In a survey by ASME and Microsoft last year, small and medium sized enterprises (SMEs) projected that digital transformation will deliver a 26% increase in revenue and 22% reduction in cost, on average. These numbers are rosy, but they apply only to the 56% of companies which have embraced digital transformation. The remaining 44% of SMEs surveyed had not even made much progress in their digitalization journey.
The survey found that the top four barriers to digital transformation were: the perceived high cost, difficulty in integrating, no urgency and a lack of digitally-skilled workforce. Let’s examine these barriers one-by-one.
The “barriers”
1. Perceived high cost. When we read about the billions of dollars that governments and large corporations spend on digital transformation, as SMEs it is natural to feel overwhelmed. However, digitalization does not have to gobble up your next few years’ profits. In fact, SMEs can get up and running with a full-suite HR solution for the price of a cup of coffee for every employee per month. Besides, the returns in productivity and employee satisfaction will more than cover the cost.
2. Difficulty in integrating. Integration of new software can indeed be a huge headache if multiple different systems are purchased in a piecemeal fashion. This is where you want to look for software that can meet most of your needs under one roof, so that you don’t have to shop around for six separate systems to meet your requirements — and grapple with the need to integrate them.
3. No urgency. This is arguably a mindset rather than a statement of reality. Digitalization is no longer the future; it is the present. Some SME leaders may think there is no urgency because their bottom line is still healthy and they are still managing with their manual processes — or at least they think their staff are managing. However they are missing out of huge opportunities to make a leap in productivity and grow their company.
4. Lack of digital skills. A former defense secretary once said, “You go to war with the army you have, not the army you might want.” Most SMEs don’t have the resources to hire a dedicated data scientist or engage expensive consultants. However, an HR solution can do the work of optimizing business processes, analyzing data and producing actionable reports, without any increase in headcount. You may not have a huge army to fight the war, but you can have high tech weaponry software that can overwhelm your enemies competitors.
SMEs and digital transformation
SMEs are, in many ways, much better-positioned to jump-start their digital transformation journey than large enterprises: they face little internal bureaucracy and, with the right directions from leadership, can get started on digitalization without too much fuss. They can start small and build up from there.
The key is finding a trusted partner who can walk this journey with you. Truth be told, there are tons of vendors out there. Some will boast of endorsements from big name players or highlight government grants to offset their fees. Sifting through and interviewing all the vendors will take a lot of time and leave you no wiser as to which is the best solution, if you don’t have a well-considered evaluation criteria.
Evaluating solutions
Your key considerations should be:
1. Does the software meet your needs and is it easy to use? You may not fully know what you need, and that’s ok. If you get a well-designed software solution, you will likely discover many features that you never knew you needed. The software should have a pleasant-looking, modern user interface that is mobile-friendly, not an archaic windows-like interface from the previous century.
2. How much will the software cost over a five to eight year period? You will likely be using software for at least five years, so don’t just look at the first year’s fees. Also consider the cost of subscription as your headcount increases. If you are going for an on-premise solution, you have to add up the cost of servers, maintenance and the like. (Our advice: Just don’t use on-premise enterprise solutions — see our next point.)
3. Is the software continually improving in response to customer feedback? Generally on-premise software tends to be rather static, unless you are willing to pay and wait for customised upgrades. In our opinion, SMEs should always go for cloud-based solutions, unless there are compelling and rational reasons to keep data on-premise.
4. How fast can you get up and running? This matters because time is money for you. Can you sign up online and start using it right away? Or do you have to gather a project team and set aside several months to work with the vendor on the project to implement the new system? If you want to tap on government grants, expect some lead time for grant application, justification and approval.
5. How’s the customer support? This will matter greatly not just for the initial implementation but also in the long run as you use more and more features of the product. Customer support responsiveness is hard to gauge until you’ve signed up as a customer. But in general, response time from sales tends to be faster than that of customer support. So if even sales take a long time to respond to your queries, you shouldn’t waste your time (and theirs) signing up as a customer.
Digital transformation is a crucial endeavour for businesses, but one fraught with pitfalls. In the ASME survey, 75% of SMEs reported that their digital upgrades were not even “relatively” successful (ie, they failed). This highlights how important it is for organisations to start small and start fast on their digital journey, so that they can clock up small wins and build on them. Digital transformation is a journey, not a project.
Learn Anchor is a cloud-based HR productivity platform for SMEs. It reduces your HR admin workload, freeing up your time to focus on your core mission — serving your customers and growing your revenue.
