Medium Enterprises and ICT

List of Acronyms — Forword — Overview — Concepts and Definitions — SME Adoption of ICT — General Policy Framework for ICT Adoption by SMEs — Specific Policy Recommendations for Governments — Suggestions for Further Reading — Works Cited — Notes — About the Author

It is commonplace for governments to have policies to encourage the growth of local small and medium enterprises (SMEs) as they can help to directly alleviate poverty by increasing income levels and creating jobs. However, as the global economy becomes increasingly reliant on information and communications technology (ICT) to receive, process, and send out information, the small businesses within the Asia-Pacific region - which form a significant portion of their developing economies - have yet to reap these benefits evenly. This is because obtaining such opportunities rests largely upon the ability of SMEs to engage in the regional and global economic business networks which, in turn, demand provision of a prerequisite level of access to and use of ICT. Unless these prerequisites are in place, these SMEs are set to lose out on opportunities to integrate into the global supply chain, bid for outsourcing businesses, and increase their internal productivity and efficiency.

SMEs can benefit either as producers of ICT or as users of ICT for purposes such as increased productivity, faster communications and reaching new clients. However, it must be noted at the outset that not all SMEs need to adopt ICT tools to the same degree of sophistication. The most basic ICT tool is having communication capabilities through fixed lines or mobile phones, whichever is more cost effective. SMEs may then use a personal computer (PC) with basic software for simple information processing needs such as producing text or keeping track of accounting items. Internet access enables SMEs to have advanced communication capabilities such as email, web browsing and launching a website. SMEs in manufacturing can benefit from more advanced ICT tools such as Enterprise Resource Planning (ERP) or inventory management.

While ICT can benefit SMEs in multiple ways, SMEs within the Asia-Pacific region have been slow to adopt ICT as they face major constraints such as poor telecommunications infrastructure, limited ICT literacy, inability to integrate ICT into business processes, high costs of ICT equipment, incomplete government regulations for e-commerce, and a poor understanding of the dynamics of the knowledge economy. To remove these constraints, governments need to do more than merely improving ICT national policy and promoting SMEs in the ICT sector. Instead, governments should embed ICT components into overall SME policy in a comprehensive and focused manner. However, this does not mean that SME policy should be the same for all industries. SMEs in different sectors use ICT differently and will adopt them at a different pace. Additionally, SMEs need help in translating the benefits of ICT to their core business. The willingness of SMEs to integrate e-business practices depends on how much it can directly improve their core business and how much the potential benefits outweigh the definite costs. For example, a tour operator may be more likely to purchase computers and Internet connectivity in order to service its clients than a grocery store owner will be willing to convert its cash register system into point-of-sale (POS) technology to better manage inventory. By recognizing these differences and focusing their efforts on removing the constraints, governments can play an important role in encouraging SMEs to become more effective users of ICT. This can have wider impact on national economies since SMEs are the engines of economic growth.

This e-Primer will show why SMEs should adopt ICT, explore the possible uses of ICT, survey past ICT policies and programmes for SMEs, and recommend possible policies for governments to consider.