Definition Of Information Communication Technology

Published Date: 02 Nov 2017

2.1 Introduction

Today’s business world has been deeply influenced by Information and Communication Technologies (ICT) and the application of ICT among business is widespread. ICT is rapidly changing global production, work and business methods and trade and consumption patterns in and between enterprises and consumers. Denni (1996) stress every business must bring ICT into their business operation and take advantage of the benefits they offer. In the developed countries including Australia and United Kingdom Small and Medium enterprises (SMEs) account for more than half of all business and over half of all employment (Kazi, 2007). Nowadays small businesses are increasingly using and adopting information and communication technology due to the advent of Personal Computer and broadband internet access. Alberto and Fernando (2007) argued that the use of ICT can improve business competitiveness with internet providing numerous opportunities for SMEs to compete equally with large corporations.

As the world economy continues to move toward increased integration as a result of advances in information communications technology and the increasing reduction in trade barriers, some of the greatest opportunities for small businesses will derive from their ability to participate in the regional and international markets (Mutula and Brakel, 2006). Adoption of the ICT is considered to be a means to enable these businesses to compete on a global scale, with improved efficiency, and closer customer and supplier relationships (Chong et al., 2001). In this respect, SMEs should consider information and communication technology (ICT) as an important approach in their business to take competitive advantage from the global markets (Mutsaers et al., 1998).

This research therefore intends to review various literatures on ICT adoption by Small and Medium Enterprises which forms about 90% of businesses in both developed and developing countries. In effect they are the engine of growth and hold about 70% of the working population in the world. The search considers e -business in general, benefits and barriers as well as its implication to SMEs in developing countries.

2.2 Definition of Information Communication Technology

ICT is defined as ‘any technology used to support information gathering, processing, distribution and use’ (Beckinsale and Ram, 2006). The definition taken in this paper classifies ICT into information technologies, telecommunications technologies and networking technologies (Nicol, 2003). This covers all forms of technologies such as computers, Internet, websites as well as fixed - line telephones, mobile phones and other wireless communications devices, networks, broadband and various specialized devices (Manueli et al., 2007).

Focusing exclusively on small businesses, Mpofu (2012) opined that ICT represents the advancement in technology uptake among small businesses in developing nations. According to Melody et al. (1986; In: Mpofu, 2012) the phrase ICT had been used by academic researchers since the 1980s, but it became popular after it was used in a report to the UK government by Stevenson in 1997. ICT is technology that supports activities involving information, i.e., activities involving gathering, processing, storing and presenting data.

2.3. Overview of Small and Medium Scale Enterprises

The issue of what constitutes a small or medium enterprise is a major concern in the literature. Different authors have given different definitions to this category of business. SMEs have indeed not been spared the definition problem that is usually associated with concepts which have many components. Some attempt to use size, capital assets while others use skill of labour, legal status, method of production and turnover level to back their definition.

Storey, (1994) tries to sum up the danger of using size to define the status of a firm by stating that in some sectors all firms may be regarded as small, whilst in other sectors there are possibly no firms which are small. The Bolton Committee (1971) first formulated an ‘economic’ and ‘statistical’ definition of a small firm. Under the ‘economic’ definition, a firm is said to be small if it meets the following criteria:

It has a relatively small share of their market place;

It is managed by owners or part owners in a personalized way, and not through the medium of a formalized management structure;

It is independent, in the sense of not forming part of a large enterprise.

Under the ‘statistical’ definition, the Committee proposed the following criteria:

The size of the small firm sector and its contribution to GDP, employment, exports, etc.

The extent to which the small firm sector’s economic contribution has changed over time;

Applying the statistical definition in a cross-country comparison of the small firms’ economic contribution.

The Bolton Committee applied different definitions of the small firm to different sectors. Whereas firms in manufacturing, construction and mining were defined in terms of number of employees (in which case, 200 or less qualified the firm to be a small firm), those in the retail, services, wholesale, etc. were defined in terms of monetary turnover (in which case the range is 50,000 -200,000 British Pounds to be classified as small firm). Firms in the road transport industry are classified as small if they have 5 or fewer vehicles. There have been criticisms of the Bolton definitions. These centre mainly on the apparent inconsistencies between defining characteristics based on number of employees and those based on managerial approach.

