Approaches to Information Systems Strategy in small and medium sized businesses. An Analysis

Term Paper, 2014

19 Pages




1. Introduction

2. Significance of Researching the Role of Information Systems in SME’s
2.1 Defining Small and Medium Sized Businesses
2.2 Defining Information Systems
2.3 Information Systems Investment in Small and Medium Sized Businesses

3. Information Systems Strategy in Small and Medium Sized Businesses
3.1 Character of Information Systems Strategy
3.2 Information Systems Strategy in Small and Medium Sized Businesses
3.3 Analysing Contemporary Tools

4. Analysing Multi-Paradigm Approach to Information Systems Strategy in SME’s

5. Analysis of a Refined Framework for Information Systems Strategy in SME’s
5.1 Business Context
5.2 Business Process
5.3 Strategic Content

6. Conclusion

7. References

Analyzing Approaches to Information Systems Strategy in Small and Medium sized Businesses

Faculty of Information Technology, Strathmore University, Nairobi, Kenya

Abstract. The Research area of information systems strategy in small and medium sized businesses is intriguing but surprisingly under researched. Small and medium sized businesses are a significant part of a country’s economy therefore it is important for researchers and decision makers of small enterprises to initiate and establish a more appropriate understanding of information systems strategy, which can be an important contributing factor in the growth of small and medium sized businesses. This paper reviews the existing literature available on approaches towards information systems strategy in small and medium sized businesses. The paper considers information as a resource which is strategic in nature. It asserts that Information systems Strategy proposals in small and medium sized businesses should give as much importance to issues regarding organizational changes as implementation of information systems.

Keywords: Information Systems, Small and Medium sized Businesses, Information Systems Strategy

1. Introduction

The importance and significance of information systems strategies have been recognized (Blili Raymond, 1993). Based on their experiences gained from larger businesses Blili & Raymond offers a structure or method for the development of information system strategies in small and medium sized businesses. They acknowledge that SME’s have attributes that have influences on their capabilities to develop an information system strategy. They also concentrate on using information technology in SME’s in order to develop an information system strategy. On the other hand Hagmann & McCahon argues that SME’s for a number of reasons don’t develop information systems strategies.

Paper briefly introduces importance of researching information systems within the context of small and medium sized businesses. SME’s are defined and shown to differ in size, scale and scope. A brief section on information systems and information systems investment in SME’s is given followed by the analysis of important issues that are likely to have an effect on the development of information system strategies in small and medium sized businesses (SME’s). Paper also critically analyzes tools and techniques used in the development of information system strategies in small and medium sized businesses (SME’s).The aim of the author is to present existing work done on information systems strategy in SME’s which can help future researchers to develop new approaches to IS strategy for SME’s.

2. Significance of Researching the Role of Information Systems in SME’s

According to Levy & powell (2005) Information is a strategic resource for organization, especially in relation to improving and enhancing competitive advantage, collaborations and partnerships that are strategic in nature both in local and global context. A large amount of research on recognizing strategic opportunities has focused on large businesses with restricted research in SME’s. As more SME’s are investing in information systems due to customer demands, there is a need for research into strategic information systems in SME’s. Easy availability and accessibility of information technology is also pushing SME’s to make investments in information systems primarily for the purpose of managing and supporting growth. (Levy and Powell, 2005:43)

Previous research in information systems and SME’s has indicated the difficult and tricky nature of information systems investment for these organizations (Hagmann and McCahon 1993, Thong 2001). A better interpretation of information systems role in SME’s can be helpful in enhancing the capacities of SME’s to make beneficial and informed investments in information systems to accelerate growth.

2.1 Defining Small and Medium Sized Businesses

Though there are various definitions for SME’s, the one that is more practical in management research context is the number of employees. The justification for this is the growing formality in the structure of management as the organization expands (Burns 2001, Storey 1994). Micro business is defined as an organization with fewer than 10 employees. Small business as an organization with employees between 10 and 49 and medium sized organizations with employees between 50 and 249. (SBS 2003)

SME’s differ in shape and size. They are often visualized as organizations which are adaptive and inventive in nature, and are able to react promptly to the demand of their customers. Owner or the manager is considered to be in the center, maintaining the power to make decisions. Burns (2001). One of the important issues that make SME’s distinct is their lack of control in market as prices are generally decided by the customers. (Storey and Sykes 1996) SME’s are price takers.

SME’s outlook towards risks and skepticism may result in a short term view on strategy, concentrating primarily on prevailing operational proceedings, acting diplomatically or tactically rather than strategically. SME’s are also more susceptible to failure than large businesses because of capital constraints (Storey 1994, Bianchi, 2002). Growth of SME’s are irregular with some SME’s taking upward trajectory, but most are contended to acquire sufficient growth which permits them to maintain and keep control (Morrison et al., 2003). Other kinds of SME’s are those which do not formulate growth, where basis for the business is provided by life style opportunities. Gray (2002)

It can be said that SME’s are diverse in nature with distinct drivers dependent on their strategic targets. In most SME research this diversity is more often not taken into consideration.

2.2 Defining Information Systems

System: According to Merriam-Webster dictionary “a system is a set of interacting components forming a united whole or a set of elements and relationships which are distinct from the relationships of the sets or its elements to other elements or sets”.

Cambridge dictionary of philosophy describes systems as “the transdisciplinary study of the abstract organization of phenomena independent of their substance, type or temporal set of existence. It investigates both the principles common to all complex entities and the models which can be used to describe them”.

