Small and medium-sized enterprises (SMEs) in ASEAN have set their sights on leveraging external tech providers as a way of accelerating their digital ambitions, according to a TDCX’s report.
SMEs are looking to tech providers such as cloud providers, system integrators, cybersecurity specialists, as well as digital platforms for the expertise they require as they grow their businesses.
Titled ASEAN SMEs: Small Business, Big Opportunity for Tech Providers, the report aims to help tech providers globally understand the approach that ASEAN SMEs are taking to grow their business in the digital economy and their expectations of tech providers.
There are more than 70 million SMEs across ASEAN which make up about 97 per cent of all businesses in the region. ASEAN SMEs have signaled their strong commitment to digitalizing through their investments.
Over the last three years, they have invested more than USD 78 billion on such initiatives and do not plan to slow down, with a further USD 130 billion planned for investment over the next three years.
The study revealed that close to half (49 per cent) have only digitalized a few functions across their business. On average, ASEAN SMEs are currently using three tech solutions to support their business needs, with digital marketing being the top area of focus.
While the pandemic has expedited the speed of digitalization among ASEAN SMEs, the rate of advancement is uneven across the region. One-fifth (20 per cent) of the region’s SMEs only took the plunge to digitalize in the last two years and those in the Consumer Goods, Retail, and F&B sectors lag behind their peers in their digitalization journey.
ASEAN SMEs, however, are taking steps to bridge their digitalization gap. The study found that their top priority over the next two years is to enhance their data analytics and innovation capabilities. To support their digitalization push, SMEs are looking to work with tech providers that have strong technical skills (76 per cent), industry knowledge (69 per cent), and speedy response times (65 per cent).
Mr. Laurent Junique, Chief Executive Officer, TDCX said, “Post-pandemic, SMEs have fully come around to the benefits of going digital. What was once a nice-to-have is now a must-have and SMEs are making up for lost time by tapping the expertise of digital solution providers. Hence, the time is also ripe for digital solution providers to engage with SMEs to support their digital transformation.”
Key findings from the report include:
- ASEAN SMEs are investing big in digital
Tech investments are crucial for SMEs to remain competitive and to meet customer expectations in ASEAN’s rapidly growing digital economy which reached a gross merchandise value of USD 200 billion in 2022.
In addition to improving their data analytics and innovation capabilities, ASEAN SMEs are focused on transforming their traditional business model to an e-Commerce enabled one (69% per cent) and digitalizing operations such as sales and marketing and customer relationship management (69 per cent) in the next two years.
However, they continue to grapple with a host of challenges. These include access to knowledge and expertise (67 per cent), training programs to reskill or upskill employees (66 per cent), and advisory and consultation on technology adoption (65 per cent).
- Going together to go far
As SMEs mature in their digitalization journey, things can get increasingly complex and more difficult to manage. ASEAN SMEs are now more receptive to getting an external tech provider to help them manage certain functions to achieve their goals more quickly. Across the five ASEAN countries surveyed, more than 84 per cent of SMEs see value in working with an external tech provider.
The top two areas where they are leveraging external support are their digital marketing and employee training needs. This suggests that ASEAN SMEs are prioritizing revenue generation and ensuring that employees have the right skillsets to adapt to a digital future.
On the operations front, there remains a big opportunity for ASEAN SMEs to tap digital solution providers to enhance their capabilities. For example, in the area of payments and collections, only one in four SMEs (25 per cent) are leveraging external solutions to provide such services.
- ASEAN SMEs are on the lookout for tech providers who can better meet their needs
To serve ASEAN SMEs, digital solution providers need to keep a pulse on what SMEs want and understand the pain points of a frustrating experience. According to our report, more than four in five (82 per cent) of the SMEs surveyed expressed their openness to switching providers, with advanced technology (71 per cent), more responsive customer care (68 per cent) and better pricing (45 per cent) being the top three factors driving this desire.
The need for better customer support was further highlighted by the SMEs surveyed. Customer-experience related issues were the top two reasons behind their dissatisfaction with their existing tech provider. Specifically, these were the speed of responding to customers (74 per cent) and the availability of human interaction as part of customer experience (64 per cent).
An SME owner shared, “Many digital service providers have pitched seamless customer service as part of their differentiators. But the response time ends up being dismal. When we work with external partners, we almost expect them to be part of our team, jumping in to help resolve issues once they occur.”