 | Issue: | Latin America 2009 |
| Article no.: | 1 | |
| Topic: | ICTs for micro, small and medium-sized enterprise competitiveness | |
| Author: | Maria del Rosario Guerra | |
| Title: | Minister | |
| Organisation: | Information and Communications Technologies of Colombia | |
| PDF size: | 180KB |
About author
María del Rosario Guerra is the Minister for Information and Communications Technologies of Colombia. The Minister’s long career in public service includes appointments as the Director-General of the Colombian Institute for the Development of Science and Technology – Colciencias; General Manager of the National Financial Fund for Development Projects – FONADE; Deputy Manager of the National Rehabilitation Plan – PNR (Presidency of Colombia) in terms of reintegration, peace process and strategies for overcoming the consequences of violence; and as a Consultant at the Department of Agricultural Studies of the Ministry of Planning. María del Rosario Guerra also served as the Vice Chancellor and Dean of the Faculty of Economics at Universidad del Rosario in Bogotá, Colombia and has lectured for the Economics Departments of top-level universities such as the Universidad de los Andes and the Universidad Nacional in Bogotá, Colombia. Ms Guerra has conducted research and published articles on topics linked to poverty, higher education, science, technology and innovation, and the development of the productive sector.
Article abstract
Columbia’s micro, small and medium-sized enterprises (MSMEs) create 81 per cent of the country’s jobs and 37 per cent of its GDP. MSMEs drive socioeconomic development in Columbia, but most have poor management skills and technological capabilities and make little use of ICTs to improve productivity. Columbia’s Ministry of Information and Communications Technologies has embarked upon an ambitious project to rapidly increase the use of ICTs by MSMEs to build the sector and the economy that has had significant success.
Full Article
Colombia’s productive sector is home to approximately 1.6 million firms. Micro, small and medium-sized enterprises (MSMEs from now onwards), according to domestic industry regulations, have less than 200 employees and assets of under US$7.5 million; they represent almost 99.9 per cent of the total productive units in the Colombian economy. Moreover, MSMEs account for 81 per cent of aggregate employment and contribute 37 per cent to Colombia’s GDP. In this context, MSMEs, performance is the main driver of socioeconomic development in our country. Accordingly, the Colombian Government, industry associations, entrepreneurs and academics, among others, have aligned their strategies over the last few years in order to pave the road of sustainability for this highly relevant segment of the aggregate economy. Following the recently issued public policy framework document entitled “National Policy towards the productive transformation and promotion of micro, small and medium sized enterprises”, most MSMEs operate in informal markets, show absence of associative strategies, do not diversify their businesses, face challenges with regards to their management skills and technological capabilities, have restricted access to financial markets, are risk averse regarding investment decisions, do not pursue innovation strategies, face generic barriers to adoption of information and communications technologies – ICTs – and do not play a relevant role in public procurement. This brief profile illustrates that MSMEs in Colombia are quite vulnerable to strong competitive strategies adopted by large enterprises in a global environment. However, as the global economy becomes increasingly reliant on information and communications technologies to receive, process, and send out information, small businesses have yet to reap the benefits evenly. In this respect, the most recent survey measuring indicators of access to and use of ICTs in Colombian enterprises (National Statistics Department – DANE, 2008) show that ICT connectivity (PCs and Internet) is very widespread in businesses of all sizes. When it comes to analyzing the use of these innovative technologies in terms of the size of the firm, as is the case with all technologies, small businesses are slower than large ones to adopt ICTs. Indeed, we find that although almost all medium and large enterprises use ICTs, only 13.2 per cent and 7.2 per cent of micro enterprises make use of Internet and PCs, respectively, in their productive processes. These numbers explain why on-line services, e-commerce and business-to-business (B2B) and business-to-consumer (B2C) relationships are not yet widely used by micro enterprises as mechanisms to improve their productivity. Another study performed by Colombia’s ICT industry association demonstrates that, overall, the average investment of a large company in these technologies amounted to more than US$1.0 million in 2006. In contrast, the review found that only US$400 per firm was invested in ICTs by MSMEs in our country. This study provides enough support for the Ministry of Information and Communications Technologies to embed ICT components into overall MSME policy in a comprehensive and focused manner so as to allow them to improve both productivity and competitiveness in a global environment. Empirical evidence from large firms proves that ICTs and e-business applications provide many benefits across a wide range of intra- and inter-firm business processes and transactions. More specifically, ICT applications improve information and knowledge management inside the firm and can reduce transaction costs and increase the speed and reliability of transactions. Therefore, the effective use of ICTs is an important driver of increased sales, optimized production and reduced operational costs through supply chain management. ICTs