SMEs (Small and medium-sized enterprises) are powerhouses of growth in the ASEAN region. Their contribution to the economy by generating jobs, spurring consumption, and launching new products and services cannot be underestimated. Within the ASEAN region, Malaysia has one of the highest number of SMEs (97.4% of total establishments) which have built the resilience of the nation as well as strengthened the economy, despite the challenges of the economic environment brought about by the pandemic.
Pandemic Impact
In Malaysia, small and medium enterprises (SMEs) saw a decline in the generated gross domestic product (GDP) in 2020 by 7.3%, sharper than the decline in the country’s GDP and non-SMEs GDP, which shrank 5.6% and 4.6% respectively, as per an update by the Department of Statistics Malaysia (DOSM). Overall, this reduction in momentum for SMEs can be attributed to the decline across a majority of its sectors, resulting in negative growth over the pandemic. Coming out of the pandemic, SMEs face uncertainties in ensuring business resiliency, continuity, and sustainability.
The Challenge of Digitalisation
While adopting a digital mindset is imperative, SMEs in Malaysia are not as quick in embracing digital transformation. The World Bank’s 24th Malaysia Economic Monitor: Weathering the Surge report stated, “The COVID-19 pandemic has exposed the gaps and exacerbated the vulnerabilities in Malaysia’s private sector. This is especially the case for SMEs, which have been hard hit by both demand and supply shocks. Malaysian firms especially SMEs lag behind their global peers on productivity measures and have lower rates of technology adoption.”
Even before the pandemic, World Bank data shows that Malaysia’s businesses have underperformed in terms of digitalisation relative to most of its ASEAN peers like Thailand, Philippines, Vietnam, and Singapore.
Budgetary constraints are one of the key barriers to adoption. Upgrading legacy systems, cloud migration, automation, integration, and flow of data – critical elements of digital transformation – require investment in tools and technologies, which can be perceived as a daunting cost for SMEs. SME Corp, data states that 60% of business owners were unaware of the various financing options available to them, and 34% thought that cloud computing was expensive. Further, only 15% of Malaysians have the advanced ICT skills needed for digital transformation. Cultural change management, talent, and resource allocation also pose hurdles and sometimes even challenge organisational identity.
Bridging the Gap
Accelerating digital innovation is a journey where a mindset change is a start in the right direction. Digital transformation is a structural change that takes into account people, processes, and know-how, rather than a cosmetic adjustment. This is where, the support of a SI (solutions integrator) or channel partner who is supported by the right IT distributor and solutions aggregator can deliver immense value by ensuring that adoption runs seamlessly, end-to-end. A few elements of the journey to consider:
- An evolving cloud environment – The vastness of the cloud landscape can be daunting, where there are reams of updates and new features to contend with, on a weekly basis. Given the crucial role of cloud adoption in the digitalisation process, a cloud-centric Centre of Excellence (CoE) offering from SIs can help SMEs to assess which features are most useful to them, and what changes they need to make to their cloud environments to configure and optimise these solutions.
- Pre-configured solutions – Malaysia’s public cloud market has reached over USD 643M, making Malaysia the second-biggest cloud market in ASEAN after Singapore. While, cloud computing is often the foundation of the digital journey, SMEs grapple with the lack of know-how, with 77% still at the basic stage of the transformational curve. This is where pre-built solutions come in and allow SMEs to be market ready, faster, and at the same time deliver consistent outcomes. Whether it is advanced security practices, data protection, or backup facilities, pre-configured solutions from SIs can value-add to businesses at all stages of their cloud journey with reduced risk.
- Ease of deployment – There are multiple checkpoints in the deployment process at different stages of scalability. Add to that multiple vendors and the complexity increases. Dashboards that manage cloud consumption, and subscriptions, and generate automated reports through a unified management console can help immensely to integrate business systems to gain operational efficiencies. This saves up time and resources, enabling SMEs to focus on delivering differentiated customer value and excellence.
Business transformation is a massive undertaking and while the barriers to entry for digitalisation have never been simpler, SMEs in Malaysia have a huge opportunity to be agile and embrace a digital future. The first and crucial step is in identifying and collaborating with IT partners who are supported by the right distributors and solutions aggregators, which can go a long way for SMEs with an ambition to be the multinationals of tomorrow.
By Kam Fei Yoon, Vice President & Country General Manager at Tec D Malaysia