The European Commission (EC) defined SMEs largely in term of the number of employees as follows:

1 to 9 employees - micro enterprises;

10 to 99 employees - small enterprises;

100 to 499 employees - medium enterprises.

Thus, the SME sector is comprised of enterprises (except agriculture, hunting, forestry and fishing) which employ less than 500 workers. In effect, the EC definitions are based solely on employment rather than a multiplicity of criteria. Secondly, the use of 100 employees as the small firm’s upper limit is more appropriate, given the increase in productivity over the last two decades (Storey, 1994).

Weston and Copeland (1998), hold that definitions of size of enterprises suffer from a lack of universal applicability. In their view, this is because enterprises may be conceived of in varying terms. Size has been defined in different contexts, in terms of the number of employees, annual turnover, industry of enterprise, ownership of enterprise, and value of fixed assets. Van der Wijst (1989) considers small and medium businesses as privately held firms with 1– 9 and 10 – 99 people employed, respectively. Jordan et al. (1998) defined SMEs as firms with fewer than 100 employees and less than €15 million turnover.

Michaelas et al (1999) consider small independent private limited companies with fewer than 200 employees and López and Aybar (2000) considered companies with sales below €15 million as small. According to the British Department of Trade and Industry, the best description of a small firm remains that used by the Bolton Committee in its 1 971 Report on Small Firms.

According to Kayanula and Quartey (2000; In: Bright, 2012), the Ghana Statistical Service (GSS) considers firms with fewer than 10 employees as small -scale enterprises and their counterparts with more than 10 employees as medium and large-sized enterprises. Kayanula and Quartey, (2000) also revealed that the GSS in its national accounts considered companies with up to 9 employees as SMEs.

The value of fixed assets in the firm has also been used as an alternative criterion for defining SMEs. However, the National Board for Small Scale Industries (NBSSI) in Ghana applies both the International Research Journal of Finance and Economics -"fixed asset" and number of ‘employees’ criteria. It defines a small -scale enterprise as a firm with not more than 9 workers, and has plant and machinery (excluding land, buildings and vehicles) not exceeding One Thousand Ghana Cedis (GH¢1,000.00). According to Kayanula and Quartey, (2000), The Ghana Enterprise Development Commission (GEDC), on the other hand, uses a Ten Thousand Ghanaian Cedis (GH¢10,000.00) upper limit definition for plant and machinery. It is important to caution that the process of valuing fixed assets poses a problem. Secondly, the continuous depreciation of the local currency as against major trading currencies often makes such definitions outdated.

In defining small-scale enterprises in Ghana, Steel and Webster (1991) and Osei et al. (1993) used an employment cut-off point of 30 employees. Osei e.t al. (1993), however, classified small -scale enterprises into three categories. These are:

Micro - employing less than 6 people;

Very small - employing 6 -9 people;

Small - between 10 and 29 employees.

A more recent definition is the one given by the Regional Project on Enterprise Development Ghana manufacturing survey paper. The survey report classified firms into:

Micro enterprise, less than 5 employees;

Small enterprise, 5 - 29 employees;

Medium enterprise, 30 – 99 employees;

Large enterprise, 100 and more employees (Teal, 2002).

2.4 Theoretical Framework

By drawing and building on the previous studies, this paper presents a research framework adapted mainly from Anukis (2009), E- adoption model.

Anukis (2009), e -adoption ladder suggests sensible, bite-size that allow businesses to spread cost and risk of ICT investment and enables them to achieve maximum return on investment (ROI). It is one method for planning correct and efficient investment in ICT. It allows businesses to decide what you need now, for the future and how to ensure today’s foundation support tomorrow’s improvement.

Stage 1: Efficient Internal and External Communications

This seeks to find out how a given SME communicates in terms of telephony (or IP Telephony), email, Instant messaging, text messaging and faxing. Internal communication may also mean communicating with outlying or remote offices

Stage 2: Efficient Internal Collaboration.

This ensures how a given company works on projects or process that cross departmental or geographical boundaries. For example, can the firm works effectively on important documents; or does employees struggle to know which the most recent version of that important file is?

Stage 3: Place in the worldwide Market

At this stage, firms ensure that customers know their existence and that they can easily find out information about them.

