SMEs need to invest more in technology to better leverage their strengths

An influential Australasian journal last year published an excellent article by Bradshaw, Pulakanam & Cragg in which the authors showed how their extensive research demonstrated that many small and medium enterprises (SMEs) depend on consultants to overcome knowledge barriers, especially for IT projects. Their research showed the extent to which IT consultants affect the IT knowledge of SMEs when IT consultants and SMEs interact. Data were collected using face-to-face interviews with both IT consultants and SME managers. Their study identified what and how SMEs learn from consultants during an IT implementation project. They concluded that consultants help SMEs gain different types of knowledge, employing a broad range of knowledge sharing mechanisms. Furthermore, as consultants are an important part of the knowledge creation processes of SMEs, SMEs should strive to form long-term relationships with consultants and use these interactions to develop IT knowledge within the SME.

This fits in very closely with my own experience, both in managing SME organisations which require ICT support, and in managing an ICT service provider giving support to SMEs. In my experience SMEs seem to adopt two different approaches towards ICT (information, communications and technology). Some SMEs which look at ICT as an opportunity to add value would look at such expenses as investments. I refer to these as the IT-savy firms. Other firms do not look at ICT as providing opportunities for growth and development, but look at these as costs which had to be incurred to run the business. These I refer to as Non-IT-savy firms. The difference in approach between the two groups is obvious.

The first group, the IT savy firms, are keen to get the best return on their investment. As Bradshow et al. found in their research,  these look for long term business relationships with their ICT service providers. They seek on-going business relationships to avoid having repeated learning curves and to ensure that their ICT service providers knew about their organisations and their particular challenges. The non-IT-savy firms are focused on minimising their costs of ICT. They focus on their current budget and the all-important priority of not exceeding budgetary spend. Inevitably, they seek the cheapest service providers and products, determined to set minimum specifications and get the lowest price for any ICT service or product. These firms tend to work with multiple ICT service providers and change firms often in search of the lowest cost. Yet, in their search for the lowest cost they fail to realise that because they do not have a long term business relationship with their ICT service providers, there is no mutual interest in the accomplishment of any project. Because the service provider has already been squeezed on the project price and deliverables, the non-IT-savy firms introduce a focus on cost rather than value.

Added value is the key to survival and growth. Rather than focusing on the minimisation of ICT costs, SMEs need to look at optimisation of ICT investments to provide a basis for improved productivity or service to internal or external customers. The basis for improved customer service is recognised as being to get the right information to the right person at the right time and in the right format. This is a tremendous challenge for any organisation, large or small. Needless to say the more complex is the organisation, the more difficult is the challenge of sharing information internally and externally with suppliers and customers.

All too often SMEs focus on cost reduction rather than value creation. This approach blinds them to the value that many modern systems such as customer relationship management or time management can deliver to an organisation. Rather than see the added value that these systems deliver, and the improved performance of the organisation, they focus on the new investment require or the additional operating costs involved.

ICT investments can be a bottomless pit, so its not about blind investment in all the latest systems and equipment. SMEs need to focus on developing long term relationships with ICT service providers that do not merely sell an ICT product or deliver an ICT service. SMEs need to work with ICT service providers that are strategic in their approach. SMEs need service providers which can give them the benefit of their experience and expertise, enabling SMEs to leverage technology to perform better, thereby making it easier for front-line staff to win and keep more customers.

Bradshaw, Adrian; Pulakanam, Ventateswarlu; Cragg, Paul; 2015 “Knowledge sharing in IT consultant and SME interactions”, Australasian Journal of Information Systems, Vol. 19, pp. S197-S217