SINGAPORE—In today’s hyper- connected world, digitization is the way to survive, especially for start-ups or small and medium enterprises (SMEs) as they compete not only among themselves but also to the bigger players as well, global enterprise-application software provider SAP said.
During the company’s just-concluded media summit here, SAP Asia Pacific Japan (APJ) President Adaire Fox-Martin said that gone are the days of the so-called industrial economy, when everything was done in a manual way, or the whole series of mechanical-based process had enabled the movement of goods and services.
It’s initial transition to the information-technology (IT) economy that took much of the manual process and put it into a computer-based programmatic approach, likewise, is now a thing of the past.
“The first wave [of this transformation] really delivered some various significant process benefits, as people began to operationalize some elements of their value [proposition] and their product life-cycle chain,” Fox-Martin explained.
Then came the rise of the Internet economy, which she said had created the mechanism, whereby information became readily available and consumers began connecting and driving choices in a very different way in terms of the goods, products and services that they wish to participate in.
Next was the knowledge economy, or the exchange of information, which the latter itself became the currency of such.
“In the past 10 years or so, the adoption of these new technologies has truly accelerated. We are now on the brink of what we believe as the third IT transformation,” Fox-Martin said.
“We think that it represents a significant economic opportunity for companies that are involved in the digital economy [DE], because by 2020 the size of it is anticipated to be around $90 trillion,” she added.
To stay relevant in this regime, they must start to invest in technology and embrace the various digital trends that come their way.
From the firm’s perspective, the company president noted the five key trends that are driving or underpinning the DE framework: hyper-connectivity, super computing, cloud computing, smarter world and cybersecurity.
“That’s what’s happening, I think, from technology-trend perspective,” Fox-Martin pointed out.
Location-wise, she sees APJ is so promising that this is where the “center of gravity” in the global economy will be shifting in the future.
“The region itself is so dynamic and so exciting, and growing at such a [fast] pace,” she said. “It is predicted that over the next 25 years, APJ will actually [become the] equivalent of three euro zones of the global economy, and many millions will join the middle-class as a result of that.”
Approximately, there are more than 500 million middle-class people alone in the region this year—equal to the total population of the European Union to date.
“So, you can begin to see the importance of the rising and emerging middle class here in APJ,” he said.
Also, more than half of the top 500 fastest-growing companies in the world are not just located, but are also digital-industry players within the region.
“So it’s a combination of what we’re seeing emerging from the digital economy and the opportunities that are present in the region that we’re in, as well as the growth dynamics of that region, and how these two things come together to create opportunity and challenges for companies to address,” he said.
With the massive growth potential of APJ in DE, small-scale enterprises are, likewise, encouraged to continue digitizing their businesses to stay ahead of the curve and become not just the regional, but also global winners themselves.
Of late, SMEs account for 97 percent of all businesses and employ half of the workforce in the region, according to the Asia-Pacific Economic Cooperation group. They contribute 20 percent to 50 percent of APJ’s GDP and employ over 50 percent of the labor sector.
“The DE is actually relevant for SMEs as it is for big business. It allows them to compete and grow a lot more quickly than they could through manual processes,” SAP APJ Senior Vice President for Global Partner Operations Anthony McMahon told the BusinessMirror.
What’s alarming though is that SAP found out in a study that less than a quarter of APJ SMEs consider themselves as “early adopters” of technology, or ready to embrace some of those digital trends.
“A lot of SME customers know that they need to invest in technology, and they know that they’re operating in a DE. But many of them, traditionally, may not have invested heavily in technology,” he said.
It’s not because they need to have a big funding upfront, he noted. Like their big counterparts, they refuse to do so if they don’t have a clear return on investment (ROI).
“They are the same, if not sometimes more demanding for the ROI. And in many cases of multigenerational families with established businesses, they have to make sure that they’re doing the right insight business strategy from one generation to the next,” McMahon said.
He pointed out that they just need to begin with the digital mind-set and simplification so as to compete in a DE.
“And it’s happening now. If you get to start a business, you need to think about not just the solution, product or service, but also the environment that you’re operating in.Your business plan must capture how you will compete and thrive in a DE. But if you’re a startup not thinking that way, then I think you have challenges, he added.