SMES IN DEVELOPED AND DEVELOPING COUNTRIES

TREADING SIMILAR PATHS TOWARDS ETRANSFORMATION

Mahesha Kapurubandara

Sri Lanka Institute of Information Technology, Colombo, Sri Lanka

Ana Hol, Athula Ginige

School of Computing and Mathematics, University of Western Sydney, Sydney, Australia

Keywords: SMEs, Developing Countries, Developed Countries, eTransformation, Sri Lanka, Australia.

Abstract: The global economy has become increasingly reliant on Information and Communication Technology (ICT)

toolsand systems to process and exchange information. The Small and Medium Enterprises (SMEs) are yet

to reap these benefits as obtaining such opportunities rests on their ability to integrate ICT into business

tasks and processes. They need to transform their companies by implementing appropriate ICT in order to

compete within a busy digital economy. The aim of this study was to see how SMEs from developed and

developing countries follow their eTransformation journey and also to identify the differences and

similarities businesses encounter in that process. Our research confirms that the eTransformation takes place

as an incremental process for both groups and that the eTransformation pattern is similar in both worlds.

However, we notice that in Australia, a developed country, SMEs are more aware of eTransformation and

are demanded by customers and digital economy to change, where as in Sri Lanka eTransformation is still in

its early stages of development.

1 INTRODUCTION

Over the last few decades the world economy has

undergone numerous changes and has been impacted

by rapid advances in technology. The knowledge

demand on how to access markets and business

partners or suppliers worldwide with the aim to

remain competitive strongly depends on the

company’s ability to eTransform, the process

through which businessess identify, select and

implement required technology (Hol & Ginige,

2009).

According to Ginige and colleagues (2001) the

process of eTransformation is seen as a staged and

incremental. There are a number of models of

eTransformation, however there are two that explain

the process in detail. One of the early models is the

eTransformation Road Map model (Ginige et al,

2001). This model has been widely used to explain

eTransformation process within developed countries

(Lawson et al 2007; Hol and Ginige, 2008, 2009).

The eTransformation Road Map has been extended

further into eSME model by the researchers within

the developing countries (Kapurubandara, 2009b).

Both models stress that in order to eTransform

successfully SMEs are required to complete

eTransformation steps incrementally.

SMEs play a major role in many economies,

globally, irrespective of the fact whether they are in

developed or developing countries. They contribute

significantly to the economies of many countries of

the developed world (Rao, 2003). In Australia, the

SMEs are not only considered major employers

(70% of Australian employment), but they are also

viewed as being major drivers of innovation, and as

such, key players in making an economy

competitive in the global marketplace (Temperley,

2004).

In Sri Lanka 75% of the labour force is

employed in the SME sector (including the

agricultural sector) (ILO, 2006). These numbers

suggest that SMEs contribute substantially to

employment and income generation.

128

Kapurubandara M., Hol A. and Ginige A. (2010).

SMES IN DEVELOPED AND DEVELOPING COUNTRIES TREADING SIMILAR PATHS TOWARDS ETRANSFORMATION.

In Proceedings of the International Conference on e-Business, pages 128-131

DOI: 10.5220/0002983301280131

 SciTePress

SMEs in developing countries face an abundance

of external constraints due to the differences in

infrastructure, social, cultural and regulatory factors

and internal constraints inherent to SMEs by nature

(Kapurubandara et.al, 2007).

This effect is also visible within developed

SMEs in Australia. In developed countries, SMEs

seem to be aware of the technology but still hesitant,

lacking time and resources to fully embrace it

(Lawson et. al. 2007).

This study aims to identify similarities and

differences of SMEs eTransformation within

developed and developing worlds. The comparative

investigation was carried using two selected groups

of 3 SMEs each, one from developing and the other

from the developed world.

