PurposeThis paper seeks to investigate how small and medium‐sized enterprises (SMEs) are using information and communications technology (ICT) to try and gain a competitive advantage.Design/methodology/approachA joint methodology of questionnaire survey and semi‐structured interviews was used for both phases of the study. The research method used consisted of mailed questionnaires being sent to over 200 firms with follow‐up telephone interviews. This paper combines a significant literature review with primary data collected from the various SMEs.FindingsThis paper provides sound evidence that SMEs can gain competitive advantage through the use of ICT. More than 70 per cent of the respondents identified ICT as aiding their business in one or more of the accepted competitive areas. However, there is potential for SMEs to gain further advantages by using an integrated and strategic approach in their use of ICT.Research limitations/implicationsThe research has direct implications for UK SMEs. It will be interesting to undertake an international comparison of ICT assimilation in SMEs.Practical implicationsThis research identifies the need for a coherent reference framework for SMEs to assess, manage, and utilise existing and future e‐business tools.Originality/valueSMEs tend to use their ICT independently rather than in an integrated manner. They are not always able to take advantage of methodologies generally developed for large firms. Currently SMEs are not taking advantage of supply chain management and customer relationship management applications. A significant majority of SMEs are not using knowledge management techniques.