Encouraging digital technology adoption among SMEs

  • News
  • Monday, 17 Apr 2017

Going digital: Business practices such as accounting standards and funding has to change to raise digital technology adoption, notes Yeoh (centre). Looking on are Chai (left) and Tai.

ALTHOUGH there are ongoing efforts to push SMEs to go digital, the lack of a concerted drive to change the paradigm across the business ecosystem may hinder digital technology adoption among small businesses.

SME Association of Malaysia national deputy secretary general Spencer Yeoh notes that a lot of the standards in the industry are still based on brick-and-mortar businesses.

There is a need to change the various aspects of business practices such as accounting standards and funding needs to encourage SMEs to move into the digital space, he says.

“For example, if an SME spends RM60,000 on software or invests in an e-marketplace, when it comes to the books, the auditors will ask where is the asset tagging. It’s an asset that we can’t see.

“And if the SME gets funding for that asset, how do you quantify and verify the value of the asset? The banking industry is not evaluating intangible asset as a valuable asset. But in a digital economy, we are talking about intangible assets.

“SMEs have difficulty in answering to the banks and the books. So it is not only the SMEs that have to change that perception. The whole environment has to change. This includes the banking sector, the SMEs, the service providers and even the legal perspective,” he said at a recent panel discussion called “Start digitising: a call for Malaysia’s SMEs to reap the full potential of digitisation”.

The other panellists were Cisco Malaysia managing director Albert Chai and Funding Societies credit risk director Kevin Tai.

Notably, various associations, ministries and agencies have been encouraging SMEs to use new technology to promote their products to a larger market.

But more needs to be done to review the overall ecosystem to introduce effective measures that will include the other players apart from just the SMEs.

“For SMEs to move, things like accounting systems have to change. Intangible asset needs to be treated as an asset. That is still a stumbling block for SMEs if you want to move to a digital economy.

“But we’ve not seen anyone taking the lead to link all this. It’s a paradigm shift. We need to adapt and it takes time. And we need a strong leader to lead this change in paradigm.

“The government has the authority to make the changes. If the Government wants economic success, they should integrate all this,” says Yeoh.

Other challenges identified by the panellists for SMEs to adopt digital technology include cost of investment in technology, high cost of funds, difficulty in acquiring the right talent, lack of understanding about digitisation and cyber security.

For SMEs that are looking to start their digitisation journey, Yeoh’s advice is to start small with cloud adoption, perhaps, and to expand their investment as they grow.

“It’s a matter of dollar and sen for most SME owners. They need to understand their business models and evaluate how technology can help them. Whether it is costly or not, it’s a perception right?

“If they see the returns in the future, then it’s easier for them to make a decision to invest in digitisation. Education is critical to help them determine their spending habit whether to invest or not,” adds Tai.

However, Tai reminds SMEs that adopting digital technology is not just about using new technology to promote their products and services but also to improve the efficiency of their business operations and their value chains.

As global trends move towards the digital era, SMEs will have no choice but to follow suit or risk being phased out of the economy.

“In the digital world, every company is first and foremost a tech company with expertise in different areas including education, retail, and manufacturing. Without embracing and adopting technology, there is no business model for these companies,” says Chai.

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