Information and Communications Technology (ICT) and Digital Adoption: E- Readiness of Malaysian SMEs

Executive Summary

This survey gauges the extent of information and communications technology (ICT) and digital technologies adoption by small and medium-sized enterprises (SMEs). The adoption of technologies entail the level of IT usage; adequacy of know-how; availability of technicalsavvy workforce; and financial resources.

The survey was conducted on a random sampling. A total of 1,225 questionnaires were sent out and only 159 responded, generating a response rate of about 13%.

Key findings of the survey are as follows:

1. The overall level of ICT adoption is marginally above moderate, and primarily in a handful of designated operations or purposes.
2. The size and activity of the business influences the adoption of ICT. As expected, medium-sized SMEs generally have high usage of ICT.
3. The usage of ICTs are mostly in administrative and e-mail communication along the value chain. The most widely used technology applications by SMEs are accounting packages, word processing, and spreadsheets. On a less encouraging note, there is limited utilization of advanced ICT applications (ERP, CRM, AI, and Big Data).
4. Only 16% respondents said that they are currently using e-commerce while 11% disclosed that their businesses can function without the deployment of e-business.
5. Most SMEs acknowledged the tangible benefits of integrating digital technology into their core business operations. These include unlimited avenue to sell in domestic and overseas markets, time and cost savings as well as enhanced customer service delivery.
6. Data privacy and user protection against fraud should be accorded top priority to provide a strong sense of personal security and trust to encourage the adoption of digital technology.
7. E-government services should also be expedited to speed up decision making processes, reduce bureaucracy, save cost as well as increasing work processes transparency.
8. About 62% of respondents have either heard or aware of the Digital Free Trade Zone (DFTZ). 19% have not even heard or aware about it. Though the respondents were aware of DFTZ, many are still oblivious to the functions of DFTZ. Nevertheless, they believe that DFTZ will likely be a regional e-commerce hub to tap into regional markets.
9. The factors that hindered the slow adoption of ICT are financial constraints; lack of know-how; lack of in-house expertise and technical skills as well as security uncertainty.
10. Only 29% of respondents placed digital technology as top business planning priority. While more than half of SMEs viewed innovation and digital technology as important but not an urgent priority.

Despite the challenges and barriers inhibiting the use and adoption of digital technology by SMEs, there is no doubt that new wave of innovation will drive the higher level usage of digital technology with the Internet of Things. In a nutshell, SMEs, irrespective of size must be ready and leverage on the deployment of digital technologies and tools to capture the returns of fast growing e-commerce.

The Government have put in place the supporting initiatives and laid digital infrastructure to drive the e-commerce growth. These together with the establishment of Digital Free Trade Zone (DFTZ) can be enhanced further to create a favourable conducive ecosystem to accelerate the adoption and integration of digital technologies with e-commerce as the new business model, a departure from “business as usual” to fully harness business propositions and expand market frontiers.