How can SMEs overcome barriers to start their Digital Transformation Journey?

Are you prepared to start your Digital Transformation as an SME?

Digital Transformation is a huge undertaking for SMEs, especially in an extremely competitive business landscape such as Singapore. It is difficult to create that vision of how an SME can reap the multitude of benefits of Digital Transformation when there are obstacles to even start such a project. There are a number of barriers commonly mentioned by SMEs in starting their Digital Transformation Journey, with the top three being Skills, Costs and Time.

Embarking on projects that are not part of a company's core skill, such as IT and Digital Transformation, will require hiring a new staff with the skills to manage and execute the project, which will be a strain to the SME's budget and cashflow. This barrier itself can extinguish any hopes of getting the project approved with a strong ROI.

The alternative to hiring is upskilling current staff. This may require some job re-design, which is a common practice in SMEs in Singapore where most staff holds multiple roles and responsibilities. However, the costs of sending staff to specialised courses in Digital Transformation may be prohibitive when considering other indirect costs. The SME may have difficulties to release the staff to attend the course as SMEs are usually lean and don't have enough staff to cover for absences. The silver lining is that there are a lot of government subsidies in Singapore to cover these costs, including absentee payroll claims. But how much impact will removing the staff to attend courses have to the core operations of the SME? Will there be a dip in revenue, further impacting the company's bottomline?

It is a mid to long term project if a company wants to identify a staff, do a job re-design for the staff, gets the staff upskilled, and then start the project. Without good experience, the likelihood that the staff will not be able complete or succeed in the project increases. With heavy accountability, the stress levels for this staff increases. How resilient is this staff to stay on to complete this 3 to 5-year project? The investments poured into this project is significant even before the project starts fully. At this stage, it is difficult for an SME to abandon the project with high sunken costs.

The good news is that there are solutions to circumvent most of these barriers. The simplest way is hiring a business consultant to manage Digital Transformation projects. There are many consultancy agencies that specialise in managing IT and digital projects but not all agencies are the same though. Each agency is usually highly tuned to specific industries or client sizes.

For example, SMEs will most likely not approach the Big 4 consulting firms that have governments and MNCs as their clients. They are over budget and may not be interested in taking on small projects. There are other mid-sized agencies that would take on smaller projects but their fees may still run up to 6 digits and may not even include execution of the projects.

Contrary to common beliefs that bigger consultancy agencies can deliver better outcomes, the truth is that SMEs are most comfortable with boutique IT consultancy firms that have depth in skills and knowledge to manage and execute Digital Transformation projects.

These smaller, long established firms will have many partners from different specialised IT areas to tap on the skill sets needed to complete the projects successfully. And most importantly, some IT consultancy agencies focus on SMEs and have been serving SME clients successfully for decades. Since these boutique agencies run lean, similar to any SME, they are able to keep their own costs down when serving SME clients, thus allowing them to charge reasonable fees to their clients.

They are more flexible and creative in finding the right solutions for SMEs and within budget, ensuring there are limited risks of running over budget. It is also in their interest to complete the Digital Transformation projects within time and budget so that they will get the full project payments and move on to the next project.  Best of all, the established IT Consultancy firms can be relied upon to manage Digital Transformation projects from start all the way to executing the projects to completion. It is a win for both the established boutique IT consultancy and the SME client, which almost always results in a strong, long-term symbiotic relationship.

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