Technology Adoption by SMEs

small business

Emergic, an Indian blog by entrepreneur Rajesh Jain, has a fascinating series on small and medium-sized enterprises and technology.

His main premise: small and medium enterprises (SMEs) lag 3-5 years behind larger enterprises when adopting technology. He lists the reasons:

  • “SMEs are not very IT-focused. For many, IT is an after-thought. Part of the reason is that these enterprises do not necessarily have a dedicated IT department. Most of the decisions are made by the owner-managers or the finance people. As such, the use of IT is limited largely to some of the four basic needs — email, productivity applications (word processor and spreadsheet), accounting and a website.
  • SMEs are hard to reach. They are small and distributed. While it is easy to get to the large companies (and for the large companies to get to the IT vendors), SMEs are a hard market to crack.
  • SMEs tend to still follow processes which are largely non-electronic. Because the organizations are small, the business knowledge is more tacit than in digital form. People, especially the senior management, “know” what is happening (and all that needs to be known). This also concentrates decision-making. So, IT’s role needs to be to assist in this decision-making process.
  • SMEs need more hand-holding and support, and thus can be very demanding customers. This is because they may not necessarily have trained in-house IT staff. At the same time, their ability to pay is quite limited. Hence, as customers, they have been an unattractive market for the IT vendors.
  • The most important issue facing SMEs is business growth. They have a fairly close tab of the expenses, so there is little room for optimisation there. The challenge is to generate new business, and manage that new business with the same (or incremental) staff so as to maximise profitability.
  • It is not easy for SMEs to educate themselves about new technologies and the impact they can have on their business. While there are all kinds of training institutions for computer languages and software packages, the one segment that still has been addressed on the training side is the business applications of technologies.
  • [They have] an even lower ability to spend. They typically need solutions which are a fraction of the cost of what has been available so far.”

The series refers primarily to SMEs in emerging markets like India. Yet, the description just as easily could be describing small businesses in developed countries like the United States, Canada, Australia and much of Europe.

Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.