Govts targeting SME sector as engine of growth, IT sector as engine of innovation
No real stats on SMEs, nor any consistent definition of what constitutes one
IT is a mantra uttered so often that it has become a commonly accepted statement of fact: That Asia will power the new global economy.
“It’s become such a buzz topic,” said Lim May-Ann, executive director of the Asia Cloud Computing Association, who spoke to Digital News Asia (DNA) in Manila.
“If we accept that Asia is going to be the engine of the new economy, and also that 99.95% of companies in the region are small and medium enterprises (SMEs), then it stands to reason that SMEs are going to be the ones powering the new economy.
“But that begs the question: What exactly is an SME?” she added.
The quest to find the answer to that question began two years ago when Lim (pic) began digging around for information about SMEs in Asia. She soon discovered that it was a task that was more difficult than she had initially anticipated.
There was no agreement on what constitutes an SME, with some countries measuring it by company revenue or staff count. In addition, definitions could differ from one industry to the next.
“For example, an SME in the F&B (food and beverage) sector in Indonesia could be defined as having 1-20 people, while a garment SME in China would be classified as an SME with 2,000 people – based on how much product they’re able to churn out daily,” she said.
It was a problematic situation for the Asia Cloud Computing Association, an apex industry association that represents stakeholders of the cloud computing ecosystem in Asia. It wanted to know, in terms of SMEs, what the true size of the market is.
“In a nutshell, who can we sell to? If you want to have the argument that Asia is going to power the next wave of global development and that charge is being led by SMEs, then what is the face of the typical Asian SME?
“The answer is that there is no typical Asian SME, as different countries would have different flavours of SMEs,” Lim said.
Enter the association’s inaugural Asia Pacific SME Cloud Computing Attractiveness Index 2015 and the accompanying SMEs in Asia Pacific: The Market for Cloud Computing report, which breaks down 14 markets.
The study is touted to be among the first to offer comparable statistics across these 14 Asia Pacific markets – economies in which SMEs comprise variously between 60% and 99% of all businesses, 50% and 98% of all employment, and between 35% and 70% of their countries’ Gross Domestic Product (GDP).
Almost all governments across the region are targeting both the SME sector as an engine of growth, as well as the IT sector as an engine of innovation.
The biggest surprise, when it came to researching and compiling the report, was the fact that there were no easily available or comprehensive statistics on SMEs in Asia.
“I couldn’t get over that fact. You always assumed that since this is such a dominant segment of the economy that someone, somewhere, would be keeping track of SME developments – but there isn’t, and that is a real pity,” said Lim.
“There are industry associations and SME organisations in many of these countries, but their records are very focused on their membership. There isn’t really anything on a national-level in many cases,” she added.
It is a gap that the Asia Cloud Computing Association hopes to help plug, with Lim noting that there are almost no comparable measurement benchmarks to assess the effectiveness of current investments for SMEs.
“Cloud computing promises to be the great leveller, bringing enterprise grade tools and capacity within reach of SMEs.
“In addition, it will bring next-generation infrastructure benefits within reach of emerging economies, without the need for crippling capital expenditure.
“So what is the potential for this segment of the economy to be more productive with technology tools, especially cloud computing? We need a place to start so that we can then measure that development,” she added.
Law of attraction: Measuring cloud appetites in Asia
The Asia Pacific SME Cloud Computing Attractiveness Index evaluates markets according to five key criteria: Market size, market coherence, market demand, price, and government support.
Singapore and Hong Kong place second in the Index, behind Japan and ahead of South Korea and China, due to the strength of their SME economies.
In Singapore’s case, the Government’s focus is on supporting the SME sector through on-boarding schemes, adoption and training programmes, and, where necessary, subsidy systems.
Taiwan too takes a very top-down supportive approach to the SME sector, albeit on a more selective and strategic basis, according to the association.
In Indonesia, a market of enormous potential, access and awareness (simply understanding the benefits) remain problematic, as does affordability – all of which brought the sleeping giant’s Index rating down.
In contrast, the Philippines and Thailand have focused quite heavily on new IT solutions, enabling their overall economic growth and supporting new cloud computing programmes.
The Philippines in particular is actively looking at what the cloud will mean for the business process outsourcing (BPO) industry, a mainstay of growth in the country.
Thailand too has been promoting cloud computing in many of its key sectors, but struggles with a divergent economy and multiple drivers. It is also promoting affordable programmes and focused support.
Malaysia is still an emerging economy, with most SMEs involved in low-tech and traditional businesses. However, as the country continues its transition to a digital economy, modern companies are replacing more of these traditional businesses.
However, according to the Malaysian Government, some 73% of SMEs do not use ICT in conducting their business. Of the 17% which do, 67% used the Internet in their business, although only 12% had their own websites.
The report also noted that it is vitally important to clarify the definition of an SME if they are to be successfully targeted and serviced.
Vietnam, for example, has the largest SMEs in employment size, with an average of 134 employees per enterprise. Japan and Malaysia also have SMEs with large employee numbers.
Japan and Vietnam both consider businesses of up to 300-500 employees as SMEs, while Indonesia by contrast has four different definitions of what an SME is.
Lim said that based on feedback from the industry and the level of interest from the different countries, the report could most likely be a bi-or tri-annual affair.
“It would be nice to have it as an annual report, but given the current lack of ready statistics available, getting the updates would be quite a painful process,” she lamented.
To read the Index and report in full, click here.
ANZ, Thailand and Philippines big winners in Cloud Readiness Index
Rush to regulate data sovereignty hampering cloud growth in Asia
Cross-border data transfers need to be simplified: White paper
ICT adoption: Vendors, SMEs need a new paradigm
For more technology news and the latest updates, follow us on Twitter, LinkedIn or Like us on Facebook.