Small and medium-sized enterprises (SMEs) in Malaysia have set their sights on leveraging external tech providers as a way of accelerating their digital ambitions, according to TDCX’s (NYSE: TDCX) latest 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 SMEs across ASEAN, including Malaysia are taking to grow their business in the digital economy and their expectations of tech providers.
Malaysia’s digital economy has made significant progress since the pandemic hit and is one of the fastest growing sectors in the country. The country’s current digital economy accounts for 23 per cent to the gross domestic product (GDP) and is projected to grow to 26 per cent by 2025[1]. In 2022, SMEs made up 99 per cent[2] of all businesses in Malaysia, contributing 37 per cent of the country’s GDP.
However, the study revealed that half of Malaysia SMEs have only digitalized a few functions across their business, while some are at a nascent stage in their digitization journey. Similar to the SMEs across ASEAN, Malaysia SMEs are currently focused on digitalizing their business while deploying more technology, with business process improvement as the top area of focus.
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 tech providers. Hence, the time is also ripe for tech providers to engage with SMEs to support their digital transformation.”
With the aim of accelerating their rate of digitalization, Malaysia SMEs are taking steps to bridge the gaps in the adoption and deployment of digital solutions. 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, Malaysia SMEs are looking to work with tech providers that have, industry knowledge (81 per cent), speedy response times (71 per cent) and strong technical skills (64 per cent)
Key findings across ASEAN 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[3].
In addition to improving their data analytics and innovation capabilities, Malaysia SMEs are focused on digitalizing operations such as sales and marketing and customer relationship management (77 per cent) and transforming their traditional business model to an e-Commerce enabled one (75 per cent) in the next two years.
However, they continue to grapple with a host of challenges. These include access to knowledge and expertise (77 per cent), training programs to reskill or upskill employees (64 per cent), advisory and consultation on technology adoption (64 per cent), as well as having the right connections with suitable service providers (59 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 skill sets to adapt to a digital future.
On the operations front, there remains a big opportunity for ASEAN SMEs to tap tech providers to enhance their capabilities. For example, in the area of payments and collections, only one in four ASEAN 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, tech providers need to keep a pulse on what SMEs want and understand the pain points of a frustrating experience. According to TDCX’s report, more than four in five (82 per cent) of the ASEAN 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 ASEAN 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.”
Research Methodology
TDCX’s ASEAN SMEs: Small Business, Big Opportunity for Tech Providers 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.
The report is available for download here.