ICT stands for Information and Communication Technology. The term comprises electronic information-processing technologies such as computers and the Internet, as well as fixed-line telecommunications, mobile phones and other wireless communications, networks, broadband, and various specialised application devices ranging from barcode scanners and Braille readers to global positioning systems (GPS). ICT devices can be embedded in other machines and appliances to increase their functionality, from watches and washing machines to cars.
It is an umbrella term that includes all technologies for the usage and manipulation of communication of information. Information and communication technology (ICT) connectivity (PCs and Internet) is very widespread in businesses of all sizes. It is ICT that has made a borderless world and lead to globalization.
Information and Communication Technology offer benefits for a broad range of business operations. Use of ICT can reduce transaction costs and increase the speed and reliability of transactions for both business-to-business (B2B) and business-to-consumer (B2C) transactions also it can the make the management of the firm’s resources more organised through specialized software like Enterprise Resource Planning (ERP) System etc.
It can enable seamless transfer of information increasing the efficiency of business processes such as documentation, data processing and other back-office functions. Increasingly latest ICT applications such as CRM (Customer Relationship Management) and KMS (Knowledge Management System) enables businesses to retain, share and use their acquired information, knowledge and know-how which leads to saving time, increased efficiency and reducing duplication of work.
It is common knowledge that Small Businesses play a significant role in the economic development for a country. A flourishing economy reflects developing and robust SME sector in the country. The increase in the number of SMEs’, leads to augmented competition in the market.
To survive in the fierce competition, Small and Medium enterprises need to adapt themselves with the changing customer requirements. To keep abreast with the change and to remain competitive, SMEs needs to continually improve their products and services through innovation and use of latest technologies. Substantial evidence suggests that the use and adoption of technologies by small enterprises are much dawdling than large firms to adopt new ICTs.
Adoption of latest technologies will lead to better inter firm linkages and improved communication with external links. Small businesses can benefit from the use of ICT and e-business applications for increasing productivity, better, effective and timely communication, increased customer base by entering into new markets and by enter into national and global supply chains.
In last decade, usage of ICT by Small businesses have increased tremendously and they have adopted and implemented a number of small and large innovations in technologies, software applications, business processes, supply chain management and business intelligence and agility.
There has been a complete transformation from SMEs’ using basic technology to more advanced applications for example internet, e-commerce, computerization of manual operations, information processing systems etc.
The basic ICT used by almost all SMEs is for basic communication through a fixed line or a wireless phone. This is generally followed by the use of computer, internet, printer etc. However it is noteworthy that need and use of advanced ICT varies for different small businesses according to their business size, area of operation, products/services range etc.
The decision to use the degree of ICT depends on the benefits the business can derive through its usage. Also factors like available resources, level of expertise of manpower to use such applications, adequate finance, and mindset of employees to adopt new technologies also play a major role for an SME to use ICT. Strategic use of ICT offers SMEs’ great scope to internationalize and get transformed to knowledge driven businesses in this knowledge driven economy.
There are several reasons why SMEs especially in developing countries have not been able to adopt ICT instead of numerous benefits it brings to them. . The attempts to define understand and explain the mechanisms and constraints of adopting ICT are not new. There are basically two independent variable components that impact on the use of ICT by a small business to a large extent. They are specific characteristics of the business and investment in the past in any ICT technology.
Business specific characteristic category includes factors like size of the enterprise, capital structure (equity/Debt ratio), sector of operation, rural or urban etc.
Size of the firm plays a significant role in deciding to adopt ICT applications. For e.g a large enterprise has more potential to adopt ICT as it has more resources and large network whereas a small enterprise is more prone to risks and have limited resources which limits them to invest further into ICT.
Financial structure of an enterprise also acts as an obstacle in adoption. For instance if a firm has more equity than debt in its capital structure, it is more likely to adopt ICT that the one which have more debt in its capital as it already has financial obligations to be met which constrains them to invest in ICT.
If the business is operating into a rural set up or in urban setting determines the awareness and knowledge about the benefits and uses of ICT. An SME existing in rural setting is constrained to adopt ICT due to limited knowledge about the concept.
The scale of adoption of ICT also depends on the sector the company is operating, as in agriculture adopting ICT is complicated than in service sector.
Investment in ICT technology in the past by a business also acts as a barrier in revamping the system or to invest further into the new technology by upgrading or replacing if up-gradation is not possible for the whole organization. This characteristic creates compatibility issues and makes adoption dependable on the previous investments.
Resistance by employees and owners of small businesses to adapt to new technologies as traditional SMEs are family run businesses where they work manually on the various business processes. Employees oppose to computerization for their apprehensions to loose their jobs.
Lack of human technological resources required to handle and use ICT and e-business applications. The company has to either train their existing employees or hire new employees equipped with skills to use ICT. In both cases the business owner will need to invest money and time for training or recruiting. These factors generally lead to not investing into ICT.
Inadequate infrastructure to support ICT arrangements also results in not adopting ICT by small businesses. Most of the small businesses in developing countries do not have required infrastructure and outdated equipments to support and implement ICT in their businesses.
Lack of SME specific ICT applications also discourages small enterprises to put into practice ICT technologies. In general ICT technologies are designed and used by larger firms than by smaller ones. There are no tailor made ICT packages for SMEs catering specifically to their needs and requirements.
Cost towards maintenance of ICT also hindrances the owners to switch to sophisticated technologies. The owners feel too much financial pressure as ICT services does not only needs investment while adopting but also it needs to be maintained. Most of the SMEs will turn down the idea of adopting if its benefits do not outweigh the costs incurred.
Legal barriers and regulations to comply with while transacting abroad through ICT is also an issue. The SMEs needs to understand the differences in legal and regulatory environments, failing which they may be litigated under the inconsistent laws while doing cross border transactions.
Insufficient finance for investing into ICT is one of the major hindrances in developing countries SMEs’ that restricts their growth and development to a large extent.