Topic: Technologies and Innovation for SMEs.

Author Name: Prasanna DhanasekaranPosition: StudentContact Details: prasanna.d@ifimbschool.com Phone: 09590744008

Submission Type: Completed work Paper

Topic: Technologies and Innovation for SMEs.

Abstract

This paper probes the need of technologies and innovation in SMEs. The issues they faced because of not implementing new technologies and the growth of large SMEs is majorly because of innovation. Information and communication technology has played a key role in driving innovation and success for SMEs. The future of so many countries depends upon the success of SMEs as they play a major role in their economy. Considering the technology area, broad band access was a key success, but in many regions particularly in rural areas they do not have a significant coverage. This was the main reason why the people they were not able to implement e-Banking, e-Invoice etc; and this resulted in loss of time and orders. There is clear evidence that open innovation practices were followed more in larger SMEs when compared to smaller SMEs. So in this paper we will also see how the larger SMEs growth has prospered compared to the smaller ones because of Open innovation practices and reasons for adapting those practices. Larger SMEs adapted this new innovation practices more quickly than smaller ones. And few SMEs faced some barriers, viz administrative burdens, financing and knowledge transfer problem.

Content1. Introduction2. Growth of SMEs3. Technology 3.1. e-Business 3.2. e-Invoice 3.3. Software as a Service (Saas)4. Innovation 4.1. Open innovation 5. Issues faced by SMEs and Solution 6. Barriers for Innovation and solution 7. Benefits of Technology 8. Benefits of Innovation. 9. ERP on Cloud Computing Trend Changing Technology 9.1. What is cloud computing? 9.2. Benefits of Cloud computing ERP for SMEs 10. Conclusion 11. Bibliography

IntroductionSmall and Medium Enterprises have played an important role in the growth of domestic growth economy. SMEs occupy the important and strategic place in economic growth and equitable development in all countries. In the Asia pacific region around 90 percent of all businesses were covered by SMEs and 60 percent of employees are working in SMEs. SMEs are mainly focused on process and not on IT. From their point of view IT is an afterthought. SMEs IT limitation was Word processor, Spreadsheet, Email and a Website. They dont have the dedicated IT department also.Information and Communication Technology (ICT) played a major role in so many industries in their company revenue, performance, and work environment. Technology is growing very rapidly, in this scenario we will see how SMEs are adapting to change in technology and how success their because of implementing new technology and what are the benefits they achieve. On the other many SMEs are still finding difficult in using technologies like e-Business, e-Invoice and so on. In the later stage we will see the reasons why SMEs not able to adapt these technologies in their environment and issues they faced.Many smaller companies are successful because of one important success factor called innovation. SMEs all around the world companys start innovating and getting their revenues increased. Enterprises started adapting to a new type of innovation called open innovation, later stage of this paper we will see how SMEs using open innovation and benefits they got because of open innovation. And in later stage of this paper we will see the issues faced by SMEs because of not using Technology and Innovation in their organization.Types of Enterprises:

Growth of SMEsSMEs made a considerable impact in the local competitiveness. In developed countries, small and medium enterprises typically accounted for 99 percent or more on all firms; in developing countries it is more difficult to tell, because the statistics are unreliable or simply not available. They typical provide around 50% productive employment (UK: 45 %, EU: 66%, Japan: 72%, Developing countries: 50-70%). In 2012 SMEs will contribute 22 percent in Indias GDP. SMEs are the crucial part in supply chain - providing materials, sub assemblies and services to larger business.

Technology:Technology has changed lot over in the past decade. Every sector is moving towards the future technology. Because of the new technology the SMEs can use tools like e-Business, e-Invoice, Software as a service (Saas), and so on. The success of large enterprises is they adapt to new technology very quickly. But in case of SMEs they have a financial constraint because of that they cant easily change to new technology.But if they adopt some basic technology in their enterprises they can have the following benefits:-1. Production or Service time will be less.2. Can finish the work order on time.3. Efficiency will increase.4. Orders wont be missed.5. Revenue will increase.The above are the few benefits as well the core things which are required for any organization to succeed in the market. Lets talk about the few tools which are very necessary for SMEs in the current scenario.

E-Business:E-Business is the integration of the internet and related Information and communication Technologys (ICTs) into the business organization. E-Business has helped the way business done in manufacturing and service sector. It has two stages:-1. E-mail To have internal communication.2. Website For geographical reach.Is adopting new business solution worth the effort? Are the short term difficulties involved in making the transition to e-Business worth the effort?In virtual all cases, Yes. It is like any other investment in your business. Some businesses look at the cost upgrading production equipment or renovating the office or retail space or simply not worth the cost. They decide that future is uncertain and risk moving ahead. In this sense, choosing to stay abreast of technological changes is a business necessity. And these days, deciding to get involved with e-Business is the most important technological decision many current businesses will ever make.

