Critical Review of Journal Article
Introduction
Benjamin Smith and Mark Simon in their article How Data Integration Systems Affect Strategic Decision Making in Small Firms in the Journal of Small Business Strategy put forward that small business need integrated data systems just like large firms. The integrated systems will help in information availability and making the correct strategic decision. They conducted a study on 97 accounting firms and their findings confirmed their hypothesis that integrated systems do help the firm access information and make better strategic decisions. They however found that greater investment in the integrated systems decreased information availability. The critical issue is the type of system the small business invested in more than the amount used.
Integrated systems would play an important role in a small business however a larger firm has to invest more as its information needs are more complex. I believe a small business should not invest very highly in integrated systems since its information needs are less complex.
Summary
The authors start with an exposition of the relevant literature on the topic and what other researchers have written on the issue. Information systems have had a significantly positive effect in large firms (Law and Ngai, 2007). It has helped them to access more information and to make the correct strategic decisions. The authors feel that inadequate research has been conducted on integrated systems in small firms. Over time, the cost of information systems has been reducing significantly enabling the small business to purchase these business tools. Now, more than ever, the rate of computerization of processes in small businesses is very high. There are however challenges in small business in that most of the personnel do not have the
The authors therefore carried out a study to understand the impact of integrated data systems on information availability and correctness of strategic decision making in small firms. The research had two hypotheses based on two research questions. The first research question investigated the effect of data integration systems on information availability in the small firms. The second research question was on the issue of impact of information availability on the strategic decision correctness. The hypotheses of the authors were, the data integration systems have a positive relationship to information availability in the small firm and information availability leads to more correct decisions.
The study focused on public accounting firms due to the demands they face from other firms on information technology consulting. The study focused on small firms that have 100 or less employees. The choice of firms was appropriate as this is the cut-off in the industry for small firms (Karagozoglu and Lindell, 2004).
The managing partners were selected to answer the researchers’ questionnaires. The authors give the reasons for this course of action and explain that they oversee the day to day operations of the firm and they are responsible for the firm’s decision making processes. The research measured the level at which data integration systems were present in the companies by analyzing the accessibility of data that has been processed once by multiple departments. On information availability, the respondents indicated the level of information available for decision making. Finally, the respondents were asked to indicate the extent to which they felt that their firms had made the correct strategic decision. Technology investment was measured by the firm’s costs in information technology in relation to the total expenses of the company.
Regression analysis was then used to measure the relationships between the different variables.
The findings indicate a positive relationship between data integrated systems, information availability and correctness of strategic decisions (Benjamin and Mark, 2009).
Critical Review
The research carried out by the authors is important as it adds to the body of knowledge on the importance of integrated systems in small firms. It contests views held previously by other scholars that only large firms require integrated data systems. There had been the point of view that in large firms, the employees have specialized roles that restricts or constrains the flow of information between them. The firm therefore needs an integrated data system. However, employees in small firms work in highly informal environments with employees having less specialized roles, information or communication flows smoothly and there is less need of a data integrated system. There has also been the view that small firm’s managers know fully the intimate details of their company and therefore do not require objective information. The study shows that the small managers usually operate on hunches and make wrong decisions that prove to be very costly to the firm. The small firms therefore need data integrated systems to provide them with objective data.
The authors contest these views as they feel that managers in small firms face more uncertain environments than the managers of large firms. It has been ascertained that the cognitive capacity of managers in the small business is more stretched in relation to their peers in large firms (Simon & Houghton, 2003). The small firms therefore require integrated data systems. They also feel that information technology costs form a significant portion of the firm’s
costs therefore the type of information system adopted should be the best for the firm and able to serve its intended purpose (Delveshio and Anselmi, 2006).
The research focused on accounting firms in the public sector. It would be even more interesting to have a study that focuses on firms of different industries to know the value of integrated systems in their operations. What is the need when it comes to integrated systems, when it comes to manufacturing, hospitality, construction and media small firms in comparison to large firms in the same industries? The focus on the industry chosen is a limitation that the authors note. They suggest that other industries can also be analyzed and further research should be conducted in companies that produce goods. I advocate that service industries should also be involved in further research in order to have a wholesome picture.
Secondly, the researchers designed questionnaires for the managing partners of the small companies. While I appreciate that they are the ones involved in strategic decision making, it would be interesting to have a research study that also involves a sample of the employees of the company in order to investigate the claim that since they have less specialized roles and informal relationships, integrated data systems would not bring much difference to the information that is available to them. It would be important to know their views on the impact of the data integrated system on their internal coordination, communication and change in the level of workload. Views from both the managers and the employees would give a more wholesome picture on the impact of the data integrated systems.
The measure is subjective as it relies on the perception of the manager. The researcher
should be interested in the measures that the managing partner is using to determine the correctness of the strategic decisions. The correctness of the strategic decision can be measured by the outcomes that contribute to the growth of the business. Ashim Singla carried out a study on the impact of ERP systems on small and middle sized enterprises in India. The researcher focused on manufacturing firms in the telecommunications and transport sector.
On the measures of the impact of the ERP systems on the business the researcher had three categories. There were the intangible factors, tangible factors and business performance after the ERP implementation. Under the tangible factors, there were questions on the improvement in the processes such as productivity, cash management and order management. Was there costs reduction in the procurement, technology, inventory, personnel and transport? Did the profit levels significantly increase? In the intangible benefits category, the researcher asked questions on information visibility, customer’s responsiveness to the new system, flexibility in the business, standardization of the business processes and improvement in the internal coordination of the employees (Sigla, 2005)
In the last category, business performance, there were questions on reduced organizational risks, a higher level of shareholder’s confidence in the organization and change in the workloads of the different departments. There are also other factors such as the customers have access to new services as a result of the new system and the users are equipped with more skills and knowledge. When the managing partners are tasked with objectively looking at the measures of correct strategic decision making, their answers will be objective and give the researchers more information or data to analyze. The broad answers may show the researcher
critical information outside the hypothesis that he had. Ashim Singla found that the ERP systems significantly improved the business processes. Although many businesses considered the adoption of ERP systems to be highly risky, the study showed that risk did not outweigh the expected benefits of adopting the new system in any way.
Benjamin Smith and Mark Simon found that there are positive relationships between data integrated systems, information availability and strategic decision correctness. A business should adopt the integrated systems for positive business growth (Smith and Simon, 2009). I believe however that data integrated systems in SME is a new area that should be approached cautiously. ERP in large firms is more critical.
A study conducted on the use of ERP by SME’s found that the adoption of the ERP system had a direct positive relationship with the company size in terms of turnover and the workforce (Tagliavini, et al, 2002). The study found out that there was a certain point or threshold in terms of the company’s turnover whereby expenditure on an ERP system becomes a crucial investment. There was also a positive relationship between the rate of growth of the workforce and the usage of the ERP system showing that companies with more complex operations may benefit more from ERP solutions. There are SME’s that invest in ERP systems without a thorough and accurate analysis of their needs and opportunities. They end up adopting the ERP systems for contingency or back up reasons.
Conclusion
The research is an important area of study and contributes to the area of information systems impact on small businesses. Further research should be done on more industries. Employees should also be included in the interviewees for data collection. More measures should also be used in ascertaining the impact of strategic decision correctness after implementing the information systems.
References
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