Helping SMEs take the next leap towards AI

A REPORT by the Infocomm Media Development Authority (IMDA) found that Singapore’s digital economy accounted for S$113 billion or 17.7 per cent of the country’s gross domestic product in 2023. The report also found that over 90 per cent of small and medium-sized enterprises (SMEs) have adopted some form of digital strategy. Yet, a deeper dive into the adoption of artificial intelligence (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 found that in 2023, 44 per cent of large enterprises in Singapore had adopted AI. Among SMEs, the adoption plunged to only 4.2 per cent. 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 AI to enhance their business?

Key deterrents: high cost and knowledge gap

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. 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 with resource-constrained SMEs in mind. This means companies will need to consider customising these solutions, which adds to implementation burdens.

Coupled with a 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 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 per cent funding to participate in select platforms.

Other initiatives such as the Advanced Digital Solutions, Industry Digital Plan and 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 would be committed to AI over the next five years into AI compute, talent and industry development. Since then, a Sectoral AI Centre of Excellence for Manufacturing 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.

Additionally, the government may wish to consider AI adoption incentives. Currently, SMEs can access the Microsoft Copilot for SMEs programme, which supports SMEs in the adoption of generative AI. However, enhanced subsidies and a wider suite of GenAI tools can be made available to SMEs to enhance motivation to invest in AI technologies.

These incentives will lower the barriers to entry for businesses, enabling them to leverage AI to enhance productivity and innovation. Processes for SMEs to apply for grants can also be streamlined and simplified to reduce any administrative burden.

Upskilling of individuals is key

While enterprises can drive AI adoption, getting the workforce and users engaged, willing and trained to utilise AI and digital tools to enhance their value and efficiency is another key piece of the puzzle. Often, this requires a shift in mindset on how they view AI, and continual emphasis on lifelong learning.

Singapore workers can potentially tap their SkillsFuture Credit to pick up or deepen AI or digital skills. The MySkillsFuture portal has more than 1,000 courses on AI that individuals can enrol in.

Further, the SkillsFuