The Implementation of Information System Technology for Micro, Small and Medium Enterprise in South East Asian Countries.
The Implementation of Information System Technology for Micro, Small
and Medium Enterprise in South East Asian Countries
Hamzah Ritchi
The University of Melbourne
Abstract
The pressure of a more active participation of micro, small and medium enterprise (MSME)
regional and global alliance, puts stress on Information System Technology (IST). The
purpose of this paper is to examine potential benefits and risks of the use of IST to MSME
sector in South East Asia countries post crisis. A literature study was conducted from a
number of South East Asian-related research papers and other relevant literature. It was
found that due to the unique characteristics, as reflected in culture and size, there are
considerable advantages to be derived from employing IST in MSME. However, some risks
appear to be of major concern to deploy IST thoroughly. It is concluded that prudent IST
implementation would generally deliver significant impact to the development of MSME
sector.
INTRODUCTION
The encouragement of a free-trade alliance regionally such as APEC (1994) reflects
the magnitude of MSME in stimulating and creating a solid base for an economy and its
proven value. Monetary crisis that occurred nearly globally in 1996 and that still affects South
East Asian current economic condition, has given an expensive lesson with respect to the
important role of business fundamental. It has proven the back-bone function and persistence
of Macro, Small and Medium Enterprise (MSME) economic elemental and business process
in dealing with many complex and disastrous situations that even countless well established
massive-scale companies were facing to liquidation problems and even, bankruptcy. Such a
forum has provided a long-term platform which emphasizes Information System Technology
(IST) as one of chief strategies for extending opportunities for MSME as Bonk (1996) has
discovered. He reveals that the implementation of information technology is in line with the
demand for liberation in tariffs and other commerce requirements that currently are believed
to play a significant role in bringing MSME players into global competition.
1
Nevertheless, the euphoria of bringing thoroughly IST into application is facing an
unenthusiastic endorsement from some experts regarding the achievement of IST. Blili &
Raymond (1993) support this view by asserting that disregarding the ability to synergize both
computer technologies and conventional activities would potentially result in disastrous
exposure. This essay will examine the IST implementation to the MSME sector in the post
monetary crisis in South East Asia economies in general. It will be argued throughout this
paper that IST practice will deliver a constructive outcome. It will have a snowball effect
assisting MSME in playing their role in the global market after the post crisis particularly in
expanding market share and smoothing transaction processing.
MICRO, SMALL AND MEDIUM ENTERPRISE: THE SCOPE
To obtain a grasp of MSME, a well-defined feature of this particular industry should
be established at the outset. Since Indonesia has a strong background and a bulky of small
industries, the definition of MSME from Indonesia Ministry of Cooperatives and Small and
Medium Enterprises (Ministry of Cooperatives and Small And Medium Enterprises, 2004)
could be maintained. The definition states that MSME term can be separated into individual
designation relative to range of industry net asset. Based on its turnover downward, medium
enterprise would be the one that owns more than Rp 200 million until Rp 10 billion excludes
land and business building. Small enterprises are defined as those which produce no more
than Rp 200 million, exclude land and business building or those which generate maximum
an annually one billion rupiah. The remainder (micro enterprises) are those which are
operated and managed by the poor or close to poor society. Even though the clear definition of
MSME over South East Asia countries might be slightly different, the above definition can be
regarded as an average visualization of MSME in the said regional.
2
The definition of MSME clearly reflects what short of business they are undertaking to
in relation to the IST usage rate. The business nature of these companies tends to put small
concern of the IST adoption, and place a great interest to manage bottom line profit. This
figure leads to the difference of adoption degree of IST among company size. In their sensible
examination, Chau & Jim (2002) declare that there was a correlation between firm size and
the level of adoption of information technology. DeLone (December 1981), rigorously
fostered the former statement by elucidating his hypothesis that the characteristics of
computer use vary according to firm size. Additionally, the age of the firm’s computer
operation and the portion of revenues allocated to electronic data processing (EDP) are other
factors that constitute positive correlation with the size of a firm. Based on findings above, it
can be assessed that MSME magnitude factor gives a lucid contribution of how much the
allocated fund is spent for information system development or purchase. Due to this
divergence, it would not be appropriate to create generalisation and to assume the same IST
adoption result with MSME.
