Creating Awareness Among SMIs
Nicole Yeong
Computimes-27/08/01
Initiative is key to realizing the thriving growth brought on by electronic business (e-business) applications for small and medium-sized industries (SMIs). This is because all necessary viable solutions have been formulated and packaged to suit their needs.
“I may serve you food but if you don’t eat it, I can’t force you,” says Ng Boon Sing, chief executive officer of Smisme dot Com Sdn Bhd, the information technology (IT) arm of the Small and Medium Industry Association Malaysia.
“It will take a long time and a long-term approach because this is a difficult sector to penetrate. The SMIs are mostly family businesses and some owners don’t even speak English,” he explains further.
According to Ng, there are over 200,000 SMIs in the country and from this sheer number and their contributions to the country’s economy, the interest in their well-being is indeed justified. He points out that SMIs produce almost 25 per cent of all industrial output and form 91 per cent of all industrial establishments. Also, 30 per cent of SMIs produce for the export market.
The SMIs’ lukewarm response to information and communications technology (ICT) is also felt by network solutions provider Cordoda Corp Sdn Bhd, which is targeting this sector for its solutions.
“Most of them are predominantly running very small businesses and do not give much thought to IT. In fact, even owning a computer is considered a big step forward,” says its chief operating officer Shane Hodge.
“A significant number of them still prefer manual methods of conducting business, for example, preferring typewriters to computers and using hardcopy documents rather than online forms,” he explains.
"Much of the challenge today still lies in the cost of purchasing new equipment, upgrading and maintaining related equipment and systems. Furthermore, most of the SMIs whom we have approached do not have internal IT persons to manage the day-to-day- IT related matters. Most depend on administrative clerks to maintain internal systems,” he adds.
Cost. Ng says vendors are already coming out with cheaper solutions for SMIs. “Some software companies have which only cost 10 to 15 percent of the original price of a full, say, ERP (enterprise resource planning) suite,” he adds.
However, even at that discounted rate, companies still have to pay up to RM70, 000 to RM100, 000, which some SMIs are unwilling to fork out while others just cannot afford it.
“It is true that they are not embracing ICT because of the cost and shortage skilled labour, but it is important for them re-look the conundrum they are in and make bolder moves,” Ng stresses.
“To implement an application may cost up to five times the price of the software because they lack skilled worker to run the software. Software are proven to work, that’s not the problem. The problem is training workers and making sure they stay, or else pay for consultants to come operate it and pay much more,’ he says.
Study Needs. The issue can be reversed by forming a working committee within their organizations to look into implementing e-business solutions. “Not all brands are good for everything. Some may be more suited towards different industries, say chemical or plastics. They (SMIs) must be discerning about which brand(s) to choose,” Ng says.
He added that not all the big brands are better as some local software companies are able to provide better suited and, most importantly, cheaper solutions. The working committee must invite these vendors/companies to come and explain their products. Demonstrations are free and in the end, they too get educated about the products and how (the products) benefit the organization.”
Ng’s sentiments are echoed by Hodge. “In fact, we are more than happy to provide basic ICT training to these SMIs without additional charge!”
Solutions. To make e-business more viable, companies need not own the infrastructure or applications. This is possible through the application service provider (ASP) model. “They do not own the software or the majority of the hardware, and do not (need to) spend tens or hundreds of thousands on them. They only need to pay anything from a few hundred to a few thousand a month,’ Hodge explains.
The ASP model also allows workers to learn and familiarize themselves with the applications before a company invests in them. And it is an opportunity for SMIs to “taste” the benefits of e-applications.
However, there is a glitch to be corrected before this can take off and that is sufficient bandwidth for ASPs to smoothly deliver solutions. Ng says there is a correlation between bandwidth infrastructure and ICT adoption rate among SMIs. “At present, the dial-up connection is slow and the rates are high. With ADSL (asymmetric digital subscriber line) or other broadband technologies, the ASP model will truly take off.”
According to the Small and Medium Industry Development Corp (Smidec), a total of 704 applications were approved for thee-commerce grant totaling RM6.84 million since the grant was launched in August last year. Each grant is valued at RM10, 000 and is to be used to build a Web presence.
Of these applications, Smidec found that 426 had no online capabilities, 230 are able to use electronic channels to provide basic information such as online brochures, and 48 use standalone Web sites as an alternative to generate revenues. However, all have yet to use the e-applications to support core processes, trade or for customer relationship.
Aids. To fund their venture into e-business, SMIs have a few avenues to look for aid such as the Malaysian Technology Development Corp and Smidec.
Smidec offers four types of grants (which do not need to be returned) and two types of soft loans (loans at low interest rates, between 3.5 and five per cent). The grants are the Industrial Technical Assistance Fund, Factory Auditing Scheme, E-Commerce Grant and Skills Upgrading Programme while the soft loans are the Financial Package for SMIs and the Special Assistance Scheme for Women Entrepreneurs.
In reply to Computimes, Smidec says it “often encounter problems of poor take-up rates of the loans and grants provided by the Government to the SMIs. Their reluctance is mostly due to their lack of awareness of the programmes and the benefit accrued from grants and loan offered.”
Another thing, SMIs are not prepared to take risks associated with bank loans (providing for collateral). On this turf, Ng says financial institutions should use different criterion when evaluating loan applications from SMIs for investment in ICT. “If they (SMIs) have a proposal that shows a good business and profit plan, then perhaps they wouldn’t need to provide collateral.”
Alternatively, Ng says SMIs could seek the support of the Credit Guarantee Corp if they need to take loans from financial institutions.
Next step. With efforts from public and private organizations already in place, the next step should come from the SMIs themselves. “We spent the last year going on an awareness campaign. We want them to start implementation,” Ng says.
Other players, too, are convinced that with so much efforts laid before them, SMIs will gradually but surely take that step.
“There will be a growth of ICT use in this sector when all parties concerned have exploited all avenues possible to ensure that more of the SMIs have adopted new and cost effective methods in conducting business. We do not see these challenges continuing for long because as more companies begin to adopt e-business, more will realize potential gains from using automated systems,” Hodge says.
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