I V niversity of Economics Institute of social studies II Ho Chi Minh City The Hague Vietnam Netherlands I i I Vietnam - Netherlands Project forMA Program in Development Economics I -----------000----------- I I I I I DETERMINANTS OF I APPLICATION SOFTWARE ADOPTION: The Case of SMEs in HCMC By LE THANH BINH Academic Supervisor: Associate. NGUYEN DINH THO I ~ I Ho Chi Minh City, March 2011 i ---------~--- L ---------------------~---~-----------------~---· ~--_j UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Declaraiion I declare that the thesis hereby submitted for the Master degree at the Vietnam- Netherlands Program for M.A in Development Economics is my own work and has not been previously submitted by me at another university for any degree. Ho Chi Minh City, March 2011 Le Thanh Binh UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Acknowledgements In the first of all, my heartfelt thank goes to my supervisor, Associate Dr. Nguyen Dinh Tho.
During the course of my thesis research and writing, I received precious guidance, useful comments and encouragements. My deepest thank also goes to Associate Professor Dr. Nguyen Trong Hoai, Co- Director of Vietnam - The Netherlands Program for M. in Development Economics, for his encouragements during the course and thesis research.
In addition, I wish to offer much thanks to: my kindly and enthusiastic classmate, Mr Nguyen Ngoc Danh, who was always ready to give me his ideas and recommendations; my friend and ex-colleague, Mr. Marc Nguyen, who assisted me to edit English writing of my thesis. My heartfelt gratitude also goes to my wife and my son, Trinh and Trung Quoc, who are my love and motivation during the studying time. 11 UAN VAN CHAT LUONG download : add luanvanchat@agmail.co ;: • Abstract This study mms to investigate the factors that affect the adoption of application software by SMEs in Ho Chi Minh City.
A sample of 140 firms in HCMC was surveyed to test the model. It was found that perceived usefulness and ease of use of application software are potential predictors of application software adoption. It was also found that IT knowledge has impacts on the adoption of application software. BOM Innovativeness • was not significant.
It may be due to the limitation of this study. Some questionnaires were answered by who were not from BOM and the sample was not large enough to make sure the results are entirely credible. The findings of this study suggest that the government and software firms should focus on improving the IT knowledge of people who work in the office, especially people from BOM. Software fim1s should promote the usefulness and ease of use of application software.
In addition, the laws of intellectual property and laws to protect the software users are also recommended to the government. Ill UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Table of Contents DECLARATION. III TABLE OF CONTENTS. IV LIST OF FIGURES.
VI LIST OF TABLES. VII LIST OF EXHIBITS. VIII CHAPTER 1 - OVERVIEW .2 THE CONTEXT OF VIETNAMESE SOFTWARE INDUSTRY .3 OBJECTIVES OF THE RESEARCH .5 RESEARCH METHODOLOGY AND SCOPE. 5 CHAPTER 2- LITERATURE REVIEW .3 THEORIES AND EMPIRICAL STUDIES .3 Perceived Ease ofUse.
11 IV UAN VAN CHAT LUONG download : add luanvanchat@agmail.3 0PERATIONALIZATION OF MEASUREMENT .2 BOM IT Knowledge .3 BOM Perceived Usefulness .4 BOM Perceived Ease of Use .3 Type of Business .4 Measurement Scale and Notation ofVariables .2 Notation of Variables. 23 CHAPTER 4- FINDINGS AND DISCUSSION. 24 v UAN VAN CHAT LUONG download : add luanvanchat@agmail. 37 CHAPTER 5- IMPLICATIONS AND CONCLUSIONS .2 MAIN RESULTS CONTRIBUTION AND IMPLICATIONS .3 LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCHES.
48 APPENDIX 1: THE QUESTIONNAIRE .48 APPENDIX 2: NOTATION OF VARIABLES. 55 APPENDIX 3: CRONBACH'S ALPHA. 57 APPENDIX 4: FACTOR ANALYSIS. 60 APPENDIX 5: HETEROSKEDASTICITY TEST.
63 vi UAN VAN CHAT LUONG download : add luanvanchat@agmail. List of Figures Figure 2.1 -Revised Conceptual Model. 26 List of Tables Table 2.1 -List of Applications .5- Rotated Component Matrix( a) .6- KMO and Bartlett's Test .7- KMO and Bartlett's Test (ASADOPT) .9- Frequency Analysis of sum values of two items of CINT .10- Business Type with dummy variables .11 -The dummy variables of the business size .12 -Regression with data survey .13- Summary of Hypothesis Testing. UAN VAN CHAT LUONG download : add luanvanchat@agmail.co List of Exhibits Exhibit 3.1 -Application Software Adoption .5- Perceived ease of use.
21 Abbreviation BOM Board Of Managers VIII UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Determinants of Application Software Adoption: The Case of SMEs in HCMC Chapter 1 Overview 1.1 Introduction Nowadays information technology plays a crucial role in economic development. Among them, the software industry is growing faster than most other industries. The world software market was approximately US$11 0 billion in 1988 (Schware 1992), and is about US$600 billion (Rizk 2002). Software industry is viewed as a good choice for developing countries to leverage their economy and strengthen their national competitive power (Lee & Lee 1994).
