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“The perfectly bureaucratic giant industrial unit not only outsets the small- or medium-sized firm and expropriates its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class which in the process stands to lose not only its income but also, what is infinitely more important, its functions.”
• High growth new firms provide the majority of new firm jobs
• SMEs play an important role in the development of innovation
• SMEs may be in a disadvantage in the access to new technology
• LE provide better quality jobs but the gap LE-SME in job quality is shrinking• JQ = wages (higher in LE), fringe benefits (more available in LE), job tenure
“Despite the pervasive phenomenon of scale economies, the majority of firms have always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s.”
“... small firms seek out markets where they are able to avoid competition with their larger counterparts.”
“… small firms pursue a strategy of producing in distinct product niches.”
Source: website Europe (http://ec.europa.eu/enterprise/policies/sme)
What usually gets lost is that more than 99% of all European businesses are, in fact, SMEs. They provide two out of three of the private sector jobs and contribute to more than half of the total value-added created by businesses in the EU. Moreover, SMEs are the true back-bone of the European economy, being primarily responsible for wealth and economic growth, next to their key role in innovation and R&D.
What is even more intriguing is that nine out of ten SMEs are actually micro enterprises with less than 10 employees. Hence, the mainstays of Europe's economy are micro firms, each providing work for two persons, in average.
This is probably one of the EU's best kept secrets!
• Organizational size (head count, turnover, margins, …) • Head count not always relevant for IT
example: manufacturing companies > 50 people ‘blue collars’ vs ‘white collars’
• Micro enterprises constitute a separate group (9 out of 10 is µ)• Innovative entrepreneurs or sub-contractors (Pareto analysis: 1
customer / 1 supplier) • Ownership structure: family enterprises • Role of CEO • Management maturity (depends on organizational size) • Exporting – only domestic markets• Economic activity: manufacturing, services, trading, government
and not-for-profit organizations• Economic sector: see table
•SMEs have a different economic, cultural and managerial environment (compared to LEs) ▫Resource poverty (financial, knowledge, internal
IT expertise, ...) ▫Depend on external IT expertise▫Low IT capabilities and practices▫ Intuitive and informal management ▫more task-centric than process-centric▫Slow adopters of IT▫Focus (more) on trust, empathy, fairness and
devotion less on control, risk and assurance.▫Central role of CEO (owner)
•Managerial Attention Deficit Disorder (MADD) - the patient
• is easily distracted• pays no attention to his/her environment• looses the power of concentration after a few
hours• has no thoughts for details• does not listen when he/she is addressed• jumps to conclusions • interrupts and disturbs the work of collaborators • interferes abruptly into conversations
• - lack of good and appropriate methods for governing IT in SMEs (Cobit, ITIL, ...)• - SMEs should adopt more IT: IT is seen as a driver for innovation and progress • - IT is not always very positively perceived by SMEs (not a good image)
• IT and SMEs (Europe, 2004) – The Go Digital Awareness Campaign 2001-2003: The main lessons to be learnt
• E-Business is not a top priority for most SMEs• Networking is the most successful marketing strategy to reach SMEs• Awareness raising needs to be based on realistic targets and expectations• SMEs often lack appropriate information about e-business and ICT• Most SMEs remain skeptical about ICT and e-business• Training and managerial change are key issues• Resources and costs matter for SMEs more than for LE• E-business might not always be beneficial for SMEs • Many IT solutions are still too expensive or not trusted
Class Research Topic Software and Applications (31)
ERP (15), Software packages & COTS (5), Applications (1), CRM (1), Expert Systems (1), CAD/CAM (1), Stock Record System (1), Groupware (1), Advanced Manufacturing Systems (1), Application Service Providing (1), DSS (1), Marketing Information System (1), Software for innovation (1),
Internet and Related technologies (71)
Internet (10), E-Commerce (26), E-Business (11), Supply Chain E-Business (5), Websites (3), e-government (1), e-mail (1), www (3), On line connection (1), Electronic Trading Systems (1), EDI (7), Internet Based Technologies (2), web services (1)
Hardware & Infrastructure (12)
Microcomputers (8), IS architecture (1), Computer Network Development & Implementation (1), Hardware & Software (2)
Organizational IT (18) Strategic IS (9), IS Sophistication (4), EUC (3), IS Planning (1), IS Architecture (1) Nominal view of IT 115
Studies of SMEs and IT according to IS Research Topic
IS Research in SMEs: Literature
• SME-IT Literature overview
Devos, J. Van Landeghem H. & Deschoolmeester D., (2009), IT and SMEs: LiteratureOverview.
IT Managerial, Methodological, and
Technological Practices
IT Managerial, Methodological, and
Technological Capabilities
System Quality
Information Quality
IT ArtifactSatis-
faction UseOrganiza-
tional Impact
Individual Impact
Impact
Source: Benbasat & Zmud, 2003; Gable et al, 2008
121
32
37
14
125 1
6 1
3
5
82
SMEs are often disappointed with their software packages. The disappointment is a result of the inability of the package to adapt to the needs of the company. For SME with less then 20 employees the packages are too difficult to use. (Heikkila et al; Finland)
Managers were found to be more successful when they develop their own numeric applications using spreadsheets to provide greater analytical support for decision-making. (Raymond & Bergeron; Canada)
Software characteristics, vendor capability and opinions from other concerned groups are relatively important factors when making the software selection decision. (Chau ; Hong-Kong)
SMEs that adopt the vendor-only approach have more effective IS than SMEs that adopt the consultant-vendor approach (Thong et al; Singapore)
Top management support is not as important as effective external IS expertise (Thong et al: Singapore)
The most effective IS implementation environment is one in which both top management support and external IS experts work as a team. (Thong et al: Singapore)
Most important area of IT dissatisfaction is the lack of training and education. Most important factor of IT satisfaction are the owners attributes (age: younger CEO are more satisfied, gender: female are less likely to be dissatisfied then men). (Fuller & Southern: US)
CEO’s innovativeness and IS knowledge are positively associated with the decision to adopt IS in SMEs. The effect of competition on IS adoption in SMEs has no direct effect on IS adoption. (Poon & Swatman: Singapore)
In the eyes of SMEs, EDI still is not considered as something that enables them to gain major strategic benefits or competitive advantages. (Van Everdingen et al: Europe)
Owners innovativeness is the strongest determinant for adopting traditional IT – relative advantage plays most critical role for Internet related technologies. (Chau & Hui: USA)
External expertise is the predominant key factor of IS implementation success in SMEs. (Lesjak & Lynn)
Three strategies are revealed: 1) ERP systems need to be localized to reflect local management features 2) ERP systems should be customizable at a variety of levels 3) BPR should be carried out in a incremental manner taking the dialectic of organizational learning into account (Levy et al: UK)
Different industry sectors significantly differ in the amount spend to IT investments. Firm size does not influence IT investment levels. Strategic benefits vary across different industry sectors. The way employees adapt to change as a result of IT implementations depends on the size of the organization. (Lucchetti & Sterlacchini: Australia)
Managerial and vendor support are essential for effective IS in Canadian SMEs. Managers should engage quality vendors to obtain IS that contribute to the specific goals of the small business.
Strategic IT • Strategic Information Systems (SIS)
developed to support, change or enable Business Processes and Business Strategies. (Porter)
• Has a profound impact on the operational, tactical and strategic level of a business
• Example: Enterprise Systems (ERP)“Large scale (?), real-time, integrated application-software packages that use the computational, data storage, and data transmission power of modern IT to support processes, information flows, reporting, and business analytics within and between complex organizations”
• A lot of research for almost 45 years • 1967, Management misinformation systems, (Ackoff)• 2010, Project failure en masse: a study of loose budgetary control in ISD projects (Conboy)
• Much is known - less is done !• 1975 / 1995, The mythical Man-Month (Brooks)
• Failure to learn ? CIOs - IS-Researchers• 1999, Learning failure in information systems development (Lyytinen & Robey)• MISQ, EJIS, ISR, JAIS, …
when all development or operation is ceased, leaving the stakeholders (supporters) dissatisfied
•Project Runaways (Keil)
escalation of commitment(runaways): continued commitment in the face of negative information about prior resource allocations coupled with uncertainty surrounding the likelihood of goal attainment
Project Abandonment (Ewusi-Mensah)
defined as a phenomenon that concerned with the anticipated failure of the project prior to its full implementation
Some IS projects never seem to terminate… “rather, they become like Moses, condemned to wander till the end of their days without seeing the promised land (Keider, 1974)
• Why do IT projects fail in SMEs?• Information asymmetry • Low IT managerial, technological and methodological
capabilities in SMEs
• How do IT projects fail in SMEs?• Opportunistic behavior• Deterioration of trust• Lack of control
• How do SMEs manage there IT?• Absence of a formal intentional IT management
• Why is there not enough IT Governance in SMEs?• IT Governance is not an SME concept• Lack of IT managerial, technological and methodological
practices
•From a vendor perspective▫Niches – heterogeneous target groups ▫Low IT capabilities - Low expenditures▫Lot of IS failures▫Lemon Markets (the bad wipe out the good !)