Some other constituents that show the likelihood of information system acceptability
in MSME could be observed from the other version of MSME created by Yap, Soh, & Rama
(1992) that identify small business as having 50 staffs or less and medium size business as
having 51 to 250 employees. This definition guides that conventional business process, a
predominantly close family business, unstructured management level, and the little concern on
computer usage are the unique criteria and included as factors as well. Bjerke (2000) also
emphasises the nature of South East Asia MSME by stating that South East Asia MSME
constitute most of total business run in each country, reside in rural areas, produce common
product, lack of capital and low management skill. It is not uncommon to find the owner
would cover the sales function and etc. These factors are such unique characteristic that are
possessed by the vast majority of South East Asian countries. By comprehending this picture,
3
the approach to develop fusion between IST and this prospective sector will be optimised.
Taking Katz (1999) observation into consideration on specified efforts taken to overcome
crisis in Thailand, Indonesia, South Korea, Malaysia, and other famous-awarded Asian
Economic Miracle, it is apparent that only vague priority has been given to draw attention to a
more promising MSME sector, which has obviously demonstrated unquestionable role as
nation economy backbone to get up from fall over.
POTENTIAL BENEFITS
The evolution of information system and information technology does not pass benefit
not only to large company but MSME sector as well. Among of those benefits offered are
categorised into three main points. Firstly is the utilisation of electronic commerce and its
partner, World Wide Web (www). Jentzsch & Miniotas (Dec 1999) assert that with the use of
e-commerce it is said that geographic boundaries are removed, new global opportunities can
be exposed and the internet is the vehicle in which to do e-commerce. Seyal & Rahman (2003)
clearly support that e-commerce could minimize cost of transaction and provide better
communication. Furthermore, Bonk (1996) also clarifies that the subsistence of e-commerce
could accommodate this sector the ability to take role in inter-company cooperation and
global trade which include free trade alliance in there.
Secondly, the relevance of IST encompasses the acceleration in conducting transaction
processing system. Prior to post crisis era, numerous MSMEs do not maintain their
transaction processing for accounting and payroll purpose, tax authority reporting, and for
other regular data processing. The existence of IST ensures the business to run batch data into
batch processing system in any desired variety and obviously in efficient time manner.
Despite of its early formation stage, the study by Chau & Jim (2002) visibly avow that
transaction processing exploitation such as Electronic Data Interchange and other Inter-
4
Organisational System conveys a speedy, accurate, and efficient means to exchange
information. The work of Premkumar & Ramamurthy (1995), Bergeron & Raymond (1997)
and Masseti & Zmud (1996) have unveiled the benefit can be derived from the using of EDI
as well as the using of Electronic Commerce. More from his results, Yap et al., (1992) affirms
that a well organized general transaction processing system which is enclosed in computerbased information system (CBIS) would construct customer satisfaction in the absence of
company size. And finally, Chen & Williams (1998) explores the capability of EDI not only
to improve customer services in addition to stabilizing trading relationships, but also in some
cases as an essential tool for administration, operation, and manufacturing
Thirdly, as the cost of information technology keeps decreasing and instant worldwide
communication becomes increasingly available, the cost barrier shall not be number one issue
anymore. McLeod & Schell (2003) has confirmed “the Moore” theory that the cost of
processor is declining one third while its speed is inclining as three fold every year. Bonk
(1996) also supports the decreasing cost of information technology and the accessibility of
hardware peripherals as opportunities for MSME around the world.
THE RISKS
Despite the potential benefit of IT usage , new technology can also be seen a threat to
small business. Adopting IT is often related to external business pressures and organisational
changes such as alectronic commerce and process re-engineering, which are difficult to
manage. Mitey & Marsh (1998) describe that although most small business surveyed
acknowledged that work practices must change if IT is to be used effectively, few considered
the effects on jobs, skills, and training before implementing IST. He continues that those small
firms who knew where to get training advice were not satisfied with the training provided.
