ICT adoption: Vendors, SMEs need a new paradigm

By Edwin Yapp November 25, 2013

Though ICT usage high amongst SMEs, real ICT adoption for the business remains very low
Vendors need to execute better, improve vertical knowledge; SMEs need to be less cost-conscious

ICT adoption: Vendors, SMEs need a new paradigm SMALL and medium enterprises (SMEs) are often perceived as being resistant to adopting technology, but there are many good reasons why. These include vendors overpromising their proposition, the lack of expertise within the SMEs themselves when dealing with software implementation, and the cost-conscious nature of these companies, a panel discussion said last week.

Speaking at the Digital News Asia (DNA)-VADS forum entitled Is the Cloud out of Reach for SMEs?, VADS chief executive officer Ahmad Azhar Yahya (pic) noted that the usage of technology by SMEs is strong, but to a large extent, those in Malaysia do not adopt information and communications technology (ICT) and apply it to their businesses enough.

Ahmad said he believed this could be because there are some vendors in the business that are prone to “overpromising” their propositions when pitching their solutions at SMEs.

“I think a lot of time, vendors who sell solutions to SMEs overpromise. Sometimes they tell SMEs that by using such and such a product, they would save money and/ or increase their sales.

“But they may not explain how long it takes to get there as that journey might take up to five years,” he said, adding this kind of experience frustrates SMEs.

For Gwei Tze-Co, chief executive of Kinderdijk, it was not so much overpromising as it was a difficult implementation of an enterprise resource planning (ERP) system several years ago that was a sore point.

Kinderdjik is one of the largest retailers of baby products, with over 600 distribution points in Malaysia.

Gwei said he started out with an RM2,000 accounting package that lasted him two years. Realising that he needed to expand as his business was doubling, he then spent heavily on a full-fledged ERP system.

“We spent about RM70,000 for the software at the time when our turnover was about RM3 to RM4 million. We were growing fast at 100% to 150%, and that’s when we went with a sophisticated system supplied by a big name system,” he said, declining to reveal the vendor’s name.

Gwei admitted that he and his staff struggled for three years to maximise the benefit of the ERP system as the company tried to change the system to suit its processes, eventually realising that this was the wrong thing to do.

“The right thing was to change our process to suit the system,” he said. "[Looking back], I wish they [the vendor] had shared the best practices within the retail sector with us.

“Back then, the vendor just passed me stacks of white paper on what I should do. [Eventually], we had to spent a lot of money to customise the system for us again, and a lot of my staff left and we learnt the hard way.”

Gwei (pic) also believes that while there are many ERP systems out there, there seems to be a lack of expertise by vendors in implementing products that are specific to niche verticals.

“The implementation of an ERP system for the construction industry would be different compared with the retail sector,” he said.

“What I realised is that our vendors should really be studying our processes and interviewing our people, asking us what we actually need, before selling to us. That would really save us time and money, and would have helped us in our adoption.”

Gwei also noted that this experience has taught him to be careful going forward, and while he has expressed interest in cloud computing, he remains cautious about adopting such technology.

“Cloud should be cheaper and more modular,” he said. “But I’m still worried that what happened to me would happen again.”

ICT adoption: Vendors, SMEs need a new paradigm Lee Hwee Hsiung (pic), ICT Bureau chairman of the SMI (Small and Medium Industry) Association of Malaysia, said the cost-conscious nature of SMEs is still the greatest impediment to the adoption of ICT.

Reflecting on his experiences with the SMI Association, Lee said that local vendors tend to overpromise but under-deliver in terms of ICT support.

He conceded that foreign vendors have good products and support, but lamented that they were very expensive, thereby causing SMEs to shun ICT.

“If we can find solutions for SMEs that could lower their total cost of ownership (TCO) and yet provide good services, that would be ideal,” he said, adding that this is what Singapore is doing.

VADS’ Ahmad noted that besides being cost conscious, simplicity is another major factor that would encourage technology adoption in SMEs.

“The keyword is simplicity in the product offering,” he argued. “SMEs want simple and easy-to-use products and services they can understand. When they can see the value of the product and service, they will pay for it.”

For Saifol Bahri, deputy chief executive officer of SME Corp, it’s all about getting buy-in from the top bosses.

“It’s all about top-down, or the direction and instructions that come down from the CEO,” he argued. “An SME boss might say, ‘I’ve got seven million already in my pocket, so why would I want to bother with increasing productivity?’

“The sad truth is that the percentage of SME bosses who believe in the value of ICT is very small, and that’s the real challenge.”

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