HIGHER revenue and productivity gains from digital transformation by small and medium-sized enterprises (SMEs) could add as much as US$24 billion to Singapore's gross domestic product (GDP) by 2024, helping the country rebound from the Covid-19 pandemic.
This is according to a survey of 1,400 small and medium businesses (SMBs) across the Asia-Pacific region, commissioned by Cisco and conducted by International Data Corporation (IDC).
The survey found that digitally mature SMEs enjoy twice as many benefits in terms of revenue and productivity, compared to SMEs that have an indifferent approach to digitalisation.
In Singapore, digitalisation in this segment of businesses could "significantly" impact the country's recovery, as SMEs employ 65 per cent of the workforce and contribute nearly half of its GDP.
"SMBs suffered the hardest impact in the current crisis but are expected to bounce back the fastest," said Bidhan Roy, managing director for small business in Asia-Pacific, Japan and China at Cisco.
"This is not just because most of them have had to rely on technology to continue to deliver to their customers, but also because of their agility and adaptability to innovate. As the region starts to emerge from the pandemic, this trend will play a pivotal role in the economic recovery."
The 2020 Asia-Pacific SMB Digital Maturity Study found that the pandemic has accelerated digitalisation efforts for nearly 70 per cent of SMEs across the region, and 86 per cent of the respondents said they believe digitalisation will help them develop resilience against similar crises.
The survey identified four levels of digital maturity among SMEs in the region. SMEs in Singapore, Japan and New Zealand lead in the Digital Observer category, which accounts for 53 per cent of the respondents. These are companies which have started digital efforts, although these "remain tactile and in bite-sized initiatives".
About 16 per cent of SMEs in the region are considered Digital Challengers or Digital Natives, having a strategy for the use of digital technology and being proactive in market responsiveness. Meanwhile, 31 per cent are still Digital Indifferents, or companies that are reactive to market changes and have not embarked on any digital initiatives.
In the survey, Singapore SMEs said they are looking to digitally transform for several reasons - to introduce new products and services, distance themselves from the competition and grow (51 per cent), to keep pace with their competitors who are also transforming (62 per cent), and to meet demand from customers (41 per cent).
However, they face challenges such as a shortage of digital skills and access to talent, lack of necessary technologies, and lack of commitment or budget from management. Mr Roy noted that governments, educational institutions, large corporations and industry bodies will have to come together to help SMEs seize digitalisation opportunities and derive the greatest long-term value from their transformations.
Daniel-Zoe Jimenez, associate vice-president for Asia-Pacific at IDC, said: "Digitalisation is no longer an option for SMBs - it's a matter of survival. Covid-19 has forced them to move to digital-first, becoming more dependent on technologies to ensure business continuity and resiliency."
He added: "Given the rapidly changing market conditions and speed of technology evolution, SMBs should work with the right industry partners to ensure they can maximise their technology investments and thrive in their digitalisation journeys."