Lessons for Managing IS in Small Firms

i Interested in guest editing a special theme issue of IRMJ? Contact the editor at [email protected] Small and medium-sized firms (SMEs) are a vibrant part of all economies. Although the definition of an SME varies, for most economies, the focus is on firms with less than than 250 employees. The changes engendered by large corporations that focus on their core compe-tencies have fostered a resurgence for SMEs. Entrepreneurs identify new markets to support, which leads to a rise in specialist firms in many industries. However, the SME sector is unforgiving , with 50% of all SMEs failing within their first three years (Burns, 2001). Failure often is not due to poor business ideas but is caused more by a lack of understanding of the management issues required in order to be successful (Storey, 1994). Management means different things at different times in the life of an SME as power is delegated to managers and the SME moves from a Web-based structure that centers on the owner to a more matrix-or hierarchy-based structure that is required of larger organizations. As management structures become more formalized, SMEs require better information. Information systems (IS) are integral to the management development process. Management IS in SMEs is typically simple in the early stages of a firm. Spreadsheets are used to manage accounts, although growing firms usually adopt simple accounting packages. As firms grow, managing customers effectively becomes important, and databases begin to be used. Many SMEs have local area networks and use external e-mail. Internal e-mail is used in larger SMEs in order to improve communication. Many SMEs have developed brochureware Web sites. However, there is little evidence of successful e-business in SMEs (Brown & Lockett, 2004). SMEs tend to be followers when adopting management IS. While the SME sector is lauded for its flexible response to customers, there is little evidence of flexibility in its management IS. Replacement of management IS often occurs as a response to a crisis rather than a recognition that the business has outgrown the system's ability to deliver. Most SMEs focus on survival rather than competitive advantage, which limits the agility of response to investment in IS. This is due primarily to limited resources, particularly finance, in small firms. There is also nervousness about whether the purchased system will satisfy business requirements. Since most SME IS development is outsourced, there also are concerns about adequate technical support. These …