Small- and medium-size enterprises and the e-economy: Challenges and prospects

The business efficiencies of IP-based applications, stemming from improved internal coordination and supply chain management, will continue to be a co mpelling force driving the adoption of these applications by large corporat ions. Research and surveys suggest that many applications, particularly web -based customer support and supply-chain management, wilt be adopted by a m ajority of companies within the next 3-5 years. Contrary to most industry predictions, however, the small- and medium-size enterprise (SME) market has been relatively slow to adopt these application s. Although many industry analysts attribute this slow adoption rate to the lack of awareness of e-commerce applications, this paper argues that the l ack of capital and skilled personnel, the significant and often under-state d cost of such e-commerce applications and solutions, and the core structur e of SMEs remain challenging impediments to the adoption of e-commerce appl ications by SMEs. Furthermore, by examining a representative company, this paper demonstrates that internal coordination is not a problem confronting SMEs and only a re-engineering of core business processes may allow SMEs to achieve the business efficiencies of e-commerce applications. Since SMEs p articipate in some 80% of all supply chains, and given that corporations ar e likely to benefit more from improved supply chain management, corporation s might welt consider instituting incentive and subsidy programmes to encou rage SMEs to adopt e-commerce solutions. Alternatively, the national benefi ts accruing to e-commerce, such as reduced government bureaucracy, increase d national competitiveness, and higher economic growth should encourage nat ional governments to formulate appropriate tax and subsidy programs to enco urage SMEs to adopt IP-based applications.