Half of SMBs not Taking Advantage of Government Support for Digital Transformation

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According to the ‘APAC SMB Digital Maturity Index’ (Index) released by Cisco today, around 46% of Malaysian SMBs are aware of government programmes that could support them in digital transformation but have not taken the initiative to take part in them, whereas 49% are aware and have benefitted from them. The study also found that Malaysian SMBs are leading other ASEAN countries (after Singapore) in their digital transformation efforts.

The Index, developed by research firm IDC based on an independent survey of 1,340 respondents, looked at the digital maturity of SMBs across four business dimensions; technology adoption and application, digital transformation strategy and organisation, processes and governance, and the capability to source, manage and retain the right talent to enable their digital transformation.

SMBs in ASEAN, including Malaysia (but with the exception of Singapore), are in the ‘Digital Indifferent’ stage of digital maturity; where companies’ digital efforts are often reactive to market changes, rather than driven by a proactive tactical approach. However, it also notes that Malaysian SMBs are very close to reaching the next level of digital maturity, ‘Digital Observer’ that will place them in the same league as developed countries across the Asia Pacific.

The study also revealed that Small and Medium Businesses (SMBs) in Malaysia are making initial technology investments in Cloud (13.1%), Cybersecurity (12.9%) and IT Hardware (11.7%) upgrades. This is in line with the regional average of 13%, 13% and 10% for all three respective categories.

This is important as it shows that Malaysian SMBs are starting to realise how cloud will enable them to scale rapidly as and when required, without significant upfront capital investment in IT infrastructure. The increase in cybersecurity investment demonstrates how cybersecurity is finally now being placed front and centre in SMBs’ digitisation journey, whereas having the right IT infrastructure in place is critical to meet the evolving needs of Malaysian SMBs and ensure long term success.

Speaking about the report, Albert Chai, Managing Director for Cisco in Malaysia said, “It is encouraging to note that Malaysia has made digital transformation a national priority with over RM5 billion allocated in the recent budget to support SMB migration to Industry 4.0. Yet, less than half of Malaysian SMBs are taking advantage of such government opportunities. This needs to be addressed as SMBs represent over 95% of businesses in Malaysia and are key drivers of Malaysia’s digital economy transformation. Beyond that, at Cisco, we are committed to playing our part in building end-to-end digital solutions to meet the digital needs of Malaysian SMBs.”

The study also notes that SMBs in Malaysia are facing clear hurdles to digital transformation. For example, 19.5% of respondents said they are being held back by the lack of digital skills and talent within their organisation, 15.2% claimed that they lack budget and commitment from management and 14.0% said their organisation lack robust IT platforms that could enable successful digital transformation.

Bidhan Roy, Managing Director for SMBs, Emerging Markets & Distribution, Cisco, Southeast Asia, added, “SMBs make up 98% of total establishments in Malaysia across various industries and cities. For them to continue being a key driver of Malaysia’s digital economic revolution, there needs to be more dialogue between the public and private sector to understand the digital challenges and needs of SMBs in Malaysia. There also needs to be a unified platform where SMBs can come together and leverage common-pool resources. Cisco has the capability and commitment to deliver solutions and partnerships that can accelerate the digitalization of Malaysian SMBs. Together, we can drive investments in technology, redefine ‘traditional’ industries, enhance innovation ecosystems and take Malaysia forward in a fast-changing world.”

The Index suggests the following recommendations that can accelerate the digital transformation journey of SMBs in Malaysia:

  • Digital transformation is a journey: It is not a sprint but a marathon. SMBs should constantly access their maturity across the four dimensions and prioritise key initiatives to address gaps.
  • Invest strategically: SMBs need to have a well-defined digital transformation strategy and roadmap. They need to use this as a guide to make strategic technology investments, ones that help them address their key challenges and leverage specific growth opportunities.
  • Embark on process automation and digitisation: SMBs should look to gain efficiencies through process automation by leveraging relevant technologies. They should establish policies to standardise processes. As the organisation matures in their digital transformation journey, they should leverage data and digital technologies to transform processes, increase innovation rates and gain agility.
  • Secure buy-in: Change can be difficult, so SMBs need to ensure buy-in from employees and senior management. They need to identify digital champions within the organisation and bring them in early to the process. They should leverage these champions to catalyse a culture of change by encouraging collaboration, sharing success stories, and taking calculated risks.
  • Find a trusted partner: Many SMBs find it difficult to execute on their digital transformation strategy. SMBs should look for an experienced technology partner that brings consultancy and project management services, on top of technology know-how. When deciding, it is important to find partners with experience working with and within the SMB ecosystem.

 

The Index highlights that more than 60% of SMBs in Asia-Pacific have started to embrace digitisation, driven by improved internet access and growing smartphone ownership. These SMBs are redefining customer experience and expectations, disrupting sectors and in some cases creating entire new ones, while capturing investment and funding opportunities.