•From a customer perspective (the SME) ▫Opportunistic behavior (E-tic charter)▫Winner’s curse en Vendor lock-in▫Lemon Markets (IT has not a good reputation)
• Nobel Prize Winner G. Akerlof, 1970 (Akerlof, G.A. (1970). ‘The Market for 'Lemons': Quality Uncertainty and the Market Mechanism’. Quarterly Journal of Economics, 84(3), 488-500.)
• a market with unbalanced information can lead to complete disappearance or to offerings with poor quality where bad products (lemons) wipe out the good ones
• Popular economic grant theory• Used car market (lemons)• E-business, E-auctions, IT security, Grid computing, IT outsourcing
• Devos J., Van Landeghem H. and Deschoolmeester D., (2010), An IS Theory: The Lemon Market, in Information Systems Theory: Explaining and Predicting Our Digital Society, Y.K. Dwivedi, M. Wade & S.L. Schneberger, to be published in 2011
•77,4% reference selling•34,6% make use of case studies•38,9% of the ISV’s is targeting also an SME market •11,0% of the ISV’s is only targeting an SME
market•Large ISVs targeting LE (and sometimes SMEs)•Small ISVs targeting SMEs
• Rational behaviour & expectations for both parties (bounded rationality)
• Self-interest of parties (goal conflict between parties)
• Outcome has effects on the Principal's profit and success
• Outcome is only partly a function of behaviours of Agent(risk aversion / risk neutral)
• Agent has discretionary freedom due to asymmetric information • ex ante = uncertainties for Principal (Adverse Selection)• ex post = disadvantages for Principal (Moral Hazard)
• “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty”
• Surgery: Of 100 people have surgery 90 live through the post-operative period, 68 are alive at the end of the first year and 34 are alive at the end of five years.
• Radiation Therapy: Of 100 people having radiation therapy all live through the treatment, 77 are alive at the end of one year and 22 are alive at the end of five years.
• Surgery: Of 100 people have surgery 10 die during surgery or the post-operative period, 32 die by the end of the first year and 66 die by the end of five years.
• Radiation Therapy: Of 100 people having radiation therapy none die during treatment, 23 die by the end of one year and 78 die by at the end of five years.
Application of Prospect Theory in IT Outsourcing for SMEs
- Editing phase (= tendering phase) is often an extreme positive framing of a proposal on behalf of the ISV, to keep the SME (customer) in the “survival” frame
• Stressing direct benefits (pseudo-tangible) • Denying the TCO concept (selling hardware, licenses, and …consultancy)• Simplification of ROI
• Short project time • Fixed Price Contracts• Absence of requirement management (package contains “all” functionalities)• Avoid speaking about IS risks factors
• Don’t mention the burden of change management• Don’t mention risk of scope creep• …
1. Lack of top management commitment to the project2. Failure to gain user commitment3. Misunderstanding the requirements4. Lack of adequate user involvement5. Lack of required knowledge/skills in the project personnel6. Lack of frozen requirements 7. Changing scope/objective8. Introduction of new technology9. Failure to manage end user expectations10. Insufficient/appropriate staffing
1 SME-principals should have CEOs who are personally committed to IS projects
2 SME-principals should have effective project management skills.
3 SME-principals should be convinced that an outsourced IS project is a joined endeavour between two collaborating partners and should to be managed towards an equilibrated balance between control and trust
ISV Agent 4 ISV-agents should have a profound capability maturity level on project management
5 ISV-agents should avoid all distrust mechanisms vis-à-vis SME principals