IT Adoption in SMEs: A Comprehensive Analysis of Benefits and Barriers

This report examines the adoption of Information Technology (IT) within Small and Medium Enterprises (SMEs), highlighting its crucial role in today's global economy. It defines IT, its commercial applications, and the concept of IT adoption, emphasizing the expectation of increased productivity and performance improvement. The report explores the determinants influencing IT adoption, including internal factors like leadership support and financial resources, and external factors such as market competition and software availability. It underscores the importance of IT adoption for SMEs' survival and growth, facilitating smoother operations, enhanced communication, and the ability to meet consumer demands. The analysis also addresses the influences of IT on SMEs, such as improved efficiency, competitiveness, and strategic planning. Finally, the report identifies barriers to IT adoption, including lack of knowledge, end-user effort, top management support, and security concerns, providing a comprehensive overview of the challenges and opportunities in IT implementation for SMEs.

IT Adoption in SME
Name: Tamanna Tanjum Tisha
ID: 029-12-118
Section: B

Introduction
The study of systems such as computers or telecommunications for the storage, retrieval and
sending of information could apply to information technology. All over the world, small and
medium-sized enterprises known as SMEs are rising. Such enterprises are small but, by their
contribution, play a vital role in the global economy. Since new technologies, like other
businesses, are evolving every day, in order to successfully carry out their duties, SMEs often
incorporate information technology. In SME organizations, IT is modified to make activities and
functions simpler. By embracing information technology, companies will compete with the
market's competitors. The adaptation of IT creates a positive influence on organizational
activities that contributes to efficiency for organizations.
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Information technology
Information technology defines the technology that includes expansion, maintenance and
information systems, software and networks practice for processing and information delivery.
The commercial use of information technology includes computer technology and telephony for
conducting enterprise operations. Architectures, methodologies and regulations are used to
govern the use of data. Information technology consists of physical equipment, management
tools and applications to perform organizational functions. Purpose-built computers are designed
to perform different tasks to perform the organization's functions. Because of information
technology and the expense of the devices, electricity costs and manufacturing costs, the
computing capacities of the organization's machines are advanced. For instance, BME
Bangladesh is one of the renowned organizations belonging to the SME group and the business
also uses information technology for the functions of the organization.
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Information technology adoption
Adaptation to information technology is defined as the use by individuals or organizations of
information technology or technology-related services. For organisations, the adaptation to
modern information technology is challenging. Organizations adapt to new information
technologies with the expectation to increase productivity and performance improvement. The
gap between an administrative order and real operations is considered and the information
technology helps to reduce that gap. The organization's people need to fully understand the
information technology processes. As organizations rely more on information technology, related
jobs in information technology for experienced individuals are also growing day by day. Large
organizations need to use IT within the organization's departments to manage a huge number of
business functions. Nowadays, even small and medium enterprises are also adapting to
information technology for easier organization tasks and function for better capabilities. All of
these adoptions lead the organizations to increased profitability
Figure: Information technology adoption model
For example, Aptify, a SME in the UK, is a search retargeting service that focuses on users to
provide inventory to their desired audience, and information technology is used in the
organization's functions to get the organization's desired results.
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Information technology adoption in SME
Small and medium businesses hold a significant share and a wide demand in every country's
economy. The financial sector has little or no dependence on it. Due to slow progression,
companies face little or more resource inadequacy. As market dynamics shift every day,
information technology is becoming more and more relevant in order to provide vital support for
the business functions of SMEs. The information technology provides competitive advantages to
the organizations. As SMEs are not very big, the adoption of IT creates opportunities as well as
benefits to these organizations. Investment in IT is made inside the organizations to derive
profitability from the functions as well as the products and services offered by these small and
medium enterprises
Figure: Information technology adoption in SMEs
Large organizations mostly increase productivity by adopting information technology for the
development of the organization. But the rate of adoption of information technology in small and
medium enterprises is relatively low than larger organizations.
In Bangladesh, for example, many small and medium-sized enterprises (SMEs) are using
information technology to gain a competitive edge and to interact with the global economy in
order to prolong their market areas for performance and sustainability. Small and medium-sized
companies in India, the United Kingdom and the United States are also adjusting to evolving
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new information-related technologies to compete with their rivals to thrive in the global
economy.
Determinants or factors affecting IT adoption in SMEs
A brief description of several determinants or factors affecting the IT adoption process of small
and medium enterprises is given below-
Internal factors: Internal factors are the factors related to information technology adoption
within the organizational contexts of the SMEs. It also includes the technological contexts of the
organizations. Some of the internal factors influencing IT adoption are the support and
commitment of the higher authorities, financial resources availability, in-house IT experts,
investment in IT of the organizations, end user’s capabilities and development in IT,
organizational culture, strategic context, information systems planning, organizational structure
etc.
External factors: External factors describe the factors that include the area in which the
organizations conduct their businesses within the environmental contexts. It includes the dealings
with the competitors, the industry and the governments. Some of the external factors can be the
software available for IT in the market, security, user-friendly-ness of the systems, cost of Its,
compatibility, competition in the environment, legal issues etc of the SME organizations.
For example, Salesforce.com Inc. is an SME organization that provides integrated consumer
relationship management service to targeted consumers. The organization uses IT to do its tasks.
In this case, the organization needs to focus on internal factors like available financial resources,
IT experts of the organization etc. to successfully implement IT in the organization. It also needs
to focus on external factors such as environmental forces, cost of software, competitors etc. to
implement and integrate IT within the organizational function for the development of the
organization.
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Importance of IT adoption in SMEs
In order for an organization that is small and medium-sized to survive and move forward in the
global technology world, adoption of information technology has become essential. In order to
run their functions and related departments smoothly without any errors, businesses use
information technology. In order to complete their tasks, the human resources, finance,
marketing, production and security departments of organizations use information technology.
The process of adoption might not be easy. But it will allow different opportunities for the
organization. If companies adapt to information technology, they will be able to quickly see
changes in global markets. The organizations need to invest a bit for acquiring the equipment
such as hardware, software and data for establishing information technology successfully. The
demand and need for customized products and services of consumers are gradually increasing.
Information technology adoption has allowed the small and medium organizations to critically
analyse these needs and fulfil the demand of these targeted consumers of businesses
Because of the implementation of information technology, communication within the
departments of small and medium-sized companies has become easier. As all sizes of
organizations choose to adapt to information technology for development and survival in the
global economy, the world economy is becoming a single interdependent system. Small and
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medium enterprises often look for options by which they can reduce the time and cost of the
organizations. Information technology makes it possible for the organization to get the work
done within expected time and cost desired by the organizations.
For example, in Bangladesh, Lalati is an SME that provides skin care products to the consumers
of the organization and this organization uses information technology for storing and maintaining
the details and finances of the organization. Bunhill Group Plc. is an SME that provides
consumers with business analysis, networking, research, business solutions etc. by using IT.
Influence of IT adoption in SMEs
The small and medium enterprises often exist in the developing and developed economies and
overcome challenges of the organizations. The small and medium enterprises often appoint
organizational leaders to direct the subordinates to fulfil the tasks properly. Information
technology helps in this case
Before implementing information technology, every kind of organization including large, small
and medium ones used to utilize the traditional systems for carrying on their regular tasks. The
traditional systems included equipment and pieces of machinery. These traditional applications
and equipment cost more than the equipment that is used nowadays. The regular functions used
to take more time than now which previously resulted in less productivity. After the adoption of
information technology, it has influenced the progress of the SMEs and provided the small and
medium organizations with several benefits. Some of them are noted below-
 Organizational leaders will have the opportunity to improve the effectiveness and
efficiency of SME business processes.
 The small and medium enterprises can achieve growth and global competitiveness
because of the adoption of information technology.
 The small and medium enterprises that are implementing information technology are
being able to compete with their larger counterparts
 Strategic planning, researches and business forecasting in the SMEs become easier
because of information technology adoption.