2 METHODOLOGY

To identify how SMEs within developing and

developed countries, in this case Sri Lanka’s

Colombo District and Australia’s Sydney

metropolitan region are selecting, implementing and

using technology to speed up and complete their

business tasks and processes quicker and swifter we

chose an exploratory study.

The subjects of our study were 3 SMEs from a

developing country – Sri Lanka’s – Colombo region

and another 3 from a developed country –

Australia’s Sydney region. The sample for Sri Lanka

was chosen from a list maintained by the Export

Development Board of Sri Lanka a representative of

SMEs from various industry sectors, within

Colombo. The sample for Australia was chosen from

a list of previously studied sample of 30 companies

belonging to a range of industry sectors selected

from Corporate Development Office.

To conduct the study CEOs or Directing

Managers of SMEs were interviewed to get first

hand information about the business tasks and

processes, their use of ICT, and their perceptions for

adopting it.

Each interview lasted nearly one hour.

Interviews were recorded, subsequently transcribed

and subjected to qualitative content analysis. This

involved categorisation of responses into certain

themes, some of which were inherent in the

interview questions, and some of which emerged

through the interviewees’ responses to questions

posed.

3 ANALYSIS AND DISCUSSION

Data collected during the interviews was analysed

and categorised. Sri Lankan based companies ranged

in size from 6 to 12 employees. SMEs used fax,

phone and generally performed record keeping

manually. Two out of three companies had stand

alone computers while one had a network and

ADSL.

In general, computers are not fully utilised in a cost

beneficial manner, but more as a storage medium.

SMEs are lacking in resources, know how,

awareness of the optimum usage of ICT. They face

more burning problems and are concerned with day

to day survival; hence ICT implementataion has

taken less priority.

Selected Australian based SMEs ranged in size from

3 to 54 employees. They all had networks, were

continuously contacted to the Internet and all used

productivity tools. All records were kept in the

electronic form however they lacked searching,

managing and mass customisation tools. SMEs in

Australia all use productivity tools and specialized

industry software however are lacking systems such

as CRM (Customer Relationship Management),

tracking systems, document management systems

and interactive online systems.

In addition, to better understand process of

eTransformation we mapped all six SMEs on then

eSME Roadmap (Kapurubandara, 2009b). Data is

presented in Table 1.

Table 1: Internal and External Processes on eSME.

External

Processes

SME

(SL)

SME

(AU)

Internal

Processes

SME

(SL)

SME

(AU)

Stage 1

Website

S1,

S2,

Manual

Stage 2

Basic

Website

Effective

Individual

S2,

Stage 3

Interactive

Website

A1,

A2,

Effective

Team

A1,

A2,

Stage 4

E-

Commerce

Site

Effective

Enterprise

SMES IN DEVELOPED AND DEVELOPING COUNTRIES TREADING SIMILAR PATHS TOWARDS

ETRANSFORMATION

129

Table 2: Similarities and differences between the two groups of SMEs.

SMEs (SL) SMEs (AU)

Web Not an essential tool for marketing. Word of

mouth is used for marketing

Websites are present, however main jobs come via

word of mouth.

email is used occasionally but not the preferred

medium of communication

e-mails aare used regularly. Companies are trying to

establish Docoment Management systems for easy

file storing and accessing.

Lack skills, resource, knowledge of effective use of

ICT.

Lack of skills, knowledg and ICT resources is still

present, however most SMEs have realised this and

are trying to make changes. They are aware of

eTransformation.

eTransformation is given less priority.

eTransformation is seen as important, but essential

only when companies realise that old methods do not

work any more.

Manual processes are preferred. However computers

are used as storage medium

Manual procesess are still popular, and filing is done

in both paper copies and electroniclly.

Customers have not adopted ICT. Lack of pressure

from the customers.

Customers are demanding change as they search for

cheaper and better products.

Not much attention is given for quality. SMEs need to

be educated

Quality of the product as well as timely delivery are

becoming a priority.

