Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

How Malaysia’s SMEs can play in the global enterprise arena: Sage interview

AvantiKumar | June 27, 2016
SMEs play a very important role in the national economy and must leverage innovation to drive growth and derive the opportunities from the AEC and the TPPA, Sage’s Yaj Malik said to Computerworld Malaysia.

Small and medium enterprises (SMEs) and SMBs are a very important part of Malaysia's national economy and must leverage technology innovation to drive growth as well as extract opportunities from the forthcoming Trans-Pacific Partnership Agreement (TPPA) and of course the Asean Economic Community (AEC), said Yaj Malik, who is vice president and general manager for business applications company Sage Asia, when speaking recently to Computerworld Malaysia.

At Sage, we often see SMEs that are lean on manpower, he said. Many are run by a team of core staff who stretch across multiple work roles. Many of them are also rather conservative in operational culture, with a management that is resistance to change. Many small and medium businesses also lag behind in innovation and technology adoption, and fail to harness technology to drive efficiency and productivity. In the long run, this can have a detrimental impact on overall business performance and competitiveness, and of course, their bottom line.

Business applications company Sage Software (Sage) provides systems for accounts, payroll, Human Resource, ERP (Enterprise Resource Planning), CRM (Customer Relationship Management) and payments handling.

Yaj Malik, Sage VP-General Manager, Sage Asia 

Photo - Yaj Malik, VP, General Manager, Sage Asia

 

Could we start with your take on the importance of SMEs to Malaysia's economic goals, especially in the lead up to 2020?

Small and medium enterprises or SMEs play an important role in both the global economy as well as in Malaysia. According to a survey by the International Labour Organisation (ILO), SMEs are responsible for approximately two-thirds of jobs globally. SMEs also make up approximately 95 percent of all companies and contribute at least 50 percent of GVA [gross value added] according to World Bank research 2014 as reported on Baker Tilly International.

Additionally, according to SME Corp chief executive director Datuk Dr Hafsah Hashim, SMEs are important economic agents for Malaysia based on its GDP [gross domestic product] contribution of 35.9 per cent last year, which was above the standard benchmark for a developing nation status for SMEs.

What are some of the challenges SMEs face in the current 'disruptive' global economy?

SMEs played a critical role in helping the global economy to emerge from the last financial crisis. In the last few years they are responsible for 70 percent of new jobs created globally. Regrettably they are often the hardest hit, particularly when borrowing costs rise.

We also often see SMEs that are lean on manpower. Many are run by a team of core staff who stretch across multiple work roles. A survey by Sage found that more than a third of SMB owners sacrifice family time for their businesses while two-thirds have used personal savings or re-mortgaged their homes to fund their business.

Many of SMEs are also rather conservative in operational culture, with a management that is resistance to change. Many SMEs also lag behind in innovation and technology adoption, and fail to harness technology to drive efficiency and productivity. In the long run, this can have a detrimental impact on overall business performance and competitiveness, and of course, their bottom line.

Could you talk about the opportunities currently within the reach of Malaysian SMEs?

When the 2016 Budget was tabled late last year, SMEs were among those to benefit from the Budget with an allocation of more than RM1.3 billion (about US$320 million) to advance these businesses. Within this fund, the government allocated RM107 (US$26.14) million to the SME Blueprint to provide funds for SME entities at various stages of business development and RM200 (US$48.85) million for the SME Technology Transformation Fund. The support from the government gives SMEs a great platform to stay current on technology trends and better leverage innovation to drive growth.

In what ways do you hope to help level the playing field for Malaysian SMEs and startups?

We believe that the technology used to run business should be as simple and enjoyable to use as the technology used to run life. Business technology needs to be simpler and built around the forces shaping consumer technology - Social, Mobile, Apps and Cloud. We believe that checking one's finances should be as simple as checking one's Twitter feed. Or that paying suppliers should be as straightforward as checking a bank balance online. By levelling the technology playing field, we are freeing businesses from costly and time-consuming processes and allowing them to pursue what they are passionate about.  

As the global market leader of integrated accounting, payroll and payment systems, we have become an indispensable business partner to our clients. In a time of seismic technological change and digital invention, we put the smartest technology in the hands of business owners to reinvent and simplify business accounting. We enable our customers to focus on their business and help them to leapfrog to the future.

We develop products that help simplify businesses - they put you in control of your entire business allowing you to make informed decisions at speed, are simple to use and have the flexibility to grow with your business, all from the cloud. This allows our customers to focus on their business, not on operating a series of different systems.

