Malaysian SMEs to invest more in technology

By Digital News Asia June 7, 2018

65% of Malaysia’s SMEs will focus their investments on technology over other fixed assets
78% plan to invest in software and other innovations to improve customer experience and loyalty

Malaysian SMEs to invest more in technology

SMALL and medium enterprises (SMEs) in Malaysia plan to invest more in technology in order to succeed under increasingly challenging conditions. These are the findings of the Asean SME Transformation Study by United Overseas Bank (UOB) and Dun & Bradstreet.

This study focuses on SMEs with annual revenues of between US$1 million and US$20 million to capture general characteristics of these enterprises but excludes micro or larger enterprises that might present other unique sets of opportunities and challenges.

The survey found that 65% of Malaysia’s SMEs will focus their investments on technology over other fixed assets in 2018 to drive business performance and remain competitive. This echoes the direction of Asean SMEs where three in five (60%) prefer technology over investments in assets such as factories and machinery.

A majority (78%) of Malaysia’s SMEs surveyed also say they would invest specifically in software such as improving their websites and creating mobile apps. They believe such innovations would enable them to create better customer experience and increase customer loyalty. Hardware and infrastructure investments rank second for SMEs in Malaysia (77%) and across the region (65%).

Malaysian SMEs to invest more in technology Chow Sang Hoe (pic, right), Partner, Ernst & Young Advisory Services Sdn Bhd and EY Asean and Malaysia Advisory Leader, says, “While SMEs see the need to innovate, they have also been cautious about adopting cutting-edge applications, relying instead on current tools such as licensed software, customer relationship management, and content and database management. Nevertheless, increasing disruptive offerings such as robotics process automation, artificial intelligence and 3D printing have begun to pique the curiosity and interest of SMEs to drive business performance.

“In the manufacturing sector for example, the government encourages growth and productivity through greater automation. This can be achieved by the digitizing of factories which is beyond just a step-up in automation and deployment of new technologies. New digital factory systems will be far more inter-connected and powered by a completely different data ecosystem driven by big data, analytics and physical technology. Most importantly, these technologies support mobile devices such as our smart phones.”

As businesses continue to expand their digital exploits, there is an increasing demand for talent with experience in digital. Data specialists and analysts, user experience or interface designers, and digital marketers are highly sought to help these businesses transform effectively for the digital economy.

Chow adds, “The government is determined to focus on technology-based education, a key factor in building an effective long-term pipeline of talent for the digital economy. There is also a push to tackle the talent challenge for SMEs through productivity and capability development programmes.”

More benefits to be reaped from SaaS

Despite the focus on technology, the survey reveals that SMEs are not aware of how efficiently pay-per-use or Software-as-a-Service (SaaS) can address their business needs. SaaS refers to web-based software that can be used to manage business processes such as accounting, invoicing and payroll.

SaaS is a more cost-effective option for small businesses than traditional licensed software. It provides users the flexibility to pay only for what they use and to scale the solution based on their business needs. As small businesses expand, they can add on new functionalities or increase the number of users for their existing solution without the need for further significant investments.

Optimistic growth expectations

The survey also indicated that SMEs generally have an optimistic outlook despite global economic headwinds and challenges such as rising costs, flagging productivity and not harnessing new technologies.

Fifty-four percent of the Malaysia respondents anticipate revenue growth, while about a quarter project a double-digit expansion. This optimism is highest among SMEs in the manufacturing, wholesale, mining and transportation sectors. Additionally, 44% of Malaysia SMEs have ambitions for overseas expansion, fairly higher than the regional average of 37%.

“Business sentiment among Malaysian SMEs remain positive, enhanced by government support in terms of financial access and push for digitisation and innovation. Targeted initiatives such as manpower and infrastructure upgrade programmes in higher value-added sectors, tax incentives, grants and loans will continue to further propel the growth and resilience of local SMEs.

“The new administration is also committed to ensuring a stable ringgit and a vibrant stock market as well as strengthening governance and institutions. All of these are positive steps towards boosting investor confidence in the long run and will play a critical role in enhancing cross-border trade across the region as well as Malaysia’s competitiveness in the world’s marketplace,” concludes Chow.

As part of the study, EY provided insights via an industry survey of 1,235 SMEs across the six largest Asean countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – to understand how Asean SMEs are positioning themselves to participate in the region’s growth and adapt to the changes ahead.

To access the report, please visit www.ey.com/aseansme2018.