50320130403008

International Journal of Information Technology & INFORMATION TECHNOLOGY &
INTERNATIONAL JOURNAL OF Management Information System (IJITMIS), ISSN
0976 – 6405(Print), ISSN 0976 – 6413(Online) Volume 4, Issue 3, September - December (2013), © IAEME

MANAGEMENT INFORMATION SYSTEM (IJITMIS)

ISSN 0976 – 6405(Print)
ISSN 0976 – 6413(Online)
Volume 4, Issue 3, September - December (2013), pp. 114-120
© IAEME: http://www.iaeme.com/IJITMIS.asp
Journal Impact Factor (2013): 5.2372 (Calculated by GISI)
www.jifactor.com

IJITMIS
©IAEME

A FRAMEWORK FOR ICT ADOPTION IN INDIAN SMES: ISSUES
AND CHALLENGES
Jamshed Siddiqui
Department of Computer Science, Aligarh Muslim University, Aligarh, India

ABSTRACT
This paper presents a framework for ICT adoption in Indian SMEs; Globalization has
made huge impact in today’s scenario of business organizations SMEs are the most needed
sector to be aware about the development and changing trends of the technology. Information
and Communication Technology(ICT) plays critical role in growth of SMEs. Various aspects
of ICT adoption issues and challenges are highlighted in context with government, Managers
and ISPs role in it.
Keywords: ICT, SMEs, Challenges.
I. INTRODUCTION
Today, India’s small sector consists of (i) Micro Enterprises (village and cottage
industrial units) (ii) Small Enterprises and (iii) Medium Enterprises. Government of India
officially defines these enterprises in terms of investment in plant and machinery which is up
to Rs.25 lakh in case of Micro enterprise, for Small enterprise it is above Rs.25 lakh and up to
Rs.5 crore, and for medium enterprise the investment ranges above Rs. 5 crore and up to
Rs. 10 crore. Apparently, defined in this way, India’s small businesses are tiny both in terms
of investment and total number of employees which in majority of tiny and small enterprises
happen to be 9 or less and in growth oriented small and medium enterprises on an average the
employee strength ranges between 10 and 40.Small and medium enterprises play an
important role in the growth of a nation by contributing to its GDP and generating
employment. In India, the contribution of SMEs towards GDP is expected to reach 22% in
2014. In addition they create over 1.3 million jobs every year, contributing 45% to industrial
output and 40% to exports, and are the fountainhead of several innovations in manufacturing
and service sectors. However despite the growth in size and significance, the level of IT
penetration and adoption of enterprise mobility in this sector still remains dismally low even
though the need for the adoption of mobility is well recognized. Today's SMEs are taking
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International Journal of Information Technology & Management Information System (IJITMIS), ISSN

steps towards the creation of a more mobile workforce but several hurdles need to be
overcome before they can catch up with the large organizations in this respect. Addressing
Challenges The key problems faced by SMEs while looking for suitable technology solutions
are lack of customized solutions to suit specific needs of the business, limited capability to
invest in high-end IT infrastructure as well as inadequate in-house management capacities.
SMEs also raise concerns around role of IT investments as benefits cannot be identified
immediately making it difficult to justify the expenses incurred. Security challenges are
another area of concern where SMBs tend to let their guard down owing to resource
constraints. While trying out new technologies, SMEs are also apprehensive about a lock-in
risk with the vendor which would result in higher expenditure on frequent technology
upgrades or the vendor escalating service fees. Moreover, a relatively low SME focus from
service providers owing to the fragmented nature of the SME sector has been another
stumbling block in the way of these companies being able to proactively adopt enterprise
mobility. Benefits of Deploying Mobility Solutions With the growing importance of the SME
sector, several service providers have woken up to the huge opportunity awaiting them.
Solutions tailor made for the sector have found their way into the market and promises to
address the issues that have held them back so far from going mobile. Also, the introduction
of cloud computing has opened up a world of enterprise mobility opportunities for SMBs by
reducing the cost burden of using IT and offering scalability and flexibility-while providing
on-demand services which are highly attractive for this segment. For many SMEs, one of the
key advantages of enterprise mobility is the ability to deliver this enhanced flexibility to their
sales teams using the mobile cloud. Among other key benefits is the ability to enhance
communication across the organization and also enable key people to stay in touch with all
the latest developments-a measurable impact that enables workforce flexibility, increases
employee responsiveness, and helps in sharing knowledge and data with others. The
combination of the cloud and enterprise mobility allows SME staff, wherever they may be, to
collaborate in real-time. Product and solutions development can also be made simpler with
the mobile cloud. These developments have resulted in an increase in IT spends by SMEs
where 40% of mid-sized organizations in India have already deployed enterprise mobility
solutions and another 25% are planning to embrace at least one mobility device in the near
future
From the beginning of time, technology has been a key element in the growth and
development of societies. It is a combination of knowledge, techniques and concepts; it is
tools and machines, farms and factories. It is organization, processes and people. The
cultural, historical and organizational context in which technology is developed and applied
is the key to its success or failure. In short, technology is the science and the art of getting
things done through the application of skills and knowledge. SMEs, Small business entity is
widely known and recognized in India next only to agriculture. In terms of its overall
contribution to the Indian economy, Small and Medium Enterprises or Small sector, in fact, is
better placed than India’s agricultural sector. SME often have limited IT/IS resources as well
as they are lacking in expertise, these limitations often culminate in SMEs being incapable of
exploiting their use of IT to its full potential or developing the information system (IS) [1].
II. THEORETICAL FRAMEWORK FOR ICT ADOPTION
Technological innovation is a key factor in a firm’s competitiveness. Technological
innovation is unavoidable for firms which want to develop and maintain a competitive
advantage and/or gain entry in to new markets [2]. SMEs find it difficult to make the
115


