The Small and Medium sized Enterprise (SME); defined by the European Commission (2005) as any firm with less than 250 employees, is acknowledged as a fundamental component in the success and growth of any economy. Given the very difficult global economic conditions we are faced with, it is essential that this sector is supported and continues to thrive. In tandem with these difficult economic conditions, monumental technological advances are happening almost on a daily basis. These advances impact and change how businesses need to operate and SMEs must keep abreast of these advances and better understand how to remain competitive in such a difficult and fast moving environment. Given the resource constraints such as time and access to finance that are inherent in the small firm, ma intaining this competitive edge proves increasingly difficult. This paper seeks to examine the key business challenges faced by SMEs around their Information Tec hnology (IT) or Information and Communications Technologies (ICTs) in this current climate. It also seeks to determine the IT capabilities that firms are most interested in seeing improvements in. This is done through employing a quantitative research approach to the data collection (questionnaire) and analysis processes. Through analysis of this data, an SME IT Capability framework (SME IT-CMF) is conceptualised to facilitate maximum value to be gained from IT. This paper will make a number of practical recommendations. Firstly, these recommendations are of value to the knowledge base, secondly to SMEs themselves, in helping them understand how they can improve their competency in a number of key IT areas or critical capabilities (CCs). From a government perspective it will identify the key areas that require support for the SME in an effort at maintaining and promoting economic growth. This research primarily relates to SMEs within the Knowledge Intensive Business Services (KIBS) Sector and those organizations which are medium sized having in excess of 50 employees.