E-Invoice:E-Invoice is an electronic transfer of billing and payment information via internet. Companies having so many advantage of having E-Invoice fast transfer and easy storage in a central location for fast access.Software as a Service (SaaS):Software as a service is a internet based application, in which all software will be delivered as a service over the internet. Instead of installing and maintaining the software saas can be access from internet with very less hardware or software requirements. It is also called as software on demand; web based software or hosted software.Innovation:SMEs consider innovation as a major factor in their companys performance and it gives them the competitive advantage over the other in their markets. SMEs have to keep on innovating on their product, working style, manufacturing etc. For them it is easy because they have a smaller group of people and process and it is flexible to change their working environment when compared to larger companies.

3 phases of innovation processInnovation usually does not take place in a given static environment. They are rather a result of a dynamic process of a organization that involves several internal and external factors.Open Innovation:Recently, growing attention has been devoted to the concept of Open Innovation, both in academia as well as in practise. Chesbrough who coined the term Open Innovation and how companies shifted from so called closed innovation to a open way of innovation. Traditionally new business development processes and the marketing of new products took place within the firm boundaries (Figure 1)

(Figure 1 Closed Innovation)However several factors have led the erosion of closed innovation. First of all the mobility and availability of higher knowledge people has increased over the years. As a result large amount of knowledge was there outside the research laboratories in larger companies. In addition to that when employee go out of organization, they will take the knowledge along with them, result in knowledge flow between firms. Second, the availability of ventured capital has increased significantly recently, which makes it possible for good ideas and technologies to be further developed outside the firm. Besides, the possibilities to further develop ideas and technologies outside the firms.As a result, companies started looking for other ways for increase the efficiency and effectiveness of innovating processes. For instance through active search for new technologies and ideas outside the firm, but also through suppliers and competitors in order to create customer value. Another important aspect is the further development or out-licensing of ideas and technologies that do not fit the strategy of the company.Open innovation (Figure 2) can be described as: combining internal and external ideas as well as internal and external paths to market to advance the development of new technologies.

(Figure 2 Open innovation)

