Balinese Handicraft industry is one of the very unique art industry in Bali. The existence has supported tourism and also provide jobs for the majority of people in Bali. Most of these Handicraft produced by Small and Medium Enterprises (SMEs). Since its produce works of art and is unique, then the sustainability of SMEs is highly dependent on the transfer of knowledge possessed by those who are in SMEs from one generation to the next. Previous research indicates that IT plays a role in the knowledge transfer process in SMEs that produce the handicraft. The study has also produced a model of knowledge transfer that is composed of several constructs, namely Information Technology, Knowledge Transfer and success of SMEs. Correlation formed is technology affecting the process of knowledge transfer and knowledge transfer effect on the success of SMEs. This study aims to perform testing of the knowledge transfer model that utilizing IT in SMEs. Testing is done by using Sequential Equation Modeling (SEM), where the instrument used to collect the data is in the form of a questionnaire. The test results showed that Information Technology significantly affect the process of Knowledge Transfer and knowledge transfer significantly affect the success of the organization. However, sub-constructs Data Repository found not significantly affect the transfer of knowledge. Therefore, in the re-specification models, the sub-constructs is abolished.