For example, the annual growth rate of India's software industry has been consistently over 20 percent since 1996. The revenues from software industry oflndia were US$8. The annual growth rate of Brazil's software industry has been also 11%-12% (Schware 1992). According to Schware (1992), the developing countries should focus more on the domestic software market; therefore, it makes software exports develop faster because of increases in experience and innovation in software production.
In acknowledging the importance of the software industry to the economic development, the Vietnamese government has paid much attention to developing the software industry in general, and the domestic software market in particular by issuing many policies to support the software industry and software firms and by investing a lot of money to its development. Vietnam's domestic software market has a lot of potential with approximately 7,000 organizations, 6,000 state firms, and nearly 260,000 limited firms. However, the number of firms using application software continues to be very limited. In the year of 2006, the revenues of application software were only 93 million USD (Laodong 2007).
Many conferences have been organized to discuss on how to leverage the demand of domestic application software but to date, no effective UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Determinants of Application Software Adoption: The Case of SMEs in HCMC solutions are chosen. Even though the growth rate of domestic market is about 25%, its size and growth rate are still below expectation.2 The context of Vietnamese software industry The Vietnamese software industry has grown prosperously in recent years. Before 2006, its growth was about twenty five percent per year. The government plan for the software industry in 2000 - 2005 was aimed to reach 500 million US dollars as revenue but without success.
The growth in 2006 and 2007 was up to forty percent and its revenue mostly reached 500 million US dollars (498 million). The government expected that the revenues for the software industry in the year 2008 were 600 million US dollars, and for 2010 would be 800 million US dollars (Tram 2009). The target for the year 2008 was reached, however, the economic recession curtailed revenue goals. In late 2008, most of the software firms, especially outsourcing software occupied the most in the revenue structure, were negatively affected by the financial crisis and economic recession.
For example, FPT software- one of the leading software firms in Vietnam - had a revenue growth of 40%, a decrease of 50% compared to year 2007. The picture of total gloominess of the Vietnamese software industry in 2008 - 2009 reappeared in results of the survey that was conducted by VINASA in May and June of year 2009 and was issued in late August of 2009. 64% of the Vietnamese software firms had negative growth compared to the year 2008. Of this number, 12% of the firms declined severely and met with financial difficulty.
There were only 36% of firms able to sustain stable growth at equal or higher than the year 2008 (Nguyen 2010). However, in late 2009, there were some positive signals. Some software outsourcing firms got new projects. It happened because Vietnam software outsourcing firms had 2 UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Determinants of Application Software Adoption: The Case of SMEs in HCMC an advantage of labor cost of less than 30% compared to that of China and India.
IT department of the Ministry of Post and Telematics, adyised that the revenues of Vietnamese software industry was 880 million US dollars. The growth rate remained at 35% and surpassed the norms that were set by the government for the year 2010 (Nguyen 2010). In general, Vietnamese software industry grows very fast, about 35-40% per year in recent years. However, the software outsourcing occupies the major revenues in the software industry.
According to the results of the survey conducted by Vinasa, 50% of software firms are in software outsourcing (Tram 2009). According to statistics, there are 2000 firms registering as the software firms but in actuality, there are only 800 firms that participated in the software industry. The total number of people that participated in the software industry is approximately forty-five thousand. Most of the software firms have less than 30 employees and their charter capital is less than 500 millions Vietnam Dong.
According to Jefrey Haddee- Deputy Chairman of Business Software Associate, Vietnamese IT and software labors are still too weak. For every ten candidates, only one is qualified. Haddee assesses that: out of date teaching programs, failures in teaching and practising soft skills, and weaknesses in foreign languages, are the biggest deficency of Vietnamese IT labors (Manh 2009). Some experts believe that in order to leverage the Vietnamese software industry; the Vietnamese government needs to focus on developing its IT services.
The revenue rate for this field occupies over 75% of the revenue in the whole IT and telecom in the world (Hiep 2009). According to Deputy Minister of Post and Telematics Nguyen Minh Hong, the domestic IT services industry has not developed to its fullest potential. One reason is because mechanism in place is not clear enough. The rest is because the government does not have preferred policies for specialization of the services industry.
3 UAN VAN CHAT LUONG download : add luanvanchat@agmail.co Determinants of Application Software Adoption: The Case of SMEs in HCMC Other opinions by specialists believe that the current Vietnamese IT services industry has a lot of limitations in areas like: quantity, investment capacity, professionalism, lack of intellectual property protection, and a shortage of legal documents. The government should therefore define specific assessment standards for service quality. Some firms think that government should not stipulate the quality of service as a pretest like before. They should make assessment based on the service quality agreement between business providers and their clients (Ha 2009).
In order to leverage the IT industry, particularly software, the government has trusted to assign Minister of Post and Telematics to propose an action plan. The Minister of Post and Telematics Le Doan Hop reports that he propose this strategy to Prime Minister and hopes that it would be approved soon. Because there is an enormous amount of work, he insist on the six major things (Ha 2010): First, build up IT human resources on a large scale as well as key resources. Second, develop IT industry in order that Vietnam not only consumes but also produces IT products.
Third, establish a high bandwidth infrastructure Fourth, IT should reach everyone, such as communication and internet; tools that contributes to development in modem and civilized countries Fifth, apply IT into the State management system to save money by: establish e- govemment to ensure the transparencies from central to local, eliminate back logs and bureaucracy while and speeding up paperwork; Sixth, establish telecom incorporation with international stature. In April 2009, the Prime Minister has decided.