ICT in SMEs (S6 term 3 Sub ICT Topic)

Below is a compilation of notes I made recently for this topic which is part of the NCDC Sub ICT syllabus. Members may read through and give some input on how they have been teaching the topic over the years.


Introduction: What are SMEs and how is ICT relevant to SMEs?

Small and medium enterprises (SMEs) are independent firms and companies which tend to have fewer employees and lower sales volume compared to large firms and companies. Different definitions are given from different organizations and countries. For example, the Organisation for European Economic Cooperation (OECD) and European Union (EU) designate the upper limit of employees for SME as 200 employees.

Information and communications technology (ICT) offers enormous opportunities for individuals, businesses and society. The application of ICT is equally important to economic and non-economic activities. Researchers have increasingly focused on the adoption and use of ICT by small and medium enterprises (SMEs) as the economic development of a country is largely dependent on them. Following the success of ICT utilisation in SMEs in developed countries, many developing countries are looking to utilise the potential of the technology to develop SMEs. Past studies have shown that the contribution of ICT to the performance of SMEs is not clear and certain. Thus, it is crucial to determine the effectiveness of ICT in generating firm performance since this has implications for SMEs’ expenditure on the technology.

Role of ICT in SMEs

  • Innovation and productivity. ICT assists businesses to be more responsive to innovation opportunities and provides significant efficiency gains.
  • Open and closed innovation. SMEs survive the competitive environment based on the innovation driven by ICT.
  • Economic role. ICT in economics plays two important tasks, which are strategic management and cost reduction.
  • Entrepreneurship role. ICT enables closer links between businesses, suppliers, customers and collaborative partners.

Policies regarding adoption of ICT in SMEs

The organisations should consider these factors for adoption of ICT in SMEs.

  • E-commerce / E-business: Shift to a wider view of e-commerce integration of internal and external processes. Business and sector associations to provide tools to assess ecommerce/ e-business opportunities, benefits and costs and the development of niche products and services.
  • Staff ICT training. Training programmes for SME managers and employees focussing on both ICT and managerial skills need to be provided in cooperation with business and sector organisations, training institution and commercial training services.
  • Privacy issues. Address security, trust and confidence through broad policy frameworks, regulatory and self-regulatory tools, trustworthy technologies and affordable redress mechanisms.
  • E-governance. Use e-government initiatives to provide incentives for SMEs to go on-line by simplifying administrative procedures, reducing costs and allowing them to enter new markets.
  • Growth analysis. Expand collection and analysis of increasingly available statistics on e-business and e-commerce to monitor progress and improve cross-country analysis.

Challenges of ICT adoption in SMEs

  • Technical Support challenges. In developing countries like Uganda, SMEs often lack the human technological resources needed for ICT implementation. Without internal technological capabilities, utilisation of ICT applications might be difficult and sometimes dangerous in terms of system maintenance and failures. The opposite is to seek advice and support from IT professionals, but most SMEs do not simply afford to do that because of the relatively high cost.
  • Lack of awareness- uncertainty of ICT benefits, set-up costs and pricing issues and security concerns are the most visible barriers to ICT
  • Managerial challenges. From managerial perspective, SMEs may also lack the managerial understanding and skills. ICT adoption projects are complex in nature and cannot be successfully implemented without relevant skills and a visionary mindset.
  • Administrative challenges. The decision-making process of the managers is rather intuitive, based on instinctive decisions and is less dependent on formal models of decision making. They tend not to pass on information and do not delegate decision-making powers to their inferiors.


Case Study: SMEs in Uganda

In Uganda SMEs account for a significant share of production and employment and are therefore directly connected to poverty alleviation. While in many respects the Ugandan economy is different to that of other countries in the continent, for the poor population in the rural areas SMEs are also very relevant for employment and as an income source. Especially in developing countries like Uganda, SMEs are challenged by the globalisation of production and the shift in the importance of the various determinants of competitiveness.

Through the rapid spread of information and communication technologies (ICT) and ever decreasing prices for communication, markets in different parts of the world become more integrated.


Why Uganda government encourages SME access to and use of ICTS?

The SME play a key role in national economic development strategies by facilitating flows of information, capital, ideas, people and products.

