The digitalisation of small and medium businesses (SMBs) in Malaysia could add between US$19 to US$24 billion (RM79 billion to RM99 billion) to the country’s GDP by 2024 and contribute to economic recovery post Covid-19, according to the 2020 Asia Pacific SMB Digital Maturity Study.
The study, commissioned by Cisco and conducted by International Data Corporation (IDC) maps out the four stages of digital maturity; Digital Indifferent, Digital Observer, Digital Challenger and Digital Native, experienced by SMBs across Asia Pacific. It also found that SMBs that are more digitally mature enjoy higher benefits in revenue and productivity compared to those that have an indifferent approach to digitalisation
Now in its second year, the study shows that Malaysia’s SMBs have moved into the Digital Observer stage, up from Digital Indifferent in 2019. According to the study, 64 percent of SMBs in Malaysia are looking to digitally transform to bring new products and services to market, a huge jump from 33 percent last year. In addition, 59 percent recognise that competition is transforming, and they must keep pace, while 43 percent said they are transforming due to demand from customers.
These are positive and significant developments, given that SMBs account for 98.5 percent of all businesses, 66.2 percent of the country’s total employment and contribute 38.3 percent to overall GDP, making them a critical component to Malaysia’s trade and commercial landscape. The resilience, agility, and digital transformation capabilities of SMBs will play a pivotal role in Malaysia’s post-Covid-19 economic recovery.
“The SMB sector has been among the hardest hit by the Covid-19 pandemic. However, the country’s SMBs have shown great resilience, and have leveraged technology to continue to operate and serve their customers during the period. As Malaysia continues to overcome the current situation, and consumer and business activity starts to pick up, digital transformation of SMBs will play a pivotal role in their recovery and contribute to the country’s overall economic growth. At Cisco, we are committed to work with SMBs to help them emerge stronger with the right digital solutions and strategy,” said Albert Chai, Managing Director of Cisco Malaysia.
The results of the study show that purchasing or upgrading IT hardware (18 percent) is the top technology investment priority for SMBs in Malaysia, followed by purchase or upgrade of IT software (14 percent) and cybersecurity (11 percent)
However, SMBs are also facing challenges in adopting digitalisation strategies. According to respondents, shortage of digitally skilled talent is the biggest hurdle they face (21 percent), followed by lack of budget and or commitment from management (16 percent). They are also found to be lacking the proper digital transformation roadmap that is critical to any organization looking to drive substantial change (12 percent).
“SMBs are the backbone of ASEAN economies, accounting for over 85% of total business establishments and making up the main contributions to private sector employment in the region. While they are currently facing the biggest challenges to their operations, they also have an unprecedented opportunity to accelerate their digital transformation. Technology can not only help solve some of their key challenges and revitalise their operations, but also help them sustain their growth in the long term,” said Raz Mohamad, Director Small Business and Commercial for ASEAN at Cisco.
“However, for SMBs to fully leverage technology, all stakeholders need to play a role. The government is already taking the lead and has introduced a range of measures to help Malaysian SMBs on their digital journey. At Cisco, we are proud to be playing our part. From a talent perspective, the Cisco Networking Academy has trained over 80,000 students in Malaysia in various ICT skills since its inception. On the technology front, we have launched a series of curated products and solutions specifically for the SMB sector under the Cisco Designed portfolio and introduced 0% financing for SMB customers in the country,” he added.
The study also highlights that nearly 70 percent of SMBs in Asia Pacific are accelerating the digitalisation of their businesses because of Covid-19. Among the respondents, 86 percent say they believe digitalisation will help in developing future resilience against crises like Covid-19.
Within the region, SMBs in Singapore, Japan, and New Zealand continue to lead the Digital Observer group, with no changes in their ranking compared to 2019. However, mainland China, Taiwan, and Thailand surpassed Korea, Hong Kong, and Malaysia, respectively. There has also been notable progress made by SMBs in Indonesia and Vietnam.
The 2020 study aims to further the understanding of how SMBs can progress in their digital transformation journey and the impact of digitalisation among SMBs to drive economic activity.