The other concern comes from Doukikis, Smithson, & Lybereas (1994) that dirge the
5
significant problem that may arise in dealing with the relatively unstructured way in which
largely MSME are managed. The strong resistance also may occur when the implementation
of IST is confronted to the work behaviour in existing circumstances might be altered in order
to keep it in line with the implementation of IST.
CONCLUSION
The role of information technology has lead to the new opportunities in many aspects
currently. Along with the offer to participate in global competition as encouraged by several
strategic free trade alliances, the benefits could be obtained are ostensibly can not be passed
up by MSMEs. These benefits are including the exploitation of internet and e-commerce as a
tool to create a new market share particularly, the function of computer-based information
system which can be narrowed down to focus on transaction processing system and the last,
the feasibility of information technology cost for MSMEs. However, the careful study should
be taken in order to place the profound and cohesion understanding before, during and after
implementing IST against the very basic nature of business activities. Failure to do so will
bring the immeasurable failure to MSME that even would bring them into dismissing from
global market competition.
6
Bibliography
APEC. (1994). Asia Pacific Economic Cooperation Forum. Paper presented at the Ministerial
Joint Statement, Jakarta, Indonesia.
Bergeron, F., & Raymond, L. (1997). Managing EDI for Corporate Advantage: A
Longitudinal Study. Journal of Information & Management, 31, 319 - 333.
Bjerke, B. V. (2000). A typified, culture-based, interpretation of management of SMEs in
Southeast Asia. Asia Pacific Journal of Management, 17(1), 103.
Blili, S., & Raymond, L. (1993). Information technology: Threats and opportunities for small
and medium-sized enterprises. International Journal of Information Management,
13(6), 439 410 pgs.
Bonk, E. T. (1996). The information revolution and its impact on SME strategy: the Asia
Pacific Economic Cooperative Forum as model. (small and medium-sized enterprises).
Journal of Small Business Management, 34(1), 71(77).
Chau, P. Y. K., & Jim, C. C. F. (2002). Adoption of Electronic Data Interchange in Small and
Medium Sized Enterprises. Journal of Global Information Management, 10(4), 61-85.
Chen, J.-C., & Williams, B. C. (1998). The impact of electronic data interchange (EDI) on
SMEs: summary of eight British case studies. Journal of Small Business Management,
36(4), 68(65).
DeLone, W. H. (December 1981). Firm Size and the Characterisic of Computer Use. MIS
Quarterly, 5(4), 65-67.
Doukikis, G. I., Smithson, S., & Lybereas, T. (1994). Trends in information technology in
small business. Journal of End User Computing, 6(4), 15-25.
Jentzsch, R., & Miniotas, A. (Dec 1999). The Application of E-commerce to a SME. Paper
presented at the Proc. 10th Australasian Conference on Information Systems,
Wellington.
Katz, S. S. (1999). The Asian crisis, the IMF and the critics. Eastern Economic Journal, 25(4),
421.
Masseti, B., & Zmud, R. W. (1996). Measuring the Extent of EDI Usage in complex
Organizations: Strategies and Illustrative Examples. MIS Quarterly, Sept, 331-345.
McLeod, R., & Schell, G. (2003). Management Information Systems: Prentice Hall.
Ministry of Cooperatives and Small And Medium Enterprises, M. (2004, 2004). Kamus Istilah
Pemberdayaan
KUKM.
Retrieved
08-02-2005,
2005,
from
http://www.depkop.go.id/index.php?option=com_glossary&func=display&page=52&c
atid=197&Itemid=0
Mitev, N. N., & Marsh, A. E. (1998). Small Businesses and Information Technology : Risk,
planning and change. Journal of Small Business and Enterprise Development, 5(3),
228-245.
7
Premkumar, G., & Ramamurthy, K. (1995). The Role of Inter-organizational and
Organizational Factors on the Decision Mode for Adoption of Inter-organizational
Systems. Decision Sciences, 26(3), 303-336.
Seyal, A. H., & Rahman, M. N. A. (2003). A Preliminary Investigation of E-Commerce
Adoption in Small & Medium Enterprises in Brunei. Journal of Global Information
Technology Management, 6(2), 6-26.
Yap, C., Soh, C., & Rama, K. (1992). Information systems success factors in small business.