Issues faced by SMEs and Solutions:SMEs faced so many issues because of not adapting to the technology change in the market and not practising open innovation concept. So many medium enterprise used technology and innovation and achieved significant growth in their organization, but some small enterprise because of financial constraints they was not able to implement this technology in their organization. Major issues they faced were loss of orders, poor management of materials, time consumption, lack of IT support, Lack of finance, Lack of marketing assistance, Lack of technology and innovation.In case, of manufacturing sector people in the production department do not about the quantity of raw materials available in the warehouse. So each time physical they have to go and see the level of stock in the warehouse and make a note of it. If the particular organization is using any tools like ERP in their company easily they understand the availability of materials. Adding to it all the data will be decentralised each and every department will working individually, so if you want any information they have to search department wise to get the data required. This is a tough job if the data in an organization keeps increasing. The solution for the above issue will be implementing ERP package in the organization. But on the other hand ERP package are too costly which is not affordable to the SMEs. And ERP maker also will have particular criteria to sell their package to the customers; they will see the companys turnover. All SMEs wont have the turnover the ERP seller asking for. The best solution for this issues is to go for ERP on cloud computing. All the software will be available over the network as a service (SaaS). We already talked about this in the introduction of technology.Common issues all the SMEs facing are the in the financial side. Each time they made any transfer is all made through banks (like cheques, Draft...) so it will long time to get processed in the bank side. Because of that the company has to wait till the transaction is done and then they will start the work. Due to this, time for doing a job will increase than usual time. This will result in the loss of new job from customers. To this issue they can go for E-commerce. E-commerce is similar to do doing business online. Doing there transaction online, so that as soon the money transferred by customers they will know and they can start their work and companies start looking for the next order. Some of the common issue SMEs face was the lack of the following:-1. IT support2. Finance support3. Uneven IT Awareness4. IT literacy.Talking the IT support, outside the organization there are so many excellent IT professional attracted by larger companies and MNCs. It is very difficult to attract the IT people in to SMEs because of less salary, and its tough to retain them in the organization because of the attraction of the salary from MNCs. More over good professional are expensive and its not affordable for the SMEs. All the SMEs, financial resources are limited. This often makes the company to select to choose the options which is cheap and affordable to them, without knowing the hidden cost in it. Later on the hidden cost will keep on increasing and it will be burden for them. This will make them to stop the implementation at the middle and it will create a financial crisis at the end which will make them to stop the particular project once for all. Uneven IT awareness is a major issue in smaller companies. People who are working in the company from the day they started and they are not aware of the power of IT in an organization. As the time progress new managers will come and join the company and old managers will be there without the IT experience, when this people are working together there will lot of conflict between them because of the uneven IT awareness between the old and new managers. Coming to the IT literacy many people in the company will be started working group up from the start-up for many years. Some of them will be holding the higher position in the manager. These employees may not be an IT literate and they will resistance in change in process, because they dont want to learn anything new and they are comfortable with old jobs. This will make the organization to work with all the old process.Barriers for innovation and Solutions:Innovation has always been a hallmark of small and medium enterprises. SMEs that integrate innovation can reap significant benefits. Studies conducted by US Department of Commerce, revealed that since World War II, 50% of all innovations and 95% of radical innovations, have come from new and smaller firms. Coming to the barriers they faced for implementing innovation in an organization. There are three factors which is barriers for innovation in small and medium enterprises.1. Economic factors2. Internal Factors3. External Factors.Economic factor consists of cost in which the innovation has to be done. Major issue they faced was the lack of finance; this was the issue we talked about in the issue in small and medium enterprises. Because of this SMEs cant implement any new ideas in their process or product. Another important point is the risk involved in the innovation process, if the process went wrong or if the budget was exceeded than calculated they have to stop the process. This is will lead the SMEs to a financial crisis. Each and every innovation required some amount of change in the working environment or in the product side, for this change they required capital. Because of huge capital involved it is not easy to implement the innovation process.Internal factor is also a major barrier in the SMEs. The barrier are organizational rigidities, people in the company are not willing for a change in the working process. The reason can be many. They used to do the old work and comfortable in doing it. Employees are not ready to learn new things and awareness of new technology was less in SMEs. They think that this will make our job much more difficult. Skilled labours were the key, irrespective of all sectors. Because of lack of skilled labours in the SMEs the new technology cant be implemented and even though if its implemented no labour have proper knowledge about the particular innovation. So before implementing labours has to be properly trained. And further barriers will be lack of information about the technology and market. Without knowing both of the above mentioned barriers, companies create an innovative process or product.External factors like government regulations, this will vary country to country. In some countries regulation will be very high so that it will be highly impossible for SMEs to do innovation in their companies. So the government has to consider this and they have to change the rules and regulation in order the SMEs can work freely and innovate. As in many countries SMEs have a major share in economic growth, government can consider this and formulate the regulations. Customer responses, if the product was released and there was no response from the customer, companies start thinking about stop innovating new product.Benefits of Technology:SMEs have gradually recognised the impact of technology, especially communication technology such as computer, internet, email, e-commerce and their application on their business. ICT and e-commerce offers benefits for a wide range of business processes. At the medium level it applications can make communication within the firm faster and the make the management of the firms more efficient. Seamless transformation of through shared electronic files and shared computer increase the efficiency of the process such as documentation, data processing and other back-office functions. E-commerce has the great potential for reducing the transaction cost and increasing the speed and reliability of the transactions. They can also reduce inefficiencies resulting from lack of co-ordination between firms in the value chain. Internet based B2B interaction and real time communication can reduce information asymmetries between buyer and suppliers and build closer relationship among them.E-Business can develop a more cost-effective Communication and Marketing strategy The most obvious advantage of upgrading to e-Business is that it gives you a vital web presence. In a n upgraded e- Business environment company web site becomes the focal point of your communications and marketing strategy. And in an era when a increasingly large number of people are using the web as their first source of produce and service information, being there 24/7 is extremely important.You can reach new markets worldwide the internet offers exciting ways of reaching new markets that could only be dreamed of in the past. There are methods of promoting your products online that allow you to precisely target the customers you are after whether they are in your town or in the other side of the world. You can cut advertising and marketing costs online advertising is not only more efficient but it is often less expensive than traditional advertising. After sales training expenses can also be reduce by utilizing online seminars, training, videos and tutorials. You can streamline the ordering process by taking orders online Implementing an online ordering system allows you to eliminate manual paper work or telephone order taking, It also offers the possibility if integrating your sales order system with order fulfilment and delivery so customers can be up to speed on the progress of their orders at all times. You can cut communications and telephone costs while the cost of voice communications using long distance telephone services have been coming down rapidly over the last few years, switching to a e-Business model offers the possibility of totally eliminating many of these costs. Of course there is traditional email. But beyond that, there are systems like Live help where customers can chat live with support or sales staff. And the most recent development is VoIP (Voice over Internet) which promises to completely revolutionize telephone service

