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83% of SMEs going digital, but three in five think it is unsuccessful: Microsoft study

Jovi Ho
Jovi Ho10/22/2020 05:00 AM GMT+08  • 4 min read
83% of SMEs going digital, but three in five think it is unsuccessful: Microsoft study
Some 56% of companies polled say high implementation cost was the biggest barrier faced by SMEs going digital.
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Although 83% of some 400 small and medium enterprises (SMEs) polled now have digital transformation strategies in place, more than half the companies say their digitalisation efforts are too expensive.

Aside from cost, other factors include a digital skills gap and poor awareness of government initiatives available to support digitalisation.

In addition, only two in five SMEs polled consider their efforts successful.

These findings were revealed in the 2020 SME Digital Transformation Study produced jointly by Microsoft Singapore and the Association of Small & Medium Enterprises (ASME).

The study surveyed 400 business owners and key IT decision makers of local SMEs from across 15 industries, including manufacturing, engineering, real estate, information technology, construction, healthcare and education; from March to June this year.

See: Singapore, Germany sign MOU to speed up SMEs' industrial and digital transformation

First launched in 2018, the study seeks to assess the state of local SMEs’ digital transformation and identify gaps in digitalisation.

Some 56% of companies polled say high implementation cost was the biggest barrier faced by SMEs going digital – a similar observation from the 2018 iteration of the study.

At the moment, only two in five companies (39%) perceive their digital implementation to be successful – a slight improvement from 28% two years ago.

That said, the 2020 study found that 80% of Singapore SME leaders are now aware of the term ‘digital transformation’ – up from 57% in 2018.

Nearly all companies (99%) surveyed have adopted at least the most basic level of digital technologies such as office productivity tools and web-based email.

See also: Singapore risks losing competitiveness if it doesn't digitalise: Minister Chan

There has also been a growing appetite for slightly more advanced technologies among local SMEs — with a 14% increase from 2018 — particularly for cloud productivity and storage services, as well as collaborative tools.

Singapore SMEs remain optimistic about the potential impact digital transformation can bring to their bottom-lines. According to the study, companies implementing digital initiatives project that their investments would deliver 23.5% in cost savings and 26.5% in revenue gains – a slight increase from 22% and 26% in 2018 respectively

In the next year, the top three solutions that SMEs plan to adopt include AI and machine learning, business process apps, and big data and advanced analytics – especially among medium-large companies.

Digitalisation as a response to Covid-19

Some 30% of SMEs indicated that they were forced to digitalise due to Covid-19, with more than half (54%) reporting delays in their digitalisation plans due to the pandemic.

More than 80% of SMEs also indicated that their plans for overseas expansion have been delayed due to border closures and other lockdowns.

Many SMEs in Singapore struggled to stay afloat as their businesses took a hit, notes Mr Vivek Chatrath, Small, Medium and Corporate Lead at Microsoft Singapore.

See also: Most Singapore SMEs tapped on government Covid-19 support, more than global counterparts: Xero

“Survival became a priority for these smaller companies as they grappled with rising costs and falling revenue, and naturally digital transformation may have taken a backseat. When providing support to businesses impacted by Covid-19, it is important to consider the unique challenges faced by SMEs in order to identify areas where the government, corporates, or industry associations can support them in digitally transforming during this time,” he says.

ASME is a not-for-profit organisation established in 1986. The group champions enterprise in Singapore and hosts two annual awards: The Entrepreneur of the Year Award and Singapore Prestige Brand Award.

Ms Irene Boey, Vice President, Membership & Training, ASME says more guidance can be offered to SMEs to help them strategise, upskill and properly leverage government grants to harness the full suite of benefits from digital transformation.

“Digital transformation calls for more than just updating technology or adopting a new platform – it is never about tech for tech’s sake. Success and value derived from digital transformation can only be achieved if these strategies are clearly aligned with SMEs’ business objectives.”

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