Omega International Journal of Management Science, 20(5-6), 597-609.
8
and Medium Enterprise in South East Asian Countries
Hamzah Ritchi
The University of Melbourne
Abstract
The pressure of a more active participation of micro, small and medium enterprise (MSME)
regional and global alliance, puts stress on Information System Technology (IST). The
purpose of this paper is to examine potential benefits and risks of the use of IST to MSME
sector in South East Asia countries post crisis. A literature study was conducted from a
number of South East Asian-related research papers and other relevant literature. It was
found that due to the unique characteristics, as reflected in culture and size, there are
considerable advantages to be derived from employing IST in MSME. However, some risks
appear to be of major concern to deploy IST thoroughly. It is concluded that prudent IST
implementation would generally deliver significant impact to the development of MSME
sector.
INTRODUCTION
The encouragement of a free-trade alliance regionally such as APEC (1994) reflects
the magnitude of MSME in stimulating and creating a solid base for an economy and its
proven value. Monetary crisis that occurred nearly globally in 1996 and that still affects South
East Asian current economic condition, has given an expensive lesson with respect to the
important role of business fundamental. It has proven the back-bone function and persistence
of Macro, Small and Medium Enterprise (MSME) economic elemental and business process
in dealing with many complex and disastrous situations that even countless well established
massive-scale companies were facing to liquidation problems and even, bankruptcy. Such a
forum has provided a long-term platform which emphasizes Information System Technology
(IST) as one of chief strategies for extending opportunities for MSME as Bonk (1996) has
discovered. He reveals that the implementation of information technology is in line with the
demand for liberation in tariffs and other commerce requirements that currently are believed
to play a significant role in bringing MSME players into global competition.
1
Nevertheless, the euphoria of bringing thoroughly IST into application is facing an
unenthusiastic endorsement from some experts regarding the achievement of IST. Blili &
Raymond (1993) support this view by asserting that disregarding the ability to synergize both
computer technologies and conventional activities would potentially result in disastrous
exposure. This essay will examine the IST implementation to the MSME sector in the post
monetary crisis in South East Asia economies in general. It will be argued throughout this
paper that IST practice will deliver a constructive outcome. It will have a snowball effect
assisting MSME in playing their role in the global market after the post crisis particularly in
expanding market share and smoothing transaction processing.
MICRO, SMALL AND MEDIUM ENTERPRISE: THE SCOPE
To obtain a grasp of MSME, a well-defined feature of this particular industry should
be established at the outset. Since Indonesia has a strong background and a bulky of small
industries, the definition of MSME from Indonesia Ministry of Cooperatives and Small and
Medium Enterprises (Ministry of Cooperatives and Small And Medium Enterprises, 2004)
could be maintained. The definition states that MSME term can be separated into individual
designation relative to range of industry net asset. Based on its turnover downward, medium
enterprise would be the one that owns more than Rp 200 million until Rp 10 billion excludes
land and business building. Small enterprises are defined as those which produce no more
than Rp 200 million, exclude land and business building or those which generate maximum
an annually one billion rupiah. The remainder (micro enterprises) are those which are
operated and managed by the poor or close to poor society. Even though the clear definition of
MSME over South East Asia countries might be slightly different, the above definition can be
regarded as an average visualization of MSME in the said regional.
2
The definition of MSME clearly reflects what short of business they are undertaking to
in relation to the IST usage rate. The business nature of these companies tends to put small
concern of the IST adoption, and place a great interest to manage bottom line profit. This
figure leads to the difference of adoption degree of IST among company size. In their sensible
examination, Chau & Jim (2002) declare that there was a correlation between firm size and
the level of adoption of information technology. DeLone (December 1981), rigorously
fostered the former statement by elucidating his hypothesis that the characteristics of
computer use vary according to firm size. Additionally, the age of the firm’s computer
operation and the portion of revenues allocated to electronic data processing (EDP) are other
factors that constitute positive correlation with the size of a firm. Based on findings above, it
can be assessed that MSME magnitude factor gives a lucid contribution of how much the
allocated fund is spent for information system development or purchase. Due to this
divergence, it would not be appropriate to create generalisation and to assume the same IST
adoption result with MSME.
