SINGAPORE - Small businesses are lagging behind their larger peers in digital transformation, a survey found on Monday (March 22).
They make up 72 per cent of the companies polled that have not yet digitalised.
Their top reasons for holding back include high costs, fear of cyber-security issues and a lack of necessary digital skills among employees, according to the UOB survey of 782 small and medium-sized enterprises (SMEs). Some are also concerned that new systems will not be compatible with their old ones.
The UOB SME Outlook 2021 Study, published on Monday, was conducted from late November to early December among companies with revenue of less than $100 million. The aim was to understand the rate of digital adoption among SMEs in Singapore and the support needed.
It found that 41 per cent which had implemented digitalisation initiatives last year recorded revenue growth. By contrast, of the SMEs which had not digitalised, only 24 per cent saw revenue improve .
Those that had digitalised their entire business or multiple areas reported better revenue growth than those that digitalised only one area, while six in 10 SMEs that did not adopt any digital tools saw their net revenue decline last year from 2019.
The SMEs that have digitalised are also more optimistic about 2021, with three in five saying they are expecting revenue to grow this year, and seven in 10 saying they feel more prepared for a post-Covid-19 business recovery.
In contrast, only three in 10 SMEs that did not adopt digital tools are expecting revenue growth in 2021, and four in 10 non-adopters feel more prepared for business recovery after the pandemic.
UOB head of group business banking Lawrence Loh said: "Digitalisation offers businesses many opportunities, from improving their processes and reaching out to new customers to having a direct and measurable impact on their revenue."
Digitalisation efforts helped SMEs achieve greater productivity in 2020, the study found. This was a business objective that firms had listed as a top priority for the year in a separate UOB study conducted in late-2019.
SMEs in business services, manufacturing and engineering, community and personal services, technology, media and telecoms and consumer goods sectors saw the highest year-on-year percentage increases in productivity and efficiency, ranging from 42 to 49 per cent.
Aside from higher productivity, digitalisation also helped businesses to improve customer experience, increase coordination across departments, enable remote working and drive business performance.
Mr Loh said: "The digitalisation journey is a long one and we urge SMEs to stay the course to see their efforts pay off when they emerge stronger through the pandemic."