Ict, e-business and Small and Medium Enterprises

ICT, E-BUSINESS AND SMES 

INTRODUCTION 

Information and communication technology (ICT) and e-business applications provide many 

benefits across a wide range of intra- and inter-firm business processes and transactions. ICT applications 

improve information and knowledge management inside the firm and can reduce transaction costs and 

increase the speed and reliability of transactions for both business-to-business (B2B) and 

business-to-consumer (B2C) transactions. In addition, they are effective tools for improving external 

communications and quality of services for established and new customers.  

Despite these advantages, rapid growth in businesses’ purchases and sales over the Internet has 

yet to materialise. E-commerce is increasing but still accounts for a relatively small share of total 

commerce. Broad definitions of e-commerce (including established EDI as well as Internet transactions) 

suggest that in 2000 total on-line transactions were generally 10% or less of total business sector sales and 

are mainly business-to-business, and business-to-consumer sales are even lower, generally less than 2% of 

the total retail transactions. On-line transactions are mainly B2B and domestic, rather than B2C or 

cross-border.  The situation is similar for small and medium-sized enterprises (SMEs), although they lag 

behind larger firms in Internet transactions. 

For small firms to adopt e-business and e-commerce strategies and tools, benefits must outweigh 

investment and maintenance costs. Commercial considerations and potential returns drive adoption. 

Beyond a certain level of connectivity (PC, Internet access, on-line information or marketing), not all 

SMEs will necessarily “catch up” with large firms, simply because e-commerce may not bring large 

benefits and SMEs will stay with traditional business processes. Other barriers have been seen to be the 

availability of ICT competencies within the firm, and availability and cost of appropriate interoperable 

small-firm systems, network infrastructure and Internet-related support services. Lack of reliable trust and 

redress systems and cross-country legal and regulatory differences also impede cross-border transactions. 

Policies that will affect the adoption and use of e-business strategies include those designed to 

expand and improve the quality of network infrastructure and legal and regulatory environment, foster 

technological diffusion and create a favourable business environment. Beyond these general framework 

policies, specific policies for SMEs have focused on ICT and e-business awareness programmes, business 

consultation services and employee and management training to enhance ICT and managerial skills.  

Policies have shifted over time as firms and economies have moved from concentrating on e-

readiness and connectivity, to diffusion and use, and are moving towards mature e-business strategies 

which blend broad policies for the business environment with polices for particular areas such as IPRs and 

competition. Policy has moved beyond a narrow concept of e-commerce (on-line transactions) to a wider 

view of e-business integration of internal and external processes, based on technology neutrality. Policy 

initiatives in some cases aim at facilitating SME participation in product and sector value chains and 

providing them with information to assess the opportunities and costs of e-business. However there is no 

one-size-fits all approach to policy and the policy mix and priorities will depend on national circumstances 

(leading or lagging countries) and sectoral distribution of economic activity, as well as size factors. 

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