SMEs are aware of the importance of customers. Lack

funds for implemantaation of CRM. Awareness need to

be created in systems such as CRM.

Companies are identifying that the customers are

their crucial asset. CRMs are becoming popular.

Furthermore, it also became evident that SMEs can

be in different levels of maturity with respect to their

internal and external processes which is in common

with the other stages of growth models (McKay,

Prananto, & Marshall, 2000).

Our investigation indicates that Sri Lankan SMEs

broadly fit into stage 1 and stage 2 on the internal

process arm of the eSME roadmap. SME S2 and S3

fall into two different sub stages with in the stage

“Effective Individual”. In Sri Lanka, e-mail and

Internet are considered costly affairs (SLBDC,

2002). Where the SMEs are saddled with many other

pressing concerns, adoption of eTransformation

given a lower priority which is not surprising given

the expenditure involved (Lawson, Alcock, Cooper,

& Burgess, 2003; Lawson et. al. 2005).

On the other hand, Australian SMEs have reached

Interactive website (Stage 3 on the external

processes) and effective team (they are between

stage 2 and 3 of the Internal Processes) which

indicates that they have advanced further on the

eSME Roadmap.

It can be concluded that SMEs lack awareness of

eTransformation and are struggling with costs

associated with hardware/software purchase which

led to only partial adoption. Previous studies

confirm that lack of awareness can significantly

impede technology adoption (Bode, & Burn, 2001).

Table 2 surmises similarities and differences

between SMEs from developed and developing

countries.

This exploratory study has shown that while the two

groups of SMEs agree that adoption is essential in

today’s business they are hindered from adoption.

This is predominant with the Sri Lankan SMEs, but

still present within Australian SMEs too. When

compared to the Australian SMEs, Sri Lankan SMEs

lack in awareness, resources, knowledge and skills

required for a successful eTransformation while

Australian SMEs are aware of eTransformation but

still do not have required skills to fully implement it.

This could be attributed to the fact that

eTarnsformation was introduced in Australia much

earlier than Sri Lanka and that businesses within

Australia have a slight advantage of early adopters.

Furthermore, it appears that some of the companies

have been forced to implement ICT as they have

realised that their existing processes were not

functioning any longer, which may happen within

Sri Lanka as well in the years to come (Lawson et.

al. 2005).

When analysing the process of eTransformation

however, it seems that both groups follow a similar

pattern in their eTransformation journey irrespective

of the fact whether they are from a developing or a

developed country. It looks that their journeys have

started at different times and also that their rate of

progression is different. Australian companies are

ahead, however they have been faced in the past

with very similar challenges with which Sri Lankan

companies are faced with today. We can also see

that eTransformation journey is staged and

incremental. In addition, a more detailed eSME

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Roadmap depicts this journey in minute steps and

identifies stages SMEs are required to undertake for

both developed and developing countries.

3 CONCLUSIONS

In summary it can be seen that within both

developing – Sri Lanka and developed – Australia

countries SMEs today are required to undertake the

process of eTransformation. By analysing

eTransforming SMEs it can be concluded that SMEs

are required to undertake an incremental, staged

journey in order to eTransform. However due to

many inherent constraints, the SMEs in developed

countries are forced to take minute steps in

discovering eTransformation and basic ICT tools.

On the other hand, the SMEs in developed countries

now have an understanding of what eTransformation

is and are on the road to discovery of what

eTarnsformation and ICT system integration can

offer to them. Due to the governmental regulations

and country’s development and access to the

technology Australian SMEs have undertaken the

eTransformation journey before Sri Lankan SMEs;

however the journey Sri Lankan SMEs are

undertaking today is very similar to the journey

Australian SMEs have been undertaking earlier.

Furthermore, pressures of the digital worlds,

government and customer demands have also

contributed to swifter eTransformation within

developed countries. It is expected that in the years

to come Sri Lankan SMEs will be undertaking a

similar journey Australian SMEs are undertaking

today.

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