also improve both internal and external communications channels, foster human resource development through e-learning, promote research and innovation in both product lines and processes, allow firms to engage in the regional and global economic business networks by the development of outbound logistics, and encourage associative strategies both at local and regional levels. When analyzing the reasons MSME owners give for not adopting ICTs in their production processes – despite the strong evidence of their positive benefits, we find that their limited ICT literacy hinders the ability to choose the appropriate technology and understand the concrete benefits it can bring to their businesses. However, training MSME owners is not an objective that can be achieved in the short term, given the large number of people to be covered. Therefore, the Ministry of Information and Communications Technologies of Colombia has decided to challenge the barriers to ICT adoption in MSMEs in another way. We aim to improve the MSME owners’ perception of ICT providers. In fact, MSME proprietors are still unclear about the benefits of ICTs; they are confused by technical terms, have stereotypes, and think that e-business is better suited for large companies. Moreover, we have found that Colombian ICT providers employ rather complex language and use unknown acronyms and technical terms, most of them in a foreign language, which hinders MSME owners’ familiarity with ICTs, makes them sceptical of the concrete benefits ICTs can bring to their core businesses and consequently inhibit them from investing in these technologies. With these considerations in mind, the Ministry decided to include ICT providers as part of their measures to lower the barriers to adoption of these new technologies by MSMEs. Certainly, it is both easier and more efficient to train ICT providers to use language that MSME owners can understand than to train MSMEs to understand ICT providers. Since entrepreneurs always keep their cost in benefit relationship in mind, it is vital to the success of our ICT adoption strategy to make the returns of investments in ICTs clear to MSME owners by focusing on concrete benefits and realistic targets. For example, MSMEs are not interested in knowing if the software offered them is from open source or of it is proprietary. On the contrary, they want to know if the software under discussion is reasonably priced and if it will allow them to improve the profitability of their companies. Following these guidelines, the Ministry of Information and Communications Technologies developed an innovative strategy, which, since 2008, has allowed 42,000 MSMEs to adopt technological solutions, which directly improve their productivity and competitiveness. Many of these solutions correspond to a mixture of hardware, software, Internet connectivity, training sessions both for the adoption of the technology and the recognition of the impact of these applications on the productive chain of the firm. In this way, we have allowed ICT providers, which have been targeting strategic sectors of the economy driven by large companies, to explore the relatively unknown demands of MSMEs. In order to guarantee this aim, the Ministry has opened a call for tender targeted to ICT providers, who are given incentives to design proposals together with local public authorities, large companies, industry associations, and universities, among others, to benefit a pre-selected group of MSME owners who have expressed their explicit consent to participate in the strategy. The proposals are selected through an objective process; the criteria used include the expected socioeconomic impact and the amount of financing asked from the Ministry. In this way, the Government provides a healthy environment, which is fundamental for firms to thrive and benefit from ICTs. Once the group of MSMEs to be benefited by the strategy, MiPyme Digital, is selected, the leading firms – those successful in implementing ICTs in their productive chain, are used as examples and publicised by the mass media. In this way, the success of a given firm is multiplied by using it as an example for others. These firms are strong evidence; they demonstrate the key role ICTs play in improving productivity and competitiveness. With this advertising strategy, communication is easier and more effective since it reflects the true language of many other potential beneficiaries. To date, we have benefited MSMEs from several economic sectors, such as tourism services, manufacture of wearing apparel, footwear and leatherwork, agro industry, small merchants and storekeepers, among many others. The Ministry of Information and Communications Technologies has, up to now, financed 65 per cent of the total value of the solutions designed for the 42,000 MSMEs the programme has helped; the remainder has come from the private sector counterpart of these alliances. In just two years, the strategy has reached the 58 per cent of the geographic regions of our country, which reflects the effectiveness of our approach. In this short implementation period of less than two years, we are convinced that this innovative approach to foster access to, and use of, ICTs in MSMEs is going to develop into a market niche of ICTs for this important segment of the aggregate economy. Hence, we are improving the competitiveness of MSMEs while consolidating a dynamic market for ICT providers in Colombia. Finally, we are convinced that Information and Communications Technologies play an essential role in encouraging the growth of local MSMEs because they help them to integrate into the global supply chain, bid for outsourcing businesses, and increase productivity. In this way, we will also help alleviate poverty by increasing income levels and creating jobs. This is our commitment!
