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A CRITICAL ANALYSIS OF INFORMATION PROCESSING SYSTEM FOR SMALL BUSINESS ENTERPRISE
CHAPTER ONE
INTRODUCTION
1.1 B Background of the study
Traditionally, the success of Information Systems (IS) has been studied in the context of large organisations with a focus on systems that have been developed inhouse. Most businesses, however, are small and medium enterprises (SMEs), and they have increasingly adopted packaged application software to meet their information processing requirements. Furthermore, due to the small number of employees, SMEs depend on outside support for the success of their IS activities. Studies in the small/medium packaged systems domain are now emerging. For example, Gray ( 1991) investigated the incongruences between accounting professionals when assisting small organisations in the selection of Accounting Information Systems (AIS). Ponemon and Nagoda (1990) investigated the perceptions of team members during packaged AIS implementation.
Our study extends this research by investigating user practices and design features of installed small/medium packaged accounting software. At the commencement of our research we believed, as did Nazem (1990), “that some sense of maturity with respect to the use of computers is emerging in small businesses” (p. 100) and that it is time to evaluate the use and design of packages that have been operating for a while. We chose public accountants acting as advisors to SMEs to perform this evaluation. The study’s primary aim was to provide feedback of contemporary adequate and inadequate user practices and design features to small/medium accounting package users and developers.
For the present study, three areas of IS research are particularly relevant. They are information systems success, the use and design of small/medium accounting packages, and public accountants involvement with packaged software.
The notion of information systems success
Interest in what constitutes the “success” of Information Systems has mainly focused on large computer systems. Typically, factor research is carried out which “deals with the influence of static organisational abstractions and technical system quality upon successful implementation.” (Cerveny and Sanders, 1986, p.
192) During the 1980s research focused on the criteria of system quality, information quality, use, user satisfaction, individual impact and organisational impact (DeLone and McLean, 1992). In recent years, IS success variables have included system impact on strategic direction, the integration of the IS plan with the corporate plan, the quality of information outputs, contribution to organisational performance, and the identification and integration of new technologies (Saunders and Jones, 1992).
Studies in the smaller systems area have found factors determining IS success to include consultant effectiveness, vendor support, IS experience, sufficiency of financial resources, CEO support, and user participation (Yap et al, 1992). Furthermore, there is evidence that Information Technology (IT) growth in small-firm computing is strongly motivated by the owner’s enthusiasm towards computing and inhibited by lack of IS knowledge, lack of managerial time, poor support, and limited financial resources (Cragg and King, 1993).
User practices and design features of accounting packages
Whilst computer hardware is becoming reliable and mature, the software industry remains volatile. This is a potential concern to SMEs who rely heavily on off-the-shelf rather than inhouse developed software, particularly for basic accounting applications (Nazeem, 1990). The opportunity for modification is usually limited in extent and to the time of implementation since in order to protect future sales the vendor rarely sells the source code for the program. “Therefore, with less opportunity to modify acquired software, the potential for failures may be heightened for smaller organizations.” (Gray, 1991, p. 19) Once prewritten application software is operational, SMEs may have to be satisfied with the design features of packages provided for them. Yet, Nazeem (1990) found that off-the-shelf software users in small businesses were satisfied with the flexibility of their systems and their ability to expand it. Opinions regarding performance and reliability of application software were also favourable. It appears therefore that packaged software can be flexible and, mostly through the setting of parameters, is capable of being configured to more closely suit the needs of users. Whereas design features are largely given, user practices are determined by the enterprise’s internal practices and preferences. Nazeem (1990) found that users of packaged software in small business were familiar with their systems and achieving competence, and appeared to be satisfied with the security offered by packages. Those that were concerned with security tended to develop their own inhouse IS. It appears that in small business particular importance is placed on the software attributes of performance and audit trail (Gray, 1991).
Potential support offered by public accountants
The 1980s provided SMEs with the opportunity to introduce low-cost computer hardware and packaged systems. The following years yielded “a picture of growth and stagnation in small-firm computing. While many firms had experienced growth in the number and type of IT applications, there had been little change with respect to the management of IT in small firms.” (Cragg and King, 1993, p. 57) The lack of internal expertise points to the need to use external support from vendors and consultants, including public accountants, to ensure the continued effectiveness of IS. Package suppliers appear to have recognised this by providing interface functions within packages that allow third parties to develop specialised modules to meet particular functional and industry requirements.
In Yap et al’s (1992) study, 53% of the small Singaporean businesses in the sample engaged consultants to assist in implementation and their support significantly affected information systems success. The contribution of consultants is dependent on the quality of the consultant. Clients in Yap et al’s (1992) study described an ineffective consultant as lacking specific experience, not considering future expansion, seeming unaware of actual user requirements, and ignoring specific aspects of the business. When consultants are involved in implementation they need to have agreement among themselves since it has been found that a strong relationship exists between incongruences within the implementation team and IS failures (Ponemon and Nagoda, 1990).
In Gray’s (1991) study a large number of accounting professionals had both user and advisor experiences. This led to the conclusion that in the small-organisation domain, “because of the widespread distribution of microcomputers, advisors may tend to be users of their own AIS. This may indicate that small AIS advisors will be more sensitive to the users’ needs than large AIS advisors.” (p 32) However, there are indications of a negative attitude by small firms towards consultants. A recent study found that small firms appear to have poor relationships with IT specialists and also show little desire for the situation to change (Cragg and King, 1993).
1.2 Statement of the problem
It is generally acknowledged that the IS success notion is difficult to operationalise. The key reason for this is that over time measures have changed to reflect first, changes in IT and second, differing expectations of the role of IS within organisations. Formal measurement frameworks that have emerged in recent years include the IS Success Model (Delone and McLean, 1992), the IS Function Performance Evaluation Model (Saunders and Jones, 1992) and the Goal/System Resource model (Sethi et al, 1993). The use of different measurement frameworks make comparisons between studies difficult, if not impossible, and render findings ambiguous and confounding. Sethi et al (1993) concluded that the literature has not yet build a critical mass of research in the area. Further developments and refinements of measures of IS performance are needed according to Saunders and Jones (1992) before IS success can be measured precisely.
1.3 Objectives of the study
1. To understand the importance of information processing in small and medium scale enterprises
2. To understand the challenges of information processing in small scale enterprises
2. To come up with solutions and improvements to the use of information processing in small scale businesses.
1.4 Research questions
1. What is the importance of information processing in small and medium scale enterprises?
2. What are the challenges of information processing in small scale enterprises?
1.5 Research hypothesis
H0: Information processing does not have a significant impact on the growth of small scale enterprises
H1: Information processing does not have a significant impact on the growth of small scale enterprises
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