Stage 4: Sell Online

At this stage, a given SME sells its products online and make them available to its customers in a format that makes searching and querying easy to find.

Stage 5: Integrated Supply Chain Management

This is the ability to liaise and collaborate with the business’ suppliers electronically. Where possible, systems are automated such that your systems talk to their systems automatically.

Stage 6: Open Systems Integration

At this stage too, SMEs integrate their systems with other external systems electronically to make and receive payments, for example, the Inland Revenue and your employees. Whilst the e-adoption ladder provides guidance and a logical process for implementing ICT in your business, it does not have to be strictly adhered to. Some small retail businesses need a Place in the worldwide market more than they need Efficient Internal and External Communications. (Anukis, 2009)

Table 2.1. The E-Adoption Ladder

THE E-ADOPTION LADDER

Stage 6 Open systems Integration

Stage 5 Integrate supply chain Management

Stage 4 Sell online

Stage 3 Place in the Worldwide market

Stage 2 Efficient Internal collaboration

Stage 1 Efficient Internal and External communications

Source: Adapted from Anukis (2009).

According to Roe (2007), the e-adoption ladder should incorporate dynamisms due to constantly changing nature of technology and also to be able to address the recurring criticism of the e-adoption ladder. Another model, the e-adoption typologies which describes key characteristics that determines technology adoption a business thinks about its ICT. The defining characteristics are agile, competitive and successful businesses are integrating technology across their business process and improving performance. This new approach continue to share many similarities with the ladder but seeks to move the debate forward looking beyond an approach that historically has simply focused on an examination and cataloguing of discrete ICT application.

2.5 Technological capacity of ICT

According to Hilbert and López (2011), the world's technological capacity to store information grew from 2.6 (optimally compressed) exabytes in 1986 to 15.8 in 1993, over 54.5 in 2000, and to 295 (optimally compressed) exabytes in 2007. This is the informational equivalent to 404 billion CD-ROM in 2007. Hilbert and López (2011) again said that piling them up would create a stack from the earth to the moon and a quarter of this distance beyond (with 1.2 mm thickness per CD).

The world’s technological capacity to receive information through one-way broadcast networks was 432 exabytes of (optimally compressed) information in 1986, 715 (optimally compressed) exabytes in 1993, 1.2 (optimally compressed) zettabytes in 2000, and 1.9 zettabytes in 2007 (Hilbert and López, 2011).

The world's effective capacity to exchange information through two-way telecommunication networks was 281 petabytes of (optimally compressed) information in 1986, 471 petabytes in 1993, 2.2 (optimally compressed) exabytes in 2000, and 65 (optimally compressed) exabytes in 2007 (Hilbert and López, 2011).The world's technological capacity to compute information with humanly guided general-purpose computers grew from 3.0 × 10^8 MIPS in 1986, to 6.4 x 10^12 MIPS in 2007 (Hilbert and López, 2011).

2.6 Awareness and Electronic-Readiness of ICT by SMEs

Information and communication Technology (ICT) is changing almost everything that is around us. New business opportunities are opening to those who can make effective use of ICT both locally and internationally. As the Internet and its applications including the World Wide Web and e-mail, have evolved, it is evident that digital technologies are transforming the way in which international trade and communications are conducted. These changes originated in the developed world - North America and Europe, where the Internet and its related information technologies (IT) were developed, but have been taken up by virtually every country in the world (Wikipedia, 2007).

SMEs have insufficient knowledge of information technology and ICT. Many SMEs have identified their lack of knowledge of technology as one of the main barriers to using E-business. Government and private sector partnerships can engage in a campaign to disseminate information to SMEs about e -business policies, best practices, success stories, and opportunities and obstacles relating to the use of ICTs and e -business. These awareness campaigns could include free training courses and workshops on e-business, security and privacy, awards programs, and information centers to assist SMEs. Ultimately, this information campaign should come in the form of an overall e -business development strategy for the economy, focusing on its various innovative applications for SMEs (Wikipedia, 2007).

A "digital divide" now exists between technologically developed and developing countries, as well as between populations within countries, and between genders and age groups worldwide (Okpaku, 2001). The readiness of SMEs on the adoption of e-business will be effective if the country’s infrastructure on ICT is adequate enough and spans through the length and breadth of the country. The following are the indicators as to whether they are e-ready for e- business adoption.