Some other constituents that show the likelihood of information system acceptability
in MSME could be observed from the other version of MSME created by Yap, Soh, & Rama
(1992) that identify small business as having 50 staffs or less and medium size business as
having 51 to 250 employees. This definition guides that conventional business process, a
predominantly close family business, unstructured management level, and the little concern on
computer usage are the unique criteria and included as factors as well. Bjerke (2000) also
emphasises the nature of South East Asia MSME by stating that South East Asia MSME
constitute most of total business run in each country, reside in rural areas, produce common
product, lack of capital and low management skill. It is not uncommon to find the owner
would cover the sales function and etc. These factors are such unique characteristic that are
possessed by the vast majority of South East Asian countries. By comprehending this picture,
3
the approach to develop fusion between IST and this prospective sector will be optimised.
Taking Katz (1999) observation into consideration on specified efforts taken to overcome
crisis in Thailand, Indonesia, South Korea, Malaysia, and other famous-awarded Asian
Economic Miracle, it is apparent that only vague priority has been given to draw attention to a
more promising MSME sector, which has obviously demonstrated unquestionable role as
nation economy backbone to get up from fall over.
POTENTIAL BENEFITS
The evolution of information system and information technology does not pass benefit
not only to large company but MSME sector as well. Among of those benefits offered are
categorised into three main points. Firstly is the utilisation of electronic commerce and its
partner, World Wide Web (www). Jentzsch & Miniotas (Dec 1999) assert that with the use of
e-commerce it is said that geographic boundaries are removed, new global opportunities can
be exposed and the internet is the vehicle in which to do e-commerce. Seyal & Rahman (2003)
clearly support that e-commerce could minimize cost of transaction and provide better
communication. Furthermore, Bonk (1996) also clarifies that the subsistence of e-commerce
could accommodate this sector the ability to take role in inter-company cooperation and
global trade which include free trade alliance in there.
Secondly, the relevance of IST encompasses the acceleration in conducting transaction
processing system. Prior to post crisis era, numerous MSMEs do not maintain their
transaction processing for accounting and payroll purpose, tax authority reporting, and for
other regular data processing. The existence of IST ensures the business to run batch data into
batch processing system in any desired variety and obviously in efficient time manner.
Despite of its early formation stage, the study by Chau & Jim (2002) visibly avow that
transaction processing exploitation such as Electronic Data Interchange and other Inter-
4
Organisational System conveys a speedy, accurate, and efficient means to exchange
information. The work of Premkumar & Ramamurthy (1995), Bergeron & Raymond (1997)
and Masseti & Zmud (1996) have unveiled the benefit can be derived from the using of EDI
as well as the using of Electronic Commerce. More from his results, Yap et al., (1992) affirms
that a well organized general transaction processing system which is enclosed in computerbased information system (CBIS) would construct customer satisfaction in the absence of
company size. And finally, Chen & Williams (1998) explores the capability of EDI not only
to improve customer services in addition to stabilizing trading relationships, but also in some
cases as an essential tool for administration, operation, and manufacturing
Thirdly, as the cost of information technology keeps decreasing and instant worldwide
communication becomes increasingly available, the cost barrier shall not be number one issue
anymore. McLeod & Schell (2003) has confirmed “the Moore” theory that the cost of
processor is declining one third while its speed is inclining as three fold every year. Bonk
(1996) also supports the decreasing cost of information technology and the accessibility of
hardware peripherals as opportunities for MSME around the world.
THE RISKS
Despite the potential benefit of IT usage , new technology can also be seen a threat to
small business. Adopting IT is often related to external business pressures and organisational
changes such as alectronic commerce and process re-engineering, which are difficult to
manage. Mitey & Marsh (1998) describe that although most small business surveyed
acknowledged that work practices must change if IT is to be used effectively, few considered
the effects on jobs, skills, and training before implementing IST. He continues that those small
firms who knew where to get training advice were not satisfied with the training provided.
The other concern comes from Doukikis, Smithson, & Lybereas (1994) that dirge the
5
significant problem that may arise in dealing with the relatively unstructured way in which
largely MSME are managed. The strong resistance also may occur when the implementation
of IST is confronted to the work behaviour in existing circumstances might be altered in order
to keep it in line with the implementation of IST.
