The digital transformation of small and medium businesses (SMBs) in the Philippines could add between P1.17 trillion to P1.36 trillion to the economy, a significant contribution to economic recovery post coronavirus pandemic, according to the 2020 Asia Pacific SMB digital maturity study.
The study, commissioned by Cisco and conducted by International Data Corp., also found SMBs that are more digitally mature enjoy higher benefits in revenue and productivity, compared to those that have an indifferent approach to digitalization.
The study showed that SMBs in the Philippines are moving closer to the digital observer stage, although 73 percent are still in the first stage of digital indifferent.
According to the study, local SMBs are prioritizing improved customer experience and service delivery as the main drivers for digitalization.
More specifically, 26 percent of SMBs are aiming to improve customer experience, 22 percent are aiming to improve service delivery, and 19 percent are focused on improving marketing and sales.
These are positive and significant developments since SMBs account for 99.6 percent of all businesses, 62 percent of the country’s total employment and contribute 36 percent to overall gross domestic product, making them a critical component to the Philippines’ trade and commercial landscape.
The SMB sector has been among the hardest hit by the coronavirus disease 2019 (COVID-19) pandemic.
“As the Philippines continues to overcome the current situation, and consumer and business activity starts to pick up, digital transformation of SMBs will play a pivotal role in their recovery and contribute to the country’s overall economic growth,” said Karrie Ilagan, managing director for Cisco Philippines.
According to the study, top priority of SMBs is investment on AI or analytics (18 percent), followed by cloud technologies (15 percent) and purchase or upgrade of IT infrastructure software (11 percent).
However, SMBs are also facing challenges in adopting digitalization strategies.
According to respondents, the biggest hurdle SMBs face in going digital is lack of budget or commitment from management (15 percent), followed by shortage of skills (14 percent).
Also, 12 percent experience cultural resistance to change, as digitization of products and services require a substantial shift from long-standing practices.