INTRODUCTION
This article examines the main drivers and barriers facing small business owner/managers in the manner in which they use information and communications technologies (ICTs) within their businesses. The early part of the article examines the notion of what is meant by small business. The discussion then moves onto describing some of the drivers and barriers to the use of ICTs in small business and the implications of these to small businesses.
BACKGROUND
what is Small?
When studying the use of ICTs in small business, the range of definitions used to describe small business ranges from micro businesses to small and medium sized enterprises. This range can make it extremely difficult for researchers to match up different small business studies. A 2003 study by members of the information resources management association special research cluster on small business and information technology (Burgess, 2003) found that:
• Definitions of small business ranged from less than 20 (Australasia), 50 (Europe), and 100 (North America) employees (with some definitions including annual turnover and asset levels)
• Definitions of micro business ranged from less than 5 to less than 10 employees
• Definitions of medium business ranged up to 200, 250 and 500 employees
A common acronym used to represent small and medium sized businesses is SME. There is some argument as to whether the term is of any use at all given the vast differences between small and medium sized businesses. Still, there continue to be studies that examine the use of ICTs in SMEs.
For my purposes, small businesses are those businesses with 20 employees or less. However, most small businesses are micro businesses (Fillis, Johansson, & Wagner, 2004a), made up of less than five employees.
Size is Important!
Why is it so important to consider the size of the business? A number of studies suggest that there is a relationship between the size of a business and its level of adoption of ICTs (McDonagh & Prothero, 2000). There is also a relationship between the size of a business and the different characteristics it will have that can lead to the successful use of ICTs (Igbaria, Zinatelli, Cragg, & Cavaye, 1997; Pollard & Hayne, 1998). As such, research findings based upon traditional information systems in larger businesses are not necessarily directly applicable to small businesses. This will be touched upon again later in the article.
DRIVERS AND BARRIERS TO THE USE OF ICT IN SMALL BUSINESS
The literature around the area of small business and information technology is rife with what is now a fairly accepted list of barriers to the successful implementation of ICTs in small businesses. These barriers typically include (Igbaria et al., 1997; Management Services, 1997; McDonagh et al., 2000; Pollard et al., 1998):
• The cost of ICTs—this is perhaps not so much of an issue these days (well, in developed countries anyway)
• Lack of time to devote to the implementation and maintenance of ICTs
• A lack of ICTs knowledge combined with difficulty in finding useful, impartial advice
• Lack of use of external consultants and vendors
• Short-range management perspectives
• A lack of understanding of the benefits that ICTs can provide, and how to measure those benefits
• A lack of formal planning or control procedures
What about small businesses and e-commerce? Small businesses do face a series of barriers that they need to overcome before moving into the digital economy. These are (Taylor & Murphy 2004b):
• Many SMEs are unaware of the potential of e-com-merce to enhance their business.
• Some SMEs occupy clearly defined (and small) niche markets that they are satisfied with. They do not need the extended connectivity provided by the Internet. In addition, small businesses may be happy with their existing activities because they are adequate enough to enable to maintain a particular “lifestyle” (Fillis et al., 2004a).
• There are still perceptions of unresolved security and privacy issues related to use of the Internet.
• Many SMEs lack the necessary skill base to engage in the digital economy.
• The perceived high initial and ongoing costs associated with ICTs and e-business can be seen as a barrier. This is also supported by Fillis et al. (2004a).
• Many SMEs cannot experiment with ICT investments like larger businesses. They need to be sure that there will be returns for the e-commerce investments they make.
Having identified some of the barriers to the successful use of ICTs, there is also a fairly common list of drivers that are listed in the literature that appear to indicate a greater chance of successful implementation of ICTs in small businesses.
Some of these factors are (Naylor & Williams, 1994; Yap & Thong, 1997; Swartz & Walsh, 1996; Zinatelli, Cragg, & Cavaye, 1996):
• The involvement of owner/managers in the implementation of ICTs
• The involvement of users (employees) in development and installation
• The training of users
• The use of disciplined planning methodologies in setting up applications
• The number of analytical/strategic (versus transactional) applications being run
• The level of ICTs expertise within the organisation
• The role of the external environment (especially consultants and vendors)
In relation to e-commerce, Mehrtens, Cragg, and Mills (2001) developed a model of Internet adoption using an innovation theory approach, suggesting that the decision to adopt was a based upon:
• Identifying perceived benefits: These can take the form of:
° Efficiency benefits from the relative advantage that the Internet can provide over traditional methods
° Employees gathering information in a more effective manner
° A tool to build the image (or “brand”) of the business
• Organisational readiness:
° The level of Internet knowledge in the business amongst non-IT professionals, for instance the owner/manager; an Internet aware owner might support or initiate Internet adoption.