E-Invoice benefits:-Reduced costs no postage costs and reduced staff time re-keying data. Real-time data delivery quicker insight to incoming invoices enabling you to pay suppliers on time.Eliminates errors and bottlenecks it can even deal automatically with issues such as missing purchase order numbers.Multi-format acceptance it can process invoices created in a number of different data formats, including EDI, XML and CSV.Environmental responsibility e-invoicing could help reduce your carbon footprint and the impact of your business on the environment.Security the system uses digital signatures, allowing you to guarantee that a file has not changed since it was sent, and proving who actually sent it.Accurate management information gives you a true snapshot of your incoming documents across multiple finance systems, which you can use to plan cash-flow strategies.Benefits of Innovation:In this environment, competiveness at the company level depends crucially on the speed with which new products can be brought to the market place and new cost-saving improvements made. Similarly, the creation of wealth and employment depends to a very large extent on the speed with which scientific and technological breakthroughs are converted into practical and the attractive solutions. Innovation the ability to reap the rewards of scientific achievement requires much more than ability to turn a new idea into a working product. Efficient flows of technology are not enough ready supplies of finance and of business skills area also needed. There must be accessible protection for intellectual property, and adequate incentives for entrepreneurial drive. In short, what is needed is a dynamic, self sustaining culture of innovationFollowing are the benefits in which SMEs can have because of innovation. If SMEs, innovate a new product in the market, they will be the first in the market to produce the product. Because of the new product they can keep the premium prices for the new product, so that they can get the return on investment very early than usual. And one more major benefits of innovation is the company launching the new product can easily capture the market share, because of no competitors. This will increase the shareholder return as well. Coming to the benefits of open innovation, company practising open innovation there product will go to market to the early when compared to company not practising open innovation. Open innovation will reduce the risk on innovation, because the innovation was not done only from inside source from outside source also help in the innovation process. Guessing of what the market wants is having less risk. Open innovation will have a community it will they what they want from them. All community will be integrated, so all the idea will integrate so it is easy for company to have a look at it. Ideas for innovation will come from anywhere from the world from anyone because of the integration. Some of the best ideas will reside outside the organization so we can get the ideas from outside source. Finally the cost for setting the research and development will reduce as company will get ideas from outside also.ERP on Cloud Computing Trend Changing Technology:The ERP and cloud computing landscape has been changing dramatically over the last decade. The cloud computing will be the most economical way of working for those small and medium enterprises who cannot afford to buy expensive hardware or software. Maintenance costs are also zero since nothing is managed or maintained in house. ERP Cloud Computing applications have been getting tremendous following and demand for companies battling the formidable business challenges of the day which include revenue shortfalls and uncertainty, increasing competition, higher customer expectations and turnover, and changing market dynamics.Because of the tightening budgets IT manager are looking for more affordable, high powered enterprise systems and ERP software solutions such as the web based ERP applications. IT managers in many cases are finding cloud computing applications easier to use and deploy thus further reducing the time and cost of meeting specific business needs with robust, on demand ERP cloud computing technologies.In a nutshell, the key benefits delivered by cloud computing ERP applications are a faster time to value, minimal to zero capital outlays, minimal operational and maintenance costs, fewer required IT resources and an easier implementation and integration. These significant benefits are driving CEOs, CIOs and CFOs to reconsider the way they are doing business to not only save costs but to stay competitive in the marketplace.What is cloud computing?Cloud computing comes into focus only when you think about what IT always needs: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. Cloud computing encompasses any subscription-based or pay-per-use service that, in real time over the internet, extends IT existing capabilities.Cloud computing is at an early stage, with a motley crew of providers large and small delivering a slew of cloud-based services, from full blown applications to storage services to spam filtering. Below is the example of how the architecture of the typical ERP on cloud computing will look like.

