Barriers To Digitisation A Threat To Recovery

22 Feb 2021 | 08.34 am

Barriers To Digitisation A Threat To Recovery

Vodafone report says SMEs need support for investment

22 Feb 2021 | 08.34 am

SMEs face significant barriers to the adoption of technology that could threaten their recovery in the wake of the Covid-19 pandemic.

That’s according to a new report from Vodafone, in collaboration with economist Stephen Kinsella, associate professor of economics at the University of Limerick.

Research for the report was carried out by Red C, surveying c.500 SMEs in rural and urban areas and all sectors. Kinsella compared the results to a benchmark analysis of European firms and standards, to assess the opportunities and challenges for SMEs in Ireland versus other European markets.

The study found that 58% of businesses face a number of significant barriers in the adoption of technology, despite a willingness to invest. Though cost is the highest obstacle at 37%, trust in suppliers (36%), integration with older systems (32%), and having the right in-house capabilities (28%), are also common issues for SMEs wanting to invest.

From a European perspective, Ireland sits mid-table for the level of digitalisation of its firms versus other European countries, behind Denmark, Croatia, Malta, Latvia and Lithuania.

Nearly half of Latvian firms, for example, at 49%, are described as having a high use of technology, versus only 31% of Irish firms. According to the report, only one in five of smaller Irish firms are ‘highly digitalised’, and just one in four of larger firms.

According to a Eurofound study in 2019, 30% of small firms in Ireland (10-49 employees) reported that they sell online. For larger firms (50-249 employees) that number reached 38%. This compares to 53% for larger firms in Finland, and in Slovakia, where smaller firms sell more online (42%) than larger firms (39%).

Sentiment in Ireland appears much more certain in relation to economic policy than other markets. The report  shows that while Ireland experienced extensive volatility caused by Covid-19, both Germany and the wider EU experienced a degree more since February 2020. 

The latest Economic Policy Uncertainty Index shows Ireland at 285, Europe at 327, and Germany at 387, highlighting a remarkable difference in the levels of uncertainty in Ireland, relative to Germany.

This suggests Ireland was able to communicate policy certainty more adequately than its EU counterparts, according to the report, due to strong policy supports by the government. According to the survey, more than 80% of SMEs accessed a government service during the period and 27% felt the government was providing enough support.

Kinsella said: “It is clear that technology was and is a key enabler of business adaptation throughout the pandemic, with many SMEs recognising the need to make significant changes to their digital infrastructure. 

The trends around innovation, investment, and new market entry enabled by digitalisation were apparent before Covid-19, but have been accelerated by the pandemic. However, investing for tomorrow imposes a cost on today. It is this upfront cost that results in reticence by many SMEs to invest in these areas.

“Ireland has much to learn from small, highly digitalised EU countries like Denmark, Croatia, Malta, Latvia, Lithuania, and Estonia. These countries feature highly digitalised SMEs which use lots of different technologies to build, buy, and sell.”

Vodafone chief executive Anne O’Leary (pictured) added: “Many organisations are now doing business safely and successfully and thinking about what comes next. Digitalisation was identified as a key driver for this recovery, with noteworthy growth potential for SMEs that engage in digital transformation.

“However, due to the demographic make-up of Irish SMEs, of which the vast majority are micro-businesses, their ability to make the capital investment required is challenging.

“Therefore, as the cornerstone of Ireland’s economy and a core driver of post pandemic economic recovery, it is of the utmost importance that financial support and practical policies are in place to allow SMEs invest in digitalisation and compete with EU and global SMEs.”

Pic: Naoise Culhane

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