One example would be our online accounting and payroll software solution, Sage One, offering everything you need to run the accounts and payroll side of a small business or start up. By fully automating bookkeeping for SMEs, it means less time is spent on admin and more energy dedicated to running the business. We understand that for SMEs, time is of the essence. As such, we have 24/7 telephone and email support, allowing businesses to navigate the intricacies of accounting, payroll and payments by answering 30,000 calls around the world every day.

What would be your advice about the best strategies for SMEs in the new ASEAN Economic Community?

The Southeast Asia region is one of the world's largest destinations for foreign direct investments (FDI). With a population of more than 622 million people, it is the world's third largest market base, behind only China and India. In addition, GDP growth forecast for ASEAN stands at 4.9 percent in 2017, up from 4.4% in 2016. This is above the World Bank's estimates for global growth at 2.9 percent for 2016 and at 3.1 percent in 2017.

In view of these opportunities, businesses can benefit from the establishment of the ASEAN Economic Community (AEC) as it brings access to a market worth over US$ 2.6 trillion.

Malaysia is well-positioned to benefit from the ASEAN Economic Community (AEC). Many of its entrepreneurs have proven their potential, especially in banking, oil and gas and aviation, including CIMB and AirAsia. However, Malaysia's domestic market is small, and to generate greater wealth, to create more sustainable development, businesses should look at opportunities beyond geopolitical boundaries. The AEC's biggest benefit to Malaysia is a market that is 20 times bigger than the country's domestic market, while a single ASEAN market has many key strengths.

Looking beyond the home market helps to diversify revenue and make SMEs more competitive. SMEs should not to be afraid to go global as the benefits outweigh the risks. With the right partner, market intelligence and connection, going global can be very rewarding for businesses.

Underlying and reinforcing globalization trends is the rapidly changing digital environment and one critical trend is the accelerated proliferation of data processing, e-commerce and collaboration across different countries. In particular, Malaysia's SME landscape has witnessed rapid growth in the use of e-commerce platforms to sell products and services. Businesses who innovate and are technology facilitated will have a much more rapid head start in their regionalization and globalization efforts. SMEs need to look towards longer-term goals of profitability and scaling by investing in technology. If SMEs continue to be conservative about investments in technology or fail to continue to innovate, all the opportunities brought by ASEAN would come to nought. Entrepreneurs need to not only work hard to remain competitive, the need to have open mentality is vital.

The TPPA has received mixed responses: what would be the best attitude and plan for SMEs to adopt moving forward?

With the TPPA, Malaysian-owned businesses will have opportunities to participate in government procurement in TPPA member countries. This promotes competitive neutrality and a level playing field among TPPA members. Malaysia has established strong foundations in technology, e-commerce and financial services. Together with the removal of digital customs duties, localisation barriers and forced technology transfers, these benefits of TPPA will boost Malaysia's vision of becoming an e-commerce and high-tech hub within the region. These steps will catalyse the efforts of Malaysian SME's to better participate in the global marketplace.

However, a recent survey conducted by SME Corporation Malaysia has shown that even though use of digital devices across businesses - tablets, laptops, smartphones and desktops -  was acceptable at 85.4% the 78.8% level of Internet adoption was cause for concern, considering how almost every business has to be online for marketing, discoverability and communications purposes.
 
The low level of SMEs doing business online is a real concern as only 19.6 percent of businesses are conducting e-commerce and there's still a lot of scepticism over the medium - with their main concern over the issue of trust. Technology adoption by local SMEs has been sluggish and hence in the SME Masterplan 2012-2020, some RM$36 million will be allocated to help SMEs drive innovation through technology.

Business owners need to overcome the various barriers and take that leap of faith to invest in technology. In line with the current challenging economic situation, SMEs need to be adaptive towards innovation to enable them to stay relevant in the current market. Competition is intense and only those who are willing to take a step further and stay ahead of the game will survive.

What other key factors should SME leaders take into their considerations at this time?

We understand the challenges SMEs face and we are changing the way that millions of businesses track the movement of money through their business. As the market leader for integrated accounting, payroll and payment systems, we continue to support the ambition of the world's entrepreneurs. We believe in a socially-responsible world and in playing a positive role in communities and with entrepreneurs.

For us this is the right way to do business. Our customers make life-sacrifices. They take risks to follow their dreams and pursue their passions and, on this, global prosperity is built. They deserve a bigger voice and we will always work hard to champion this noble cause.

 

Sign up for CIO Asia eNewsletters.