Information Systems: Denning(1999) describes information systems as the study of networks of hardware and software that are used by people and organizations to collect, filter, process and distribute data.

By uniting the definitions of systems and information systems it can be said that “Information system is a network of hardware, software and data transfer devices that gather and stock data and is capable of recovering and offering data in a form that is readable by humans.”

Tarantino(2008) describes information systems as part of an organization’s wider activities that are joined with the domain known as governance, risk and compliance and is mainly interested in the proof of an organization’s activities along with the alleviation of risk that may be associated with such proof.

According to Gaillour(1999) an information system is only effective in achieving the goals of increased quality and low costs if the organization redesigns its current workflows and practices. Thus a very user friendly system needs to be created to alleviate the risk of user dissatisfaction towards the new system.

The emergence of computer based information system has changed the world in the sense that both large and small systems have embraced new methods by the usage of private computers, in order to accomplish various roles regarding information production, hence computerizing the documentation of information and data to permit easy handling of input process and the output which brings us to the present world of information systems. Jantz( 2001)

Martin(1976) argues that data within an organization is increasingly being considered as a primary source required to manage the organization. As with other primary resources specialist management and data organizing are required. The effective use of planning, prediction and other functions are gaining paramount importance in a computerized environment and it will have a major impression on the development and survival of organizations. The presence of a computer based information system can greatly enhance the decision making, effectiveness and efficiency of an organization.

Types of Information Systems

- Management Information System (MIS)
- Decision support system (DSS)
- Executive Information System (EIS)
- Transaction Processing System (TPS)

Management Information System: Management information system (MIS) offers information that is needed by the corporations for effective and efficient management. Management information systems are different in the sense that they are used for the analysis and facilitation of tasks and activities that are strategic and operational in nature. In the academic sense the term is normally used to direct attention to how individual; groups and corporations design, implement, manage and utilize systems to generate information for the improvement, effectiveness and efficiency of decision making including decision support systems, support systems, expert systems and executive support systems. O’Brian(1999)

Decision Support Systems: Decision support system (DSS) is a computer based information system which helps in an organizations decision making tasks. DSS gives services to management, operations and planning level of organizations and support decision making which may be in a state of constant change and may not be identified ahead of time. DSS are either completely computerized, human or an amalgam of both. Academics have comprehended DSS as a tool to help decision making. Users of DSS see it as a tool to simplify processes of organizations. Keen(1980)

Sprague(1980) has extended the definition of DSS by including any system in DSS that may help the process of decision making. Sprague defines DSS as:

- DSS focuses on those problems faced by top management that are not well structured and not specified clearly.
- DSS attempts a combination of analytical techniques with conventional data access and recovery functions.
- DSS aims on traits that make its usage easy for people who have basic knowledge of computers.
- DSS stresses on being suitable and flexible to accommodate changes in environment and decision making approach of users.

Executive Information Systems: Power(2002) describes EIS as a management system that simplifies and helps decision making requirements of senior executives. It offers easy accessibility to internal and external information that is appropriate to objectives and aims of an organization. ESS is regarded as a specialized form of DSS.

Transaction processing System: System that executes and record routine transactions important for businesses. TPS are basically developed for the purpose of accomplishing daily transactions effectively and precisely.

2.3 Information Systems Investment in Small and Medium Sized Businesses

Like large businesses SME’s also require business intellect. The perspective of SME’s towards information systems is that they envision long durability for the system, often choosing to rectify current system rather than re-investing. (Cragg and King 1992). Restricted capital also discourages new investments in information systems. ( Proudlock, 1998). In SME’s nature of information systems are inclined towards the operational aspects, concentrating on order processing, invoices and some restricted analysis of finances. (Foong 1999, Thong 2001). There is no significant investment in information systems that can give the knowledge for the purpose of enhancing competitiveness. (Blili and Raymond 1993)

Information Systems staff is owned by very few SME’s. A large number of SME’s choose to recruit local consultants on a part time basis in order to retain and sustain information systems. (Craig and Zinatelli, 1995) It is a fact that owner of an SME is a potent force behind information systems investment decisions. In some medium sized businesses there can be some sort of management delegation but owner is still the most powerful decision maker for cash investments in information systems. (Thong 2001, Caldeira and Ward 2002). In cases where owner decides to invest in information systems, there is an inclination towards investing in systems that can fulfil the current requirements of the organization. Thong(2001)

Identifying the critical role of SME’s which constitutes 95% of all businesses and 60-70% of all employees (OECD 2004) governments on a global level have made investments in schemes to encourage internet technologies as a way for encouraging and enhancing competitiveness. Even though such schemes are providing assistance and low cost access to technologies, SME’s are still circumspect and wary about the worth of investing in e-business, as they perceive restricted benefits. (Keindl 2000, Lawson et al., 2003)

3. Information Systems Strategy in Small and Medium Sized Businesses

3.1 Character of Information Systems Strategy

An information systems strategy explains that an information system required by a business has to be competitive (Earl 1996, Galliers 1991). This can vary from systems that concentrate inwards for the purpose of enhancing usefulness and productivity to those systems that are outward focused concentrating on competitiveness (Earl 1996, Sinclair 1986).


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Approaches to Information Systems Strategy in small and medium sized businesses. An Analysis
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Ali Mirza (Author), 2014, Approaches to Information Systems Strategy in small and medium sized businesses. An Analysis, Munich, GRIN Verlag,


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