CONCLUSION
The role of information technology has lead to the new opportunities in many aspects
currently. Along with the offer to participate in global competition as encouraged by several
strategic free trade alliances, the benefits could be obtained are ostensibly can not be passed
up by MSMEs. These benefits are including the exploitation of internet and e-commerce as a
tool to create a new market share particularly, the function of computer-based information
system which can be narrowed down to focus on transaction processing system and the last,
the feasibility of information technology cost for MSMEs. However, the careful study should
be taken in order to place the profound and cohesion understanding before, during and after
implementing IST against the very basic nature of business activities. Failure to do so will
bring the immeasurable failure to MSME that even would bring them into dismissing from
global market competition.
6
Bibliography
APEC. (1994). Asia Pacific Economic Cooperation Forum. Paper presented at the Ministerial
Joint Statement, Jakarta, Indonesia.
Bergeron, F., & Raymond, L. (1997). Managing EDI for Corporate Advantage: A
Longitudinal Study. Journal of Information & Management, 31, 319 - 333.
Bjerke, B. V. (2000). A typified, culture-based, interpretation of management of SMEs in
Southeast Asia. Asia Pacific Journal of Management, 17(1), 103.
Blili, S., & Raymond, L. (1993). Information technology: Threats and opportunities for small
and medium-sized enterprises. International Journal of Information Management,
13(6), 439 410 pgs.
Bonk, E. T. (1996). The information revolution and its impact on SME strategy: the Asia
Pacific Economic Cooperative Forum as model. (small and medium-sized enterprises).
Journal of Small Business Management, 34(1), 71(77).
Chau, P. Y. K., & Jim, C. C. F. (2002). Adoption of Electronic Data Interchange in Small and
Medium Sized Enterprises. Journal of Global Information Management, 10(4), 61-85.
Chen, J.-C., & Williams, B. C. (1998). The impact of electronic data interchange (EDI) on
SMEs: summary of eight British case studies. Journal of Small Business Management,
36(4), 68(65).
DeLone, W. H. (December 1981). Firm Size and the Characterisic of Computer Use. MIS
Quarterly, 5(4), 65-67.
Doukikis, G. I., Smithson, S., & Lybereas, T. (1994). Trends in information technology in
small business. Journal of End User Computing, 6(4), 15-25.
Jentzsch, R., & Miniotas, A. (Dec 1999). The Application of E-commerce to a SME. Paper
presented at the Proc. 10th Australasian Conference on Information Systems,
Wellington.
Katz, S. S. (1999). The Asian crisis, the IMF and the critics. Eastern Economic Journal, 25(4),
421.
Masseti, B., & Zmud, R. W. (1996). Measuring the Extent of EDI Usage in complex
Organizations: Strategies and Illustrative Examples. MIS Quarterly, Sept, 331-345.
McLeod, R., & Schell, G. (2003). Management Information Systems: Prentice Hall.
Ministry of Cooperatives and Small And Medium Enterprises, M. (2004, 2004). Kamus Istilah
Pemberdayaan
KUKM.
Retrieved
08-02-2005,
2005,
from
http://www.depkop.go.id/index.php?option=com_glossary&func=display&page=52&c
atid=197&Itemid=0
Mitev, N. N., & Marsh, A. E. (1998). Small Businesses and Information Technology : Risk,
planning and change. Journal of Small Business and Enterprise Development, 5(3),
228-245.
7
Premkumar, G., & Ramamurthy, K. (1995). The Role of Inter-organizational and
Organizational Factors on the Decision Mode for Adoption of Inter-organizational
Systems. Decision Sciences, 26(3), 303-336.
Seyal, A. H., & Rahman, M. N. A. (2003). A Preliminary Investigation of E-Commerce
Adoption in Small & Medium Enterprises in Brunei. Journal of Global Information
Technology Management, 6(2), 6-26.
Yap, C., Soh, C., & Rama, K. (1992). Information systems success factors in small business.
Omega International Journal of Management Science, 20(5-6), 597-609.
8