2.7 ICT Adoption Level in SMEs

Adoption of ICT by SMEs in Ghana is still lower than expected (Pavic et al., 2007; Yu, 2006). Several barriers to ICT adoption in SMEs have been identified, including: lack of knowledge about the potential of IT, a shortage of resources such financial and expertise and lack of skills (Blackburn and Athayde, 2000; Cavalcanti, 2006; Ndubisi & Jantan, 2003; Utomo, 2001). Many studies have also focused on identifying the determinants that influence ICT adoption by SMEs in Ghana. Studies regarding the broader perspective of Internet adoption reveal that environmental factors such as government intervention, public administration, and external pressure from competitors, organizational factors, management support, suppliers and buyers play the key role in the adoption and implementation of ICT, especially in SMEs and e-commerce (Daniel & Wilson, 2002; Dasgupta, 2000; Lai & Hsieh, 2007; Scupola, 2003). Indeed, very little is understood about the determinants of ICT adoption among SME business owners in Ghana. In examining the organizational factors, for instance, Lucchetti and Sterlacchini (2004) identified financial resources, technical skills and firm characteristics as significant determinants of ICT adoption among SMEs. On the other hand, when Seyal and Abd-Rahman (2003) investigated 95 small and medium business organizations of various types, they found that the major determinants of e-commerce adoption are adoption attributes such as relative advantages, compatibility, trialability, observability, and organizational attributes such as nature, size, and type of business.

In a more recent study, Seyal et al. (2007) found that perceived benefits, management and government supports are significant predictors that influenced SMEs in Brunei to adopt ICT. Regarding ICT adoption in Taiwan, Lin (2006) identified these determinants as having influenced on adoption: organizational size, CEOs‘characteristics and CEOs‘perception of relative advantage, compatibility, and complexity. Few studies have examined the relationship between ICT skills and ICT adoption. Shiels et al. (2003), for example, asserted that strong ICT capability including the specific ICT skills of small firm owners has significant influence on the adoption of ICT. Wainwright et al. (2005) added that managerial ICT skills, ICT knowledge and ICT practices are important determinants of whether ICT is adopted or rejected by the SMEs. Ndubisi and Jantan (2003), in evaluating information system use among small- and medium-sized firms in Malaysia, found that computing skills and technical backing are strong anchors of the perception of usefulness and also wield direct influence on system use. In another study conducted by Ndubisi and Kahraman (2005), they found that the use of advanced systems is significantly related to innovativeness and suggested that innovativeness is an important trait in determining ICT use among women entrepreneurs in Malaysia.

According to MacGregor et al. (1996), small businesses (SMEs) tend to avoid ICT into their business, if it is seen as complex to use. This is not surprising because SMEs always lack of skills amongst workforce to use ICT (Spectrum, 1997). Windrum & Pascale (2003) study reveals that the ICT adoption in SME depends on the CEO/owner being the ICT decision-maker. Their findings clearly indicated that ICT adoption is positively related to firm size. It is very important for organization to determine its employee’s knowledge or skills of ICT because those knowledge or previous experiences may influence organization decision in adopting ICT. However, the ability of manager or owner in ICT’s knowledge or skills is definitely increasing the opportunity of ICT use amongst SMEs. Reynolds (1994) found that small business owner/managers are unlikely to adopt more sophisticated technologies if they are not familiar with the basic ones. This is because of the limited number of employees with lack of technical knowledge. This lack of knowledge based employees might hinder or prevent technology adoption if the owner believes that this technology can only be employed using specialist staff (Reynolds, 1994). MacGregor et al. (1996) and Cragg and King (1993) also stressed that employees of small businesses tend to lack skills and expertise to use IT in their businesses. It examined that SMEs always lack of skills amongst workforce to use ICT (Spectrum, 1997). The lack of suitable technical and managerial staff with sufficient ICT expertise is another major barrier for SMEs in adopting ICT. Allison (1999) agrees that a skilled and knowledgeable work force was closely linked with the successful implementation of technology. More researchers confirm the finding such as Cragg and King (1993) found that one of the strongest inhibiting factors for small firm to implement information technology was the lack of information system knowledge.

