Digitising SMEs means digitising the national economy

Creating awareness is of utmost importance, govt has to address fears


Parvez Iftikhar June 26, 2017
A digitised SME attracts the best available talent and digitisation also helps in retention of that talent. photo: file

ISLAMABAD: During my recent house renovation work, it was pleasing to see my semi-literate contractor using WhatsApp to remotely get my approvals for various small items that he had to procure for me.

Normally, he would have brought some samples to choose from and then gone back to procure the selected ones; this has become quite a common occurrence. By using a free app on his smartphone, he not only reduces his cost but also saves valuable time. This is a very rudimentary form of a micro enterprise increasing its operational efficiency – through digitisation at no cost.

Now consider this

In Pakistan, Small and Medium Enterprises (SMEs) constitute around 80 to 90% of over 3.2 million private enterprises in the industrial, services and trade sectors, and employ around 80% of the non-agriculture labour force, contributing over 40% to GDP, with a share of 35% in value-added manufacturing (from SMEDA website).

In short, digitising the SMEs would amount to digitising a major part of the nation’s economy.

Digitisation allows SMEs to manage their businesses using something akin to mini Enterprise Resource Management (ERM) solutions, cost-effectively. In fact, digitisation does even more than that, like selling products and services online, activating mobile marketing campaigns, online customer acquisition, retention and enhancing customer experience. The instant review system, available when something is bought online, is a flawless way of marketing products through customer experience, at no cost. Zero marketing.

If an SME has a reasonably good product, or value proposition, it does not even need to be in a big city. Selling is then easily done over the internet, using social media and its review system. A recent KPMG-Google study in India shows that the number of SMEs who expand their businesses beyond their hometowns doubles if the SMEs are digitally enabled.

Thanks to proliferation of mobile internet, the customers of today are increasingly becoming used to online purchasing and interacting with the sellers. Digitisation also allows monitoring of SME workers almost on a minute-to-minute basis, which is particularly important where the customers expect immediate response, like in case of travel agents.

A digitised SME attracts the best available talent, and digitisation also helps in retention of that talent. This is because nowadays the brightest boys and girls, coming out of colleges and universities are used to working with digital tools. The only place where they enjoy working is a digitised workplace.

Digitising the SMEs is not a ‘good-to-have’ anymore. It is a ‘must-have’.

How to get there

The question arises; how would a typical SME get to learn and make use of digitisation. Well, for that there are professional system aggregators, who offer packages of collaboration software tools, via the cloud, to business verticals like clinics, travel agencies, schools, retail outlets, small-scale manufacturers, restaurants, workshops, etc.

Almost all multinational IT and telecom firms are starting to offer system aggregation services. They also customise those packages according to individual requirements, and help the SMEs run those. In case of bigger SMEs collaboration software tools even replace dedicated IT departments. The challenge that they face is that of last-mile access, which is with ISPs and mobile operators.

It is not expensive

Normally, an SME is constrained by financial and other resources. But today such software products do not need to be purchased, unlike in the past. Broadband makes digital services from the cloud available to everyone. And since the software does not reside locally, the requirement of costly hardware goes down dramatically. That is why in case of micro enterprises even smartphones do the job. All one has to do is subscribe to the desired service/s against relatively small monthly/annual subscriptions. Discontinue when not required.

Coming to Pakistan

Unfortunately, Pakistan is lagging behind in digitisation of SMEs. Other than social media, email and spread sheets SMEs do not make use of any digital tools in their businesses. Most of the SMEs do not even know what benefits digitisation would bring them and how inexpensive it is nowadays.

Therefore, creating awareness about these modern tools should be a priority, particularly of organisations like SMEDA, whose mandate towards fostering growth of SMEs revolves around skill development through training, industry support for productivity enhancement, and business development services, etc.

The Pakistan Economic Survey 2016-2017 while conceding, “In Pakistan, lack of infrastructural development and technology are the major constraints that hinder SME productivity and competitiveness”, lists projects that SMEDA has been implementing lately across Pakistan. Digitisation – or creating awareness about it – is not to be found in it.

Once there is awareness among a certain critical mass, many SMEs would start picking up from each other. A recent survey by Facebook found that in India, 38% of SMEs indicated that they rely on each other to learn.

The secret lies in creating awareness first.

Recently, the Ministry of Science and Technology launched a project with SMEDA, called “Certification Incentive Program for SMEs under PQI Initiative 2025”, consisting of a series of awareness seminars and consultative meetings and workshops with the stakeholder trade associations.

The Ministry of IT is also preparing an SME-related study through USF, but the details of what will follow the study are yet to be revealed.

Others who could help are the chambers of commerce, TEVTA (to impart skills training to SMEs), virtual university (to train system aggregators), and FinTech-related enterprises like Karandaaz (to provide funding where essential), etc.

As mentioned above, last mile internet access providers, particularly cellular mobile operators, have a huge role to play. With access to more than hundred million individuals, which obviously include all SMEs, the telcos can easily create mass awareness and offer packages of digital services from the cloud and become Cloud Service Providers (CSPs) in collaboration with system aggregators.

This would surely be out of their comfort zones but on the face of it, with dwindling voice telephony revenues, and data tariffs also not showing much of a promise, it is important for their own survival. However, if they are still not doing it, there better be some good reasons. MoIT/PTA should look into those.

There is one more reason given by some of the SMEs for staying away from such “adventures” as digitisation, and that is fear. It is not just fear of the unknown, but also fear of the taxman – a challenge for the government, which it has to address even if there was no digitisation.

The writer is former CEO of the Universal Services Fund and is providing ICT consultancy services in several countries of Africa and Asia

Published in The Express Tribune, June 26th, 2017.

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COMMENTS (1)

Muzaffar H Khawaja | 4 years ago | Reply Very useful article. In addition to above mentioned facts, i think, most of the SMEs are not inclined to shift themselves to digitisation because of non-availability of digital currency plateforms and/or economical & legitimate domestic & international payment gateways. For instance, if an SME broadens its customer base beyond its hometown and offers its products and services to country-fellows as well as to International Markets, there appears no payment gateways to accept sales proceeds from customers. Within Pakistan, some courier companies are offering Cash on Delivery (CoD) accounts, but their costs are bit higher to deliver heavy weight goods and collect cash. Moreover, these courier companies normally retain the proceeds with themselves for upto one month, this method affects the cash flows of SMEs. Hence, Governments, SBP, Banks, SMEDA, Kaarandaz & FinTechs should take serious measures for introducing some powerful and reliable cryptocurrency tools to facilitate SMEs as well as customers to instantly exchange sales proceeds among themselves. Steps to minimize channels of money transfers would definitely reduce the costs and time period involved in getting hard earned sale proceeds. So pathetic to know that Pakistan is still not listed with PayPal. PayPal is world's most reliable and most popular payment gateway. SMEs & individuals in USA prefer to make online payments thru PayPal only. A great number of households in USA dont buy things from an online vendor who doesn't hold PayPal account. Therefore, an emerging Pakistani online business entrepreneur finds himself in a very difficult state to sale his/her products to most lucrative markets.
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