upgrades as they need to stay competitive in both domestic and international markets[3]
Among organisations different organisations of different sizes are more agile towards the
changing situation and are ready to adopt new ideas for the development.The flexibility of
SMEs, their simple organizational structure, their low risk and receptivity are the essential
features facilitating them to be innovative Therefore, SMEs across industries have the
unrealized innovation potential [4]. In this globalised environment the government of India
has felt that, there is a need to enhance the global competitiveness of the SMEs by
simplifying systems and procedures, easy access to capital and taking the SMEs in the global
value chain by increasing their productivity. To promote and develop the SMEs, the
government has implemented several schemes/programs to cater to the needs of the sector
[5].Technological progress has been the key driving force in industrialized countries,
accounting for a lion’s share of productivity growth. Technological advancement has enabled
newly industrializing economies such as Korea, Taiwan, Singapore and Hong Kong to
effectively compete against firms based in industrially advanced countries [6].
Government Support
Power sector reform/liberalization of power sector.
Initiate new policies to support SMEs.l
Introduce regulatory policy for microfinance banks.
Conduct training sessions for SMEs.
Ensure ICT related skills and technology form a part of
the curriculum in educational institutions
Initiate programs to increase Owners/Managers
awareness

ICT ADOPTION
External
Support

EFFECTIVE
UTILISATION OF ICT
ISP’s Support
Increase bandwidth to enhance internet service
Extend internet service nationwide
Reduce the price of bandwidth

External
Support

Owners / Managers Support

Identify skills required for success in organization
Conduct staff development training sessions
Acquire knowledge and skills related to ICT and
motivate employees to do the same.
Promote awareness of the potentials of ICT

Internal
Support

ADOPTION OF
SOFISTICATED
ICT APPLICATION

Fig1: Framework for ICT adoption in Indian SMEs
The economic environment in which Indian SMEs are functioning today, global
changes do affect them as much as local developments. Attaching due significance to
technology development is absolutely essential to enhance their competitiveness. Technology
development in SMEs is not an easy task. To achieve the objective, concerted efforts have to
116