The contributions of SMEs to employment and the countries’ gross domestic product (GDP) are by no means trivial. These contributions can further be enhanced and strengthened through the use of ICTs that are increasingly transforming modern businesses by enabling the rapid, reliable and efficient exchange of large amounts of information. Access to and the use of ICTs by SMEs, particularly as a collective sector, will lead to greater job creation, increased public revenue and a general rise in the standard of living.

The problem at hand in Uganda

Most SMEs in Uganda, do not appreciate the importance of using ICTs and e-business in the performance of their businesses. There is therefore need to establish the factors that have led to this reluctance towards the application of ICTs in the business processes of SMEs in order to exploit the benefits of these modern technologies which can be easily implemented for improved performance, cost reduction, competitive advantage and many others.

Comparatively, medium-sized enterprises have made attempts to put ICT strategies in place. The medium-sized enterprises attach great value to information compared to small-sized enterprises perhaps because they have significant investments.

ICTs commonly used by SMEs in Uganda

The ICTs most commonly used by SMEs in Uganda include:

  • Microsoft Office applications;
  • computers;
  • internet access;
  • e-mail communications;
  • telephones;
  • photocopiers;
  • printers


However, unlike SMEs in developed countries, those in Uganda are not fully exploiting the potential of ICT to compete effectively in the international markets. This is because of the following factors:

  • lack of e-business / e-commerce infrastructure;
  • lack of skills to develop and maintain interactive websites; and
  • the use of obsolete technologies.
  • high cost of internet connectivity;
  • security issues concerning payments; and
  • Shortage of skills.

Sources of information used by SMEs

SMEs in general obtain information from various sources, including:

  • the internet;
  • head offices;
  • heads of department;
  • brochures;
  • other ICT companies;
  • consultants;
  • training seminars;
  • trade catalogues;
  • visits to relevant offices;

Means of disseminating information by SMEs

SMEs disseminate information through a combination of methods, such as:

  • e-mail;
  • memos;
  • staff meetings;
  • departmental heads;
  • newsletters;
  • annual reports;
  • websites;
  • intranets;
  • workshops;
  • trade catalogues; and
  • personal visits.

The reliance on various means of disseminating information could be attributed to the fact that no single method is considered sufficient, perhaps due to the diversity of information needs.

Information sharing among SMEs

Some of the SMEs have LANs, suggesting that they recognise the importance of information sharing. However, most applications implemented on the LANs are basic, such as e-mail applications, small databases, Microsoft applications, and product information that are largely for in-house use.

Compliance by SMEs with information security procedures

Both small and medium-sized enterprises employ mainly antivirus programmes and regular backups to ensure the security of information. However, medium-sized enterprises in addition use sophisticated information security measures such as

  • firewalls;
  • regular software updates;
  • offsite storage;
  • authentication;
  • encryption; and
  • audit trails for diagnostics.

This suggests that medium-sized enterprises are more concerned with security than small-sized enterprises, probably because they have generally made significant investments in their businesses.

Barriers to adoption of ICTs by SMEs in Uganda

  • Most of the current and potential clients for SMES in Uganda are not connected to the internet, largely because of high costs and a lack of awareness.
  • The government has not put in place an e-commerce friendly environment, which would build consumer trust and business confidence.
  • Moreover, the ICT market is not yet mature and people are yet to develop confidence in using ICTs. For example some people still tend to prefer going to the teller in the bank instead of querying and accessing their accounts through internet or mobile banking.
  • Furthermore, telecommunication cost is high, quality sometimes poor and a barrier to transacting business on the web.

Other barriers include:

  • limited and poor-quality bandwidth;
  • lack of security guarantees;
  • inadequate legislative framework;
  • frequent internet downtime;
  • slow internet access;
  • high taxation; and
  • inadequate technical support.

Past exam Qn Mention ways in which you will use the subsidiary ICT knowledge and skills you’ve acquired to earn income during your S6 vacation. (5 mks)

  • Typesetting documents and printing business
  • Taking on Data Entry jobs
  • CD/ DVD writing and selling
  • Provision of internet services
  • Networking computers for organizations
  • Desktop Publishing
  • Computer Software Installation
  • Computer Hardware Maintenance
  • Image editing and graphic design
  • Web page or website development
  • Blogging
  • Social Media marketing

Computer Training, etc.