2.8 The Role of ICT in the Operational, Tactical and Strategic Activities of SMEs

In the present knowledge-based economy, it is important for SMEs to adopt processes that enable them to provide services that will bring about competitive advantage. ICT has a significant positive impact on organizational performance (Maldeni and Jayasena, 2009) and is vital to SMEs. ICT is known as a major catalyst and enabler of organizational change (Hazbo et al., 2008). Without the utilization of ICT, it may be impossible for modern SMEs to compete as ICT ha s a significant impact on SMEs operations and is claimed to be crucial for the survival and growth of economies in general (Berisha-Namani, 2009). ICT provides opportunities for business transformations (Chibelushi, 2008) and provide SMEs the opportunity to conduct business anywhere (Jennex et al, 2004).

The European Commission (2008), states that SMEs could use ICT in order to grow and to become more innovative. Hence, there is a need to encourage the use of ICT in SMEs and address the high cost of ownership of ICT equipment since it can help to improve technical and managerial skills, making available e-business solutions for SMEs. Love et al. (2004) ascertain that the use of ICT offers many benefits to SMEs at different levels (operational level, tactical level and strategic level).

In Africa, the use of ICT is very recent as compared to countries like the UK and USA, which is at a better stage (Harindranath et al., 2008). Chacko and Harris (2005) state that there are two ways SMEs can benefits from ICT, first, SMEs can be the producers of ICT or second, SMEs can be users of ICT with the intention to increase productivity or improve communication for reaching new customers.

Chacko and Harris (2005) also state that the use of ICT by SMEs depends on the benefits the ICT tools can bring to the business, which means its usage depends on the cost effectiveness. The ICTs adopted by SMEs serve as basic tools for their business communication such as using either mobile phones or fixed lines. For example, after SMEs adopt ICT tools, they also use personal computers (PC) with basic software installed. They can enjoy improved communication (with suppliers, customers or employees and so on) and meet information processing needs. Having Internet presence also enable SMEs to enjoy improved communication tools such as email, file sharing, creating websites, e-commerce, among others (Chacko and Harris, 2005).

In addition, Chacko and Harris (2005) identified three benefits associated with the use of ICT in SMEs: the benefits it can bring to the business in terms of utilization, the ICT literacy level of its employees and the financial resource available. Levy et al. (2001) consider how ICT is utilized by SMEs and point to the operational nature of the investments, which is driven by the consideration of cost and efficiency. However, Chacko and Harris (2005) recommend that whichever criteria is used should start with the basic technologies such as fixed line or mobile phone, fax, computers and basic document processing with Microsoft Office software to more advanced technology such as email, e-commerce and information processing systems.

Ongori (2009) states that the use of ICT would help change the way businesses operate in this era of globalization by changing business structures and increasing competition, creating competitive advantage for businesses and by changing business operations. For these reasons, SMEs must have an ability to compete and dynamically respond to rapidly changing markets using ICT. According to Kapurubandare and Lawson (2006), for survival and staying abreast in a competitive global economy it is apparent that SMEs embrace ICT, as it is becoming imperative for SMEs to gain competitive advantage and for stability in international markets.

Furthermore, Ongori (2009) states that in the present era of globalization, SMEs must have an ability to compete and dynamically respond to rapidly changing markets as it plays a significant role in an organization’s growth and success. This implies that SMEs need to be connected to the digital marketplace. Based on the review of literatures, it implies that there is need for Nigeria SMEs to make good use of the latest technologies and ideas as this may likely assist them stay competitive (Lai, 2007).

2.9 Barriers to ICT Adoption by SMEs

In general, ICT adoption works differently according to the culture and the organizational type. According to OECD (2004), lack of applicability to the business preferences for established business models, unsuitability for the type of business; enabling factors such as availability of ICT skills, qualified personnel, network infrastructure; cost factors such as ICT equipment and networks, software and re-organization security and trust factors which includes security and reliability of ICT systems, uncertainty of payment methods, legal framework and intellectual property right and challenges in areas of management skills, technological capabilities productivity and competitiveness really hinder the adoption of ICT by SMEs.