be made by governments and SMEs. The first and foremost issue is the spread of awareness
among SME entrepreneurs about the importance of technology development and up gradation
in the current economic environment. Governments should take the lead, as is being done,
involving industry associations, to spread this awareness across states. Industry associations
at the district level should carry the message further. The need and urgency for technology
development must be emphasized.One important characteristic of SMEs in developing
countries as compared with those in developed countries is that they are strong in
employment creation but weak in output contribution. In other words, in contrast to LEs,
SMEs’ contribution to GDP formation is always lower than their employment
generation.SMEs need to be vitalized for competitiveness and sustainable growth under new
world trade rules and faster technological changes, including wider use of ICT, besides new
business models. Several initiatives have been taken by the government from time to time to
promote and support MSMEs, a framework for ICT adoption in Indian SMEs is shown in
fig1.
Government Support:The limited incentives provided by the government to acquire
technology place SMEs at a disadvantage. Further, governmental support in the technology
transfer process is inadequate government approvals and certifications are impeded by long
delays, and excessive interference by the government often adds to the existing problems
Some SMEs are also unaware of the regulatory norms.Governments could assist in creating
awareness and reducing the psychological barriers to ICT acquisition by showcasing SME
success stories, best practices, and benefits gained through ICTadoption.Ministry of Small
Scale Industries is primarily responsible for promotion and development of SMEs in India,
and has evolved several policies, institutional and support measures, spread all over the
country, in order to enable SMEs to meet their changing needs. Small Industries
Development Bank of India (SIDBI) has developed various financing schemes. Ministry of
Science and Technology (DST, DBT and DSIR) has evolved several measures and programs
for technological assistance and development and transfer of technologies for SMEs. Some of
the economic ministries such as Ministry of Textiles, Department of Food Processing and
Department of Handicrafts etc. have also recently announced initiatives for technical
assistance in various firms.
ISP’s Support: An important decisive factor for SMEs is the level of support provided by
ISPs, Businesses however change ISP infrequently, When they do, it's mainly when there are
issues with reliability, quality of service, cost or for higher speeds. SMEs have very different
needs from consumers. If a business has Internet reliability issues, it costs them business,
revenue and reputation. According to the requirement of SMEs, ISPs should provide cost
effective services to the organizations.
Owners/Managers Support: One of the key problems facing the Indian region has been the
fact that many SMEs are not aware of the benefits and the direct financial gains to be attained
by adopting ICT. A weak understanding of the potential integration of ICT solutions within
business models also leads to a great degree of inefficiency. This scenario is compounded by
the fact that there are a large number of competitive ICT products and services available on
the market, which causes a great deal of confusion to companies with limited ICT literacy
and capacities. In addition, the high cost of acquiring and maintaining ICT solutions further
creates barriers to their adoption.IT personnel are in high demand and are often attracted to
bigger companies and MNCs. It is very difficult for SMEs to attract good IT personnel. It is
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even more difficult to retain them. Moreover, good IT personnel are expensive and may not
be affordable by most SMEs.As company grows, new managers are often introduced into the
company. There will also be old managers who are promoted from the rank and file. Some of
these managers may not been trained in the leadership and management skill. These uneven
skill among the managers often caused conflicts during the implementation.For the ICT
adoption owners support is amply necessary.
III. ROLE OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN
SMEs
Researchers in the past decade have shown immense deviation towards the ICT
adoption and its usefulness for the SMEs as it is the basic needforthe organizationto remain in
the cut throat competition of this era of globalization, communication media is the only way
to remain in touch with the business partners and with the others, In addition ICTs are
mediums that utilize both telecommunications and computer technologies to transmit
information. ICT environment helps in fast and accurate decision-making by the SMEs due to
increased mobility. The critical components before SMEs are speed of services, access to
information, empowering employees in terms of skill and delivering highest valued services
at competitive cost. SMEs need ICT-based solutions in terms of multi-tasking, expanding
customer base, raising productivity, controlling cost, working remotely, fast and accurate
decision-making and facilitating collaboration. SMEs have various needs in order to function
in an aggregative manner to reach out for value addition by keeping in mind the variable cost
model. ICT usage by the SMEs raises productivity of the sector in particular and the economy
in general. Product leadership, operational excellence and customer relationship, which
SMEs look at while using ICT-based solutions is essential. SMEs have to be good decisionmakers, planners and strategy-makers regarding the type of technology, which they are
adopting. There is the need for best manufacturing practices in the SME sector. Innovation,
design development and validation by the SMEs in the face of globalization and rapid
technological advancement, to stay afloat during competition are the essentials. Technology
plays a key role in providing cutting edge for development with acquisition and technology
adaptation to suit the local conditions [7, 8].
IV. ISSUES AND CHALLENGES IN ICT ADOPTION
ICT has such noble characteristics like capability to generate rapid growth in
computing power, communication capacity improvement and innovativeness that persuades
every business to adopt these technologies [ 9, 10, 11, 12,13].Most of SMEs do not
periodically recognize what actually is achieved from IT adoption [14, 15, 16,17]. However,
SMEs are regularly making use of it to pave the way for reaping benefits while various issues
and challenges await them when it comes to adopt ICT. From the other perspective and apart
from perceived benefits of IT persuading SMEs to adopt it, many studies have acknowledged
that there are other many factors that contribute to the adoption process and have forced
SMEs to adopt IT as necessity for the survival of most companies [18, 19, 20]. There are
numerous exogenous characteristics in the business environment and endogenous
organizational factors triggering SMEs to adopt ICT [21]. However, these features impelling
SMEs to use ICT may be idiosyncratic to any specific organization [22], below are issues
faced by todays SMEs.
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a. Limited ICT literacy of SME owners hinders their ability to choose the
appropriate technology
b. Limited ICT literacy of employees in SMEs hinders ICT adoption
c. Adopting ICT is an adaptive challenge, not a technical challenge
d. Lack of financing options limits SME ability to purchase ICT
e. Lack of financial and legal infrastructure.
V. CONCLUSION
This paper attempt to highlight some of important aspects of ICT adoption in Indian
SMEs by theoretical framework, and the benefits that SMEs can have by its adoption In
India and other economies, SMEs play a vital role, often acting as the primary drivers of job
and economic growth But at the same time, the research revealed a risk, because SMEs'
adoption of IT is decidedly uneven. Across the world, many SMEs, and their customers, don't
have access to modern broadband networks, and many lack the skills to get the most out of
IT. Many SMEs are also still using large amounts of old and less efficient hardware and
software.The risk of a growing technology gulf is relevant to governments looking to
maximize economic growth, and it is an opportunity for policymakers and the IT industry to
implement strategies to remove barriers to IT adoption by addressing small businesses' top
concerns about using more technology.
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