Msci

The Use of Hosted Enterprise Applications by SMEs: A Dual Market and User Perspective

This deliberately dual perspective paper seeks to deepen

our understanding of the engagement of SMEs in hosted

enterprise applications in the UK. The emergence and

development of the ASP sector has attracted much interest

and highly optimistic forecasts for revenues. The paper

starts by considering ICT adoption by SMEs in general

before reviewing the provision of hosted enterprise

applications in the US and UK (market perspective). The

study is extended by qualitative empirical data collected by

semi-structured interviews with SME users of hosted

enterprise applications (user perspective) and subsequent

analysis in order to develop the key findings and

conclusions. From an SME user perspective the key

findings to emerge from the study include: i) confirmation

that ICT infrastructure was no longer a barrier to adoption,

ii) the pragmatic approach taken to security issues, iii) the

use of both multiple information systems and multiple

service providers, iv) the financial attractiveness of the

rental model and v) the intention to continue or extend the

use of hosted applications. It also highlights the

opportunity for gaining competitive advantage by using

hosted enterprise applications to reduce costs. There are

very few empirical studies of hosted applications which

take deliberately market and SME user perspectives - this

paper makes an important contribution in this emerging

field.

Introduction

The broad relationship between small and medium sized

enterprises (SMEs) and their use of information and

communication technologies (ICT) is problematic. On the

one hand the most recent survey by the EC E-Business

Watch, which tracks e-business engagement across 15

industry sectors throughout all EU member states,

concludes that access to ICT is no longer a barrier to ebusiness

uptake by small businesses with connectivity at 84

percent. Simple applications such as e-mail and Web

access are virtually ubiquitous (EC, 2005). On the other

hand, however, usage by SMEs of higher complexity

applications, such as integrated financial ledgers, supply

chain applications, and customer relationship management

(CRM) applications (DTI, 2004) and hosted applications

(Scottish Enterprise, 2002) is much lower. It is against this

background that our paper reports some current research,

which aims to deepen our understanding of the factors that

are relevant to the adoption of these higher complexity

applications by UK SMEs. This research is characterised in

three ways. Firstly, it focuses on hosted applications since

this mode of provision is growing and is potentially of

significant interest to SMEs. Secondly, it includes a market

perspective of the emerging service offerings targeted

specifically at SMEs in the US and to a limited extent in

the UK. And finally, the research incorporates an explicit

user perspective. This latter element is important and is

revisited later in the paper. The presentation and

interpretation of the research is structured into four main

sections. The paper starts by considering the nature of a

hosted applications environment and within this context

explores ICT adoption by SMEs in general, and the

importance of application complexity in particular. The

methodology and the empirical design are detailed in

section two. In the third section a market perspective on the

provision of hosted services is summarised. Finally, section

four brings together the data analysis and its interpretation

of the user perspective to produce the key findings and

conclusions. The dual market and user perspective which is

central to this study is important in increasing the relevance

of this research. Firstly, because whilst recognising the

provision of hosted enterprise applications is dominated by

US provision it establishes a link between the two UKbased

service providers who assisted in providing access to

SME users.