A report by the Infocomm Media Development Authority (IMDA) found that Singapore’s digital economy accounted for S$113b or 17.7% of the country’s gross domestic product in 2023.1 The report also found that over 90% of SMEs have adopted some form of digital strategy. Yet, a deeper dive into the adoption of AI, which is at the forefront of digital transformation and can be a game changer for businesses and services, revealed an uneven story.
The IMDA report further revealed that in 2023, 44% of large enterprises in Singapore have adopted AI. Among SMEs, the adoption plunges to only 4.2%. Almost all those who adopted AI indicated seeing an improvement in productivity and processes – highlighting the value that AI can bring.
Why aren’t more SMEs tapping on AI to enhance their business?
Key deterrents: high cost and knowledge gap
The cost of adoption and lack of necessary skills are two major barriers to technology adoption among SMEs, according to research by the Singapore Business Federation.2 For AI, this can be even more complex, as the technology is relatively new.
While there are AI toolkits and solutions aplenty in the market, the vast options available can lead to confusion – and with it, resistance or inertia in embracing the technology. Further, existing AI solutions may be too expensive and not designed for resource-constrained SMEs in mind. This means companies will need to consider customising these solutions, which adds to the implementation burdens. Coupled with the lack of understanding of the solutions that are right for their business and the potential impact on existing processes and workforce, many SMEs therefore hold back on investing in the technology and as a result miss out on the opportunities and upsides.
Enterprise support available
Recognising these challenges, the government has introduced initiatives to help SMEs with digital and AI adoption. For example, under the SMEs Go Digital Programme, SMEs can access numerous incentives and services to help them adopt new technology or transform their organisation. SMEs can also tap on the Chief Technology Officer-as-a-Service to self-assess their digital readiness and needs, access digital solutions, and engage digital consultants for their digital transformation. The Programme also offers SMEs opportunities to expand their businesses through e-commerce platforms and eligible companies can receive up to 70% funding to participate in select platforms.
Other initiatives such as the Advanced Digital Solutions, Industry Digital Plan and the GenAI Sandbox for SMEs 2.0 are also available to support SMEs on their digital journey.
More can be done
For a start, the government may wish to consider establishing sector-focused AI innovation hubs or centres of excellence to facilitate collaboration among businesses, research institutions, and technology startups. During Budget 2024, it was announced that S$1 billion will be committed to AI over the next five years into AI compute, talent, and industry development. Since then, a Sectoral AI Centre of Excellence was launched in September 2024.
More such sector-specific hubs that focus on innovation can create a collaborative environment for SMEs and other ecosystem players from the same industry to pool together knowledge, capabilities and resources to advance their progression in AI or even create new solutions beyond the existing ones in the sandbox. Through this, the pace of AI innovation can be accelerated and new economic opportunities created.
