Strategies to Address the Barriers to Ebusiness Adoption by Smes

The adoption of electronic business (eBusiness) has been a matter of concerned for most businesses since 1980 (Fink 1998), and it has emerged as a crucial way of conducting business activities in a competitive global environment (Lewis & Cockrill 2002). Significant benefits, such as enhanced consumer relationship, wider market reach, and operational efficiency, can be realised by the adoption of eBusiness solution (Dholakia & Kshetri 2004; Daniel & Wilson 2002; Beck et al. 2005). Despite such benefits, the adoption rate of eBusiness by small-to-medium enterprises (SMEs) has not been significant (Santarelli & D’Altri 2003; Mehrtens et al. 2001) due to adoption barriers (for example, see MacGregor & Vrazalic 2005). This paper will draw on research evidences from journal articles to identify both the barriers to eBusiness adoption and the effective strategies useful to overcome the barriers identified.

For successful adoption of eBusiness, SMEs need an ongoing supply of adequate financial resources (Iacovou et al. 1995). In accordance to Iacovou et al. (1995), financial resources are needed to cover for the installation costs, maintenance, and other ongoing expenses that might occur during the entire course of the system operation. However, not all SMEs have adequate financial resources needed to support the adoption of eBusiness system (Iacovou et al. 2005; Quayle 2002; Riquelme 2002) and such financial constraint becomes the barrier to eBusiness adoption (Rao et al. 2003). An empirical survey of 164 small businesses in Australia was carried out by MacGregor and Vrazalic (2005, p.518) in which 71 percent from the 139 non-adopters have identified financial constraint as one of the reasons not to adopt eBusiness.

According to Jutla et al (2002), government can increase the diffusion of eBusiness adoption by SMEs with the introduction of its support funding. This is supported by Wagner et al. (2003, p.344) in which they found that UK government is planning to spend 25 millions for 3 years period to help SMEs to adopt eBusiness. Mirchandani and Motwani (2001, p.71) have identified from structured interviews with 62 top managers/CEOs of small businesses that 22 out of 36 non-adopting firms would consider the chance to adopt the electronic system should the necessary assistance, including financial aid, from government is made available. However, government aid is not the only solution to financial constraint as Proudlock (1999) argues that the installation of less-sophisticated system does not require the adopters to allocate much financial resources to support the adoption of the electronic system. Overcoming the adoption barrier due to financial constraint is a crucial matter as financial readiness is found to be a very significant factor in the decision to adopt eBusiness (Wymer & Regan 2005; Iacovou et al. 1995; Fink 1998).

Iacovou et al. (1995) considers future benefits awareness as an important factor for SMEs to adopt eBusiness. And it is supported by Stockdale and Standing (2004), Lewis and Cockrill (2002) and Yeung et al. (2005) in which they mentioned that if SMEs are not aware of the benefits of eBusiness solution then they may not see a clear reason to adopt the system. The benefits of adoption include greater competitive advantage, extending customer base, eliminating barriers to time and distance, operation on niche market, enhancing customer relationship, and most importantly is operational efficiency which leads to cost reduction (Thong & Yap 1995, Riquelme 2002) but some benefits may take longer time before they can be realised (Stockdale & Standing 2004; Poon & Swatman 1999). Despite such benefits, the adoption rate among SMEs has not been convincing due to lack of awareness about business advantages/opportunities that eBusiness system can provide (MacGregor & Vrazalic 2005; Taylor & Muphy 2004; Karagozoglu & Lindell 2004). Mohan-Neill (2006, p.205) found from descriptive survey that 72 out of 288 small firms with website in United States (US) have no intention to conduct online selling because they do not see any benefit from such operation. The percentage is low with only 36.2 percent (72 out of 288) but ‘do not see any benefit’ is the second most cited reason for firms with website not to conduct online selling (Mohan-Neill 2006, p.207).

Raising awareness among SMEs is an effective way to address the adoption barrier due to the lack of awareness on the business advantages/opportunities that eBusiness can provide (Taylor & Muphy 2004; Karagozoglu & Lindell 2004). Ihlstrom and Nilsson (2003, p.218) conducted qualitative interviews with 7 SMEs in Sweden and they found that the SMEs involved are very eager to raise their awareness on eBusiness and curious about the future benefits that it can provide. Ihlstrom and Nilsson (2003) suggests that the research evidence