Businesses invest in technology amid disruption and government support
SMALL and medium enterprises (SMEs) in Malaysia plan to invest more in technology in order to succeed under increasingly challenging conditions.
According to findings of the Asean SME Transformation Study by United Overseas Bank (UOB) and Dun & Bradstreet, 65% of Malaysia’s SMEs will focus their investments on technology over other fixed assets in 2018 to drive business performance and remain competitive. This echoes the direction of other Asean SMEs where three in five (60%) prefer technology over investments in assets such as factories and machinery.
A majority of Malaysia’s SMEs surveyed, some 78%, also say they would invest specifically in software such as improving their websites and creating mobile apps. They believe such innovations would enable them to create better customer experience and increase customer loyalty. Hardware and infrastructure investments rank second for local SMEs (77%) and across the region (65%).
“While SMEs see the need to innovate, they have also been cautious about adopting cutting-edge applications, relying instead on current tools such as licensed software, customer relationship management, and content and database management.
“Nevertheless, increasing disruptive offerings such as robotics process automation, artificial intelligence and 3D printing have begun to pique the curiosity and interest of SMEs to drive business performance,” says Chow Sang Hoe, partner at Ernst & Young Advisory Services Sdn Bhd and EY Asean and Malaysia advisory leader.
He notes that the government has encouraged growth and productivity through greater automation, particularly in the manufacturing sector.
“This can be achieved by the digitising of factories which is beyond just a step-up in automation and deployment of new technologies. New digital factory systems will be far more inter-connected and powered by a completely different data ecosystem driven by big data, analytics and physical technology. Most importantly, these technologies support mobile devices such as our smartphones,” he adds.
As businesses continue to expand their digital exploits, there is an increasing demand for talent with experience in digital. Data specialists and analysts, user experience or interface designers, and digital marketers are highly sought to help these businesses transform effectively for the digital economy.
“The government is determined to focus on technology-based education, a key factor in building an effective long-term pipeline of talent for the digital economy. There is also a push to tackle the talent challenge for SMEs through productivity and capability development programmes,” says Chow.
Despite the focus on technology, Chow points out that SMEs are not aware of how efficiently pay-per-use or Software-as-a-Service (SaaS) can address their business needs.
SaaS refers to web-based software that can be used to manage business processes such as accounting, invoicing and payroll. The survey notes that SaaS is a more cost-effective option for small businesses than traditional licensed software as it provides users the flexibility to pay only for what they use and to scale the solution based on their business needs.
As small businesses expand, they can add on new functionalities or increase the number of users for their existing solution without the need for further significant investments.
The survey also indicated that SMEs generally have an optimistic outlook despite global economic headwinds and challenges such as rising costs, flagging productivity and not harnessing new technologies.
About 54% of the Malaysia respondents anticipate revenue growth this year, while about a quarter project a double-digit expansion. This optimism is highest among SMEs in the manufacturing, wholesale, mining and transportation sectors.
Additionally, 44% of Malaysia SMEs have ambitions for overseas expansion, fairly higher than the regional average of 37%.
“Business sentiment among Malaysian SMEs remain positive, enhanced by government support in terms of financial access and push for digitisation and innovation. Targeted initiatives such as manpower and infrastructure upgrade programmes in higher value-added sectors, tax incentives, grants and loans will continue to further propel the growth and resilience of local SMEs.
“The new administration is also committed to ensuring a stable ringgit and a vibrant stock market as well as strengthening governance and institutions. All of these are positive steps towards boosting investor confidence in the long run and will play a critical role in enhancing cross-border trade across the region as well as Malaysia’s competitiveness in the world’s marketplace,” concludes Chow.
As part of the study, EY provided insights via an industry survey of 1,235 SMEs across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam to understand how Asean SMEs are positioning themselves to participate in the region’s growth and adapt to the changes ahead.