° The suitability of systems within the business to access and use the Internet. Historically, smaller business sizes have been identified as a factor in lower ICT adoption rates and Internet technologies (Martin & Matlay, 2001). One important aspect here is if the infrastructure is available for businesses to take advantage of ICTs. This can especially be important in rural and remote areas and developing countries.
• External pressure:
o From existing users, particularly customers but perhaps external business partners (such as suppliers).
We can now examine some of the factors mentioned in these lists more closely.
FACTORS IN THE ADOPTION OF ICT BY SMALL BUSINESSES
Role of Owner/Manager
One of the key factors leading to successful use of ICTs in small businesses identified in the previous section was the involvement of small business owner/ managers in the ICTs implementation.
There is some evidence to indicate that managers in small businesses are less likely to know how to use ICTs effectively or to keep up with the latest trends in ICTs than their counterparts in larger businesses (Pollard et al., 1988). Igbaria et al. (1997) cite a number of references to support the view that management support can promote the acceptance of ICTs. They found that the support of management positively affected the perceived ease of use and the perceived usefulness of ICTs within the small business.
The motivation of owner/managers is a key factor in shaping the e-business development of a small business. Their perceptions can range from highly positive entrepreneurial viewpoints to very conservative stances. The orientation of the business and the owner/manager can affect the level of Internet connectivity of the business. Business that exhibit entrepreneurial characteristics are more likely to adopt e-business (and will do so at a faster rate) (Fillis et al., 2004a). An important finding from Lee’s (2004) study is that owner/managers with higher computer self-efficacy were more likely to adopt Internet applications. Indeed, Martin et al. (2001) suggest that the managerial knowledge, skills, and experience of owner/managers can make a crucial difference in identifying Internet opportunities.
In a study of 59 Irish SMEs, Barry and Milner (2002) determined that the owner/manager was the principal driving force behind the decision to adopt e-commerce. Decision making within small businesses is often based upon owner/ manager intuition rather than on the basis of market data gathered by the business (Schlenker & Crocker 2003).
One of the barriers identified earlier that hinder the effective use of ICTs in small businesses is a lack of formal planning and control methodologies. This relates to a lack of knowledge of how to plan effectively, lack of time and money to seek this knowledge, lack of time to apply ICTs even if they have the knowledge and a lack of understanding that they even need the knowledge! Small businesses are, however, concerned with issues relating to how they can operate more effectively and efficiently and/or how they can grow (El Louadi, 1998). One of the problems is that management practice in small businesses is often based on the short term and is informal and ad hoc. Much of the time is spent “surviving,” so that little time can be devoted to examine ICTs projects (Pollard et al., 1988).
Location
Why is location important when considering the use of ICTs in small business? The major answer to this is a combination of resources and distance. The further you are away from resources, the longer it takes and the more it costs to get them. This can particularly be the case with hardware and software purchases, training, and support.
Another reason for examining location is culture. Some countries, and even different regions within countries, have their own traditions and their own established ways of doing things. This can influence the behaviour of small businesses and the manner in which they use ICTs.
In addition, distance from customers provides problems in relation to logistics, the regular requirement for a personal touch in closing sales or providing service and problems in relation to differing language and culture (Schlenker et al., 2003).
Developing Countries
Small businesses make up a major portion of businesses in developing countries (in some countries the percentage is higher than in developed countries). One of the major barriers faced by small businesses in developing countries is access to information, especially information used in decision-making. Another problem is the lack of data sources from which to obtain the type of information required. Problems with the technological infrastructure of developing countries only exacerbate this (Sawyerr, Edbrahimi, & Thibodeaux, 2000).
Taylor et al. (2004b) point to significant differences between e-business adoption in developed and developing countries. Many business people in developing countries are disillusioned with substandard telecommunications infrastructures, as well as a lack of expert advice and support systems in general (Schlenker et al., 2003). In relation to connecting to the Internet, the infrastructure in many countries is either not available or costs too much to connect to. Thus, new initiatives tend to occur in urban areas where affordable connections are available (Warren, 2004).
Rural Small Businesses
Some of the problems facing rural small businesses are similar to those facing small businesses in developing countries. One of the benefits that the Internet may provide is remote access to many desired ICTs resources such as training (Gallagher, 1999). A year 2000 survey ofAustralian small businesses revealed that 29% of metropolitan small businesses had a Web site, compared to 20% of rural small businesses. The main reason given by rural small businesses for not having a Web site was that they did not have access to the skills needed to design, build, and maintain a Web site (Telstra Corporation and NOIE, 2000). By 2005, the divide had increased, with 54% of metropolitan small businesses having Web sites, compared to 37% of regional small businesses (Sensis, 2005).
Martin et al. (2001) report that businesses located in rural regions of the UK had less access to ICT advice. SMEs in London and the Southeast region of the UK are more likely to have a Website than in other regions (Taylor et al., 2004b).
Industry
There is some relationship between the industry that small businesses are involved in and the types of ICTs that they use.
The level of e-business activity will vary across small businesses in different industry sectors (Fillis, Johansson, & Wagner, 2004b). In a study of the usage of ICTs by 24 businesses in Northern Ireland spanning the retail, construction, distribution, and wholesale industry areas Shiels, McIvor, & O’Reilly, (2003) discovered differences in the usage of ICTs in separate industry groupings. In some instances, they attributed these to the nature of their business operations and the type of customer they target. Martin et al. (2001) suggest that micro businesses specialising in business services are more likely to adopt ICTs than similar sized manufacturing businesses. Fillis et al., (2004b) expect that small businesses in the ICT industry would have a higher degree of uptake and usage of ICTs than non-ICT businesses. Small farms in the UK have rather low Internet connectivity rates. One of the reasons is a lack of suitable on-farm hardware. As at 2003, a significant proportion of farms still did not have a PC, and for those that did many were old and slow (Warren, 2004). The hotel industry is an information intensive industry. As such, ICTs are a key enabler in distributing information and facilitating transactions (O’Connor & Frew 2004).
In a study of 129 SMEs in New Zealand, Al-Qirim and Corbitt (2002) found that a higher proportion of businesses in the ICT and business services industries had adopted applications using Internet technologies.
working Out the Benefits of ICTs
Another barrier to the successful use of ICTs in small businesses is a lack of understanding of the benefits that ICTs can provide and how to measure those benefits. The most common way used to determine the level of ICTs success is to measure small business user satisfaction with information technology. Such measures of user satisfaction have one major problem—they are linked with user expectations (Naylor et al., 1994). For instance, an owner/manager understanding the strategic benefits that ICTs can provide may be less satisfied with a simple transactional system than an owner/ manager who is unaware of these strategic benefits. This is despite the possibility that they may be reviewing systems that perform in a similar manner. Again, the problem falls back to a lack of proper knowledge about the advantages that ICTs can provide.
Success can vary in relation to industry and culture. The measurement of success can be measures such as quality of life, company culture, and maximising profits or generating revenues. The idea of quality of life as a goal is favoured by many smaller businesses and public organisations (Schlenker et al., 2003). In fact, Schlenker et al. (2003) suggest that 70% of businesses in the SME sector are more concerned with “quality of life” than the value of their stock. Their primary purpose is to generate an income for their owners rather than maximise revenues.
The value of technology to a business may therefore be in how it can assist management and employees to define, op-erationalise and measure success (Schlenker et al., 2003).
It is important to distinguish between the evaluation of a potential ICT investment in relation to determining whether or not to invest in it and the ongoing evaluation of an ICT project after it has been implemented. Similar issues affect both types of activities as the difficulties involved in assessing the financial value of ICT systems to a business are well documented. These systems often generate indirect, qualitative and contingent impacts that are difficult to measure in monetary terms. The projects often cross organisational boundaries and are related with investments in other investment projects, making the ICT component difficult to isolate (O’Connor et al., 2004).
Employee Skills and Training
Factors relating to a lack of knowledge of ICTs or lack of understanding of the benefits of ICTs have been mentioned a number of times already in this article. Human capital in small businesses is seen as being an important factor in recognising ICT opportunities and adopting them. Businesses where employees have a lower understanding and knowledge of ICTs have difficulties in understanding the usefulness of ICTs (Martin et al., 2001). Barry et al. (2002) suggest that human resource issues are perhaps the most important factor to consider when implementing new technologies in an SME. Businesses with a mix of technological and business skills are generally better placed to exploit e-business opportunities (Fillis et al., 2004a).
In relation to development of e-business systems, Taylor et al. (2004a) observe that Web-based systems development is different to other types of ICT development and requires a wide range of skills. Taylor et al. identified the skills sets required for e-commerce projects in the SME sector, incorporating technical, business, and overlapping skills and knowledge.
Developing Skills and Knowledge in Small Businesses
Barry et al. (2002) have identified a number of predominant features of SME training:
• Very small businesses are the least interested in providing training.
• Training is often considered to be too general and not specific enough to the needs of SMEs.
• SMEs face disincentives to train employees. They have less potential to offer the higher pay and benefits that accompany increased expertise.
• SMEs are often not aware of their training needs and are not capable matching needs to suitable training options.
• Training in SMEs is more likely to be informal than formal—with the more formal approaches providing too many constraints in relation to the consumption of time and other resources.
Barry et al. (2002) found that the owner/manager was a catalyst for organisational e-commerce training in SMEs and that some 85% of the 59 Irish SMEs in their study did provide training, but most of it was delivered internally and was informal in nature.
In a case study of three small businesses, Taylor et al. (2004a) encountered the following techniques for developing e-business skills:
• Hands-on experience
• Short courses
• Higher education courses
• Technical manuals
• Viewing the Web sites of other businesses; this allowed a benchmarking exercise to be performed against rival e-business Web sites.
• Consulting experienced staff—mainly external ICT consultants or external software house staff.
Simpson and Docherty (2004) discuss the role of personal business advisors (small business consultants in the UK)—who typically had marketing or finance backgrounds but could not equal the knowledge of the owner/manager in their particular industry. Also, their fee structures were not quite suited to small businesses.
Another option for small businesses, especially ones that may feel isolated, it to set up a mentoring system where mentors are able to provide external and relevant experience and impartial advice (Simpson et al., 2004).
Building Capacity through External Sources
Small business managers perceive more uncertainty in their environment than their counterparts in larger businesses. Effective management of external information can help them to reduce the level of uncertainty that they feel (El Louadi, 1998).
In many instances, small businesses have to rely on the ICT expertise of vendors and/or consultants because of a lack of internal ICT expertise. Igbaria et al. (1997) have found that good external support provided by vendors and/or consultants, such as technical support, training and a harmonious working relationship can reduce the risk of ICTs failure in small businesses.
There is a view, however, that vendors and consultants do not understand the small and medium business market and that the level of support provided by them is only adequate or less than adequate (Management Services, 2000). Careful selection of vendors and/or consultants is vital.
Governments worldwide are beginning to realise the importance of the small business community. The role of government in developing countries has already been touched upon in this article. ICTs are one of the areas that are the subject of increased government resources, through improved information programs, increased training opportunities and technology support grants and awards.
As time goes on, governments are increasingly becoming aware of the importance of small businesses to their economies and are providing increased resources to their support. This has resulted in various support programs for small businesses that have directly or indirectly resulted in improvements in the use of ICTs by small businesses. It is anticipated that this trend will continue. There is also an increasing awareness of the importance of the efficient and effective use of ICTs by small businesses by the research community. There continues to be increased amounts of research being carried out in the field, which can only lead to greater understanding.
CONCLUSION
This article has introduced a number of issues related to the use of ICTs in small businesses. When looking at small business research, it is important to determine what the researcher’s view of “small” actually is. This is so that proper comparisons can be made across studies.
Drivers and barriers in relation to the use of ICTs were identified for small businesses as being common areas covered in the literature. The importance of owner/managers, the location of the business, differences between industries, and employee skill levels and training were discussed.
KEY TERMS
Medium Business: This term is used to describe businesses that are too large to be considered as being small and too small to be considered as being large. This somewhat vague description is matched by the varying definitions of “medium” sized business there are around. In relation to use of IT, medium sized businesses usually exhibit more of the characteristics of larger businesses than smaller ones.
Micro Business: This term is used to describe very small businesses. Many of these are operate as family businesses. They form the majority of businesses.
Owner/Manager: In most small businesses, the owner/ manger is the driving force behind the business, and as such can be the catalyst for change in the business that occurs through or around IT. In some small businesses, the positions of owner and manager are separated.
Small Business: “Small business” can be measured by number of employees, annual turnover and/or assets. It usually represents those businesses with up to 20, 50, or 100 employees (depending upon the region being investigated). This term encompasses micro businesses.
SME: This acronym is used to refer to small and medium sized enterprises as a collective group.