Source: bscaler.comBenefits of Cloud computing ERP for SMEs:SMEs who consider the latest in robust applications for business process management, business intelligence, supply-chain management lean manufacturing, and customer management relationship may find on the cloud computing as a more cost-effective way to acquire the same results on premise software would provide without the SME having to invest in multiple system on site.Instead companies can eliminate the need for in-house frameworks and use virtual hosted and managed services. Most MSE companies do not have an excessively large budget t acquire multiple software solutions. On the cloud computing can help the SME attain the advantageous benefits of technology without needing to spend in excess of their budgets for the heavy technology investment. This approach provides the SME a better opportunity to obtain a competitive advantage through technology, and potentially makes these benefits more in reach. The reason being services residing on the cloud reduces or eliminates many of the overhead expenses associated with software solutions. The benefit is these overhead costs can be sidestepped to let the provider handle those aspects of the applications. As a result, the SME can focus completely on the benefits without having to deal with the problem of maintenance.Meets Organizational NeedsFor the SME on the cloud computing can be the ideal solution to best meet organizational needs for efficiency and accuracy of data because fewer resources are needed to run on each individual computer. Other cost savings can come in the form of an eliminated need to purchase multiple software licenses and maintain multiple workstations with upgrades, or any other adjustments needing to be made. Instead SMEs may want to consider weighing out the pros and cons of using an outsourced web-based, cloud computing solutions because this solution may remove a lot of the expense associated with upgrading systems to be more modern and efficient.Security and Privacy IssuesSecurity and privacy area often two large concerns for SMEs who are considering using outsource or hosted and managed service. There are pros and cons associated with this kind of decision. Trust is an important part of the equation because essentially businesses have to be confident the company theyve contracted with will be able to maintain security and keep data safe. One thing to consider is that statistics suggest many breaches are caused by human error and are internal nature. By migrating processes on the cloud computing SMEs who may not have a lot of manpower in their IT Departments can increase the level of security by leaving this process to cloud computing with experts who are knowledgeable in security and are able to maintain integrity of data. This can decrease the margin of human error. However, central to this decision is trust. An SME must be able to trust the vendor to uphold their end of the service.Provides a Collaborative EnvironmentIn addition, on the cloud computing can increase efficiency and productivity through the ability to work in a collaborative environment. While it is true SMEs can get a collaborative environment through other solutions, the benefit to cloud computing is the concept of using software as a service (SaaS). Through working in this environment, the SME is able to ensure compatibility, avoid e-mail attachments and other potentially insecure methods of sharing data because all relevant parties can work simultaneously in the web environment structured within the cloud and have access to important business software solution applications, documents, databases and spreadsheets. In addition, decision makers can view up to the minute data as changes as they are being made and this helps make better choices when an assessment needs to done. On the cloud computing can offer many benefits to small and medium enterprises; however it is not a one size fits all kind of solution. Any business should weigh the pros and cons and decide whether or not changing their processes to web based applications is the best solution for them.Conclusion:SMEs play an important role in a country economic, job creation. The key to a successful operation in the years ahead for the SMEs is recognition of the world as a global market and the imperative for systems integration. Changes in the marketplace as well as in technology and innovation will have a great impact on SMEs operations. The manufacturing and servicing strategy will be based on an evaluation of organizational needs, continuous measuring of company strengths in design, manufacturing, marketing, finance, and human resources; and a persisting reinforcement of participative management style. SMEs in general face several challenges in the near future. Among them, exploiting their existing opportunities to the fullest but this is not enough, existing opportunities will eventually be exhausted, and todays success is no guarantee for tomorrows. Thus a second challenge involves generating entirely new opportunities.

In this paper we discussed about the technology and innovation which SMEs can implement in this organization. Future of SMEs depends upon how they use the new technology wisely. Because of implementing the new technology they can have the added advantage over the competitors. We also discussed about the barriers they faced for implementing technology, financially government has to change their policy so that they stay alive in the market. By seeing all the benefits of technology SMEs can think of using all latest technology to capture the market. As SMEs are the backbone of all countries, government can consider on their policy that would encourage the SMEs to do more productive work.SMEs play an increasingly important role in innovation, but are nevertheless left out of the research on open innovation, which has been analyzed mainly within the context of large, technology firms (Chesbrough, 2003). In this paper we have addressed this gap by analysing open innovation practices of SMEs. We identified several motives for firms to start open innovation practise and barriers that SMEs managers encounter when they open up their innovation process. Open innovation is mainly motivated by market related targets; these are the most important driver for firms to engage in venturing, to participate in other firms and to involve user in the innovation process. Most SMEs use a broad set of methods to meet the ever changing customer demand and to stay competitive. In addition, many barriers for open innovation in SMEs are related to corporate organization and culture, no matter which type of open innovation practise is pursued.

Then we talked about cloud computing and SMEs, cloud computing is the future for SMEs as it will give the high end experience with less cost. Few years back ERP was a luxurious thing for the SMEs but now because of cloud computing on ERP, SMEs can use ERP in their organization and can have the benefits of ERP. So SMEs can be a active part in the countrys GDP by using the latest technology and by practising open innovation and the future cloud computing

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