SMEs in Southeast Asia keen but green on digitalization

SMEs in Southeast Asia keen but green on digitalization
Image by MongtaStudio | Bigstockphoto

Small and medium-sized enterprises (SMEs) in Singapore, Indonesia, Malaysia, Thailand, and Vietnam are expected to invest $130 billion in digitalization technology over the next three years, according to a recent report. However, the road to digitalization is fraught with challenges.

The report, commissioned by TDCX, a Singapore-based company providing services in sales, digital marketing, and content monitoring, reveals that Singaporean SMEs in particular are eager to adopt technology to digitize their operations and explore new customer bases.

“Post-pandemic, SMBs have fully come around to the benefits of going digital. What was once a nice-to-have is now a must-have and SMBs in Southeast Asia are making up for lost time by tapping the expertise of digital solution providers,” said Laurent Junique, chief executive officer of TDCX. “Hence, the time is also ripe for tech providers in the US and globally to engage with SMBs to support their digital transformation in this high-growth market.”

SMEs face barriers to digitalization

There are over 70 million SMEs across Southeast Asia, accounting for approximately 97% of all businesses in the region. These businesses have demonstrated a strong commitment to digitalization, investing more than $78 billion in related initiatives over the past three years.

Despite their enthusiasm, however, these SMEs face barriers such as limited access to expertise, staff training, and guidance in advancing their digital transformation. Creating engaging content, reaching customers, and a lack of in-house digital marketing expertise are cited as the top pain points for local companies.

Singapore’s SMEs already lead the region in tech adoption, with 36% having significantly digitalized their operations compared to only 16-26% of their regional counterparts.

Nearly half (49%) of all SMEs have only digitalized a few functions within their organizations. On average, Southeast Asian SMEs currently utilize three tech solutions to support their business needs, with digital marketing as the primary area of focus.

While the pandemic has accelerated digitalization among Southeast Asian SMBs, the pace of progress is inconsistent across the region. Only 20% of Singaporean SMEs have yet to begin or are in the early stages of technological adoption, a lower percentage than in the wider region. The consumer goods, retail, and food and beverage sectors are currently lagging behind in digitalization.

Top priorities for the next two years

Despite this, SMEs continue to take action. The study says that their top priority over the next two years is to improve their data analytics and innovation capabilities.

To facilitate their digital transformation efforts, SMEs are seeking tech providers with robust technical skills (76%), industry knowledge (69%), and quick response times (65%).

Related article: Can DeFi boost digitalisation for Malaysia’s SMEs?

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