According to Kapurubandare (2006), owners or managers of SMEs are the decision makers for their organization and for that matter taking decisions in connection with internet adoption for expansion becomes quite a challenge as a result of lack of awareness of the technology and perceived benefits in taking up the decision. Also lack of knowledge on how to use the technology and perceived benefits is a major factor that the owners lack to take up to ICT. The low computer literacy is other contributory factor for not adopting ICT in most small and medium-scale enterprises (Kapurubandare, 2006).

Mistrust of the information technology industry and lack of time are two other factors that affect the decision to adopt ICT. Most SMEs are concerned about a return on investments and for that matter reluctant to make substantial investments particularly when short term returns are not guaranteed. This is as a result of the limited resources such as financial, time, and personnel (Van Akkeren & Cavaye, 1999). Similar to e-business benefits, literature is also silent about whether barriers differ based on organizational size. In general, the following major barriers are identified:

A lack of time to implement ICT (Scupola, 2009), the high level of complexity associated with e -business implementation (Kaynak et al., 2005) and high implementation cost associated with e -business technologies (Tan et al., 2010).

It is argued that many of these barriers can be successfully addressed by large organizations due to their resource and expertise availability. As SMEs suffer from acute resource scarcity, the perceived barriers of ICT technologies adoption by SMEs may differ considerably than those of large organizations. As such, some researchers examine the barriers perceived by SMEs for introducing ICT technologies. According to these scholars, SMEs encounter several barriers cited in the brooder SME literature. However, there is a disagreement about some barriers. For instance, lack of management willingness to engage in ICT to be a major barrier for SME context. But Li and McQueen (2008) provide opposite findings. Some scholars acknowledge that barriers to ICT technologies adoption among SME buyers and suppliers may differ. For example, Grover and Ramanlal (1999) reported that the barriers to adoption of e –business technologies between buyers and suppliers have not yet been untangled. Furthermore, it is unclear whether these barriers have significant influence on ICT technologies adoption decision making or implementation stages (Tan et al., 2010).

2.10 The Role of the Government in Promoting ICT

Government’s world- wide has recognized the crucial role that ICTs can play in socio-economic development. In this respect, a number of countries in both the developing and developed world are designing economic policies that will accelerate the process of transforming their economies into information and knowledge - based economies There is no doubt that information and knowledge economy is generating opportunities across all sectors in a number of developed and developing countries. It is a new source for the creation of quality jobs, wealth generation, income redistribution and poverty alleviation, as well as for rapid economy development, prosperity and a source for facilitating global competitiveness. However if countries like Ghana are to move their industrially weak, subsistence agriculture based economy towards an information and knowledge economy they will need to develop and implement a comprehensive integrated ICT - led socio - economic development policies, strategies and plans (Dzidonu, 2002). The challenge facing Africans in the digital world relates more to the formulation and implementation of appropriate ICT- led socio - economic development policies and plans that could aid the process of moving the economy and society to other side of the digital divide.

The first Africa Development Forum organized by UNECA in 1999, five critically interrelated areas for strategic intervention by governments in developing countries. These include:

Infrastructure – deploying a core ICT network infrastructure, achieving relative ubiquity of access, and investing in strategically focused capacity to support high development priorities.

Human Capacity – building a critical mass of knowledge workers, increasing technical skills among users and strengthening local capabilities.

Policy – supporting a transparent and inclusive policy process, promoting fair and open competition, and strengthening institutional capacity to implement and enforce policies.

Enterprise – improving access to financial capital, facilitating access to glob al and local markets, enforcing appropriate tax and property rights regimes, enabling efficient business processes and stimulating domestic demands for ICT.

Content and Applications – providing demand-driven information which is relevant to the needs and conditions experienced by local people (Dzidonu, 2002). Ghana was amongst the first countries in Africa to achieve connection to the Internet. The rapid growth in this sector is set to continue in 2006. National and international public data services are provided by more than 20 companies and there are more than 50 VSAT networks operating in the country. Almost 100 new Internet Service providers (ISPs) were licensed in 2004 alone, bringing the total to more than 140. Broadband ADSL services were introduced in 2003. The government is committed to continuing the privatization of the national carrier, Ghana telecom, as well as the fibre network of Voltacom, the country’s electricity company. The full legalization of VoIP telephony and the implementation of Broadband over Power lines (BPL, PLC) are other key development expected (Miniwatts, 2009).