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 The flexibility of the business processes increases because of adapting new information
technology.
 Product and service innovation in the SMEs also increase because of adapting to these
new technologies.
 Revenues are generated and new jobs are created because of the adoption of information
technologies in the sector of SMEs.
 Corruption inside the SME organizations reduces as the information sharing and storage
become clear and concise.
 Strategic and operational values are provided to the SMEs through the adoption of IT.
 Poverty alleviation happens because of implementing IT.
 The implementation of IT provides additional support to the supply chain management of
the organization.
 The paper-based activities, error in paper-based activities have reduced.
 Cost reduction, improved marketing of products and competitive advantages can be
gained because of the adoption of IT.
For example, Connect Bangladesh Limited is a consulting hub that has global expertise and
provides customized solutions according to the consumer need by adapting to information
technology by utilizing the equipment and software necessary.
Wright Express Corporation is an American SME that provides information management
solution and payment processing facilities to the consumers by using the new information
technology to provide the needed service for increasing profitability.
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Barriers in the adoption of IT in SME
The small and medium enterprises face several difficulties or barriers while they adapt to
information technology for the progress of the organizations. There can be external and internal
barriers that the organizations might face in the adoption process. Internal barriers can be
referred to as the barriers that exist inside the organization and can be resolved inside the
organization. These might include the barriers related to organizational culture, training
difficulties, lack of resources etc. External barriers are the barriers that do not exist within the
organizational boundaries and are outside the control of the organizations and they can be lack of
infrastructure and lack of funds from banks and other governmental bodies etc.
Figure: Barriers in the adoption of IT
Several other barriers are also discussed below-
 Information technology is a comparatively new concept or technologies that are used by
small and medium enterprises around the world. One of the most common barriers of IT
adoption is lack of knowledge about the process and implementation of the employees of
the organizations. For solving this problem, the organizations need to provide proper
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training to the senior and lower management for fulfilling tasks using IT. More people
should be skilled in information technology.
 The considerable effort from end-users is often absent while adapting to IT. The end-
users should provide effort and give important feedback to improve the adoption of
information technology.
 The top management of the SMEs is often not considerate enough to provide enough
support in the adoption process of IT. The top management should fully understand the
benefits of IT implementation in the SMEs. Then they will provide the needed support
for the progress of the organization.
 Security and liability issues are also responsible for creating barriers in the adoption of
IT. These issues are needed to be solved for the better progression of the SMEs.
 High-interest rates or bank charges can also create a barrier related to funds for the SMEs
in adapting IT.
In this case, the example of the SMEs of Nigeria can be taken. Most of the SMEs of Nigeria
often suffer from the lack of resources and are not able to expand their existing IT capabilities
and new information technologies
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Evaluation
Several things can be noticed while doing the evaluation process. Information technology is
adapted in the small and medium enterprises for the development and profitability of the
organizations that help them to compete in the global economy. External and internal factors
affect the process of adoption of information technologies in the case of SMEs. An example is
given to give a view of such kind of situation. Organizations get increased productivity and a
larger consumer base because of implementing IT. The SMEs also face several barriers while
adapting IT. The barriers and problems should be eliminated to run the information technologies
in the SMEs effectively. Then the organizations will be capable to survive in the competitive
markets.
Recommendation
It is possible to make some recommendations to SMEs that implement information technology
for organizations. People at all levels employed inside the company should recognize the
importance and advantages of IT. During the process, the internal and external factors
influencing the adoption of IT in SMEs should be evaluated and targeted. The barriers that exist
in the adoption process of IT should be eliminated for the progress of the organizations.
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Conclusion
For all sorts of organisations, information technology has become an integral part of operating.
The same applies to small and medium-sized firms. Information technology is connected to
organizations' data storage, maintenance, etc., and offers greater working capacity for
organizations. There are several factors including external and internal factors that affect the
adoption process of the organization. SMEs often face a range of challenges that they find and
eliminate in order to advance the company. To effectively incorporate information technology in
this type of organization, preparation and expertise are necessary as the organisations are smaller
and have many limitations
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