Small and medium-sized enterprises (SMEs) in ASEAN do not plan to slow down their investment in digitalization, and plan to invest a further $130 billion for digitalization over the next three years, according to a recent white paper published by TDCX.

According to the report titled “ASEAN SMEs: Small Business, Big Opportunity for Tech Providers”, over the last three years, these enterprises have invested more than $78 billion in such initiatives.

There are more than 70 million SMEs across ASEAN which make up about 97 percent of all businesses in the region, and ASEAN SMEs have signaled their strong commitment to digitalizing through their investments.

According to the report, ASEAN SMEs have set their sights on leveraging external tech providers as a way of accelerating their digital ambitions.

It said that these 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.

The study also revealed that nearly half (49 percent) have only digitalized a few functions across their business.

On average, ASEAN SMEs currently use 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 percent) of the region’s SMEs only took the plunge to digitalize in the last two years and those in the consumer goods, retail, and food and beverage (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 percent), industry knowledge (69 percent), and speedy response times (65 percent).

“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 the 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,” said Laurent Junique, Chief Executive Officer of TDCX.

It is noted that 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 $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 percent) and digitalizing operations such as sales and marketing and customer relationship management (69 percent) in the next two years.

However, they continue to grapple with a host of challenges. These include access to knowledge and expertise (67 percent), training programs to reskill or upskill employees (66 percent), and advisory and consultation on technology adoption (65 percent).

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 percent of SMEs see value in working with an external tech provider.

The top two areas where they leverage 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 percent) are leveraging external solutions to provide such services.

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 the report, more than four in five (82 percent) of the SMEs surveyed expressed their openness to switching providers, with advanced technology (71 percent), more responsive customer care (68 percent), and better pricing (45 percent) 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 percent) and the availability of human interaction as part of customer experience (64 percent).

The report was conducted by Intuit Research from September to December 2022, to understand SMEs’ mindset toward digitalization.

A total of 750 SMEs were interviewed in five countries, namely, Singapore, Indonesia, Malaysia, Vietnam, and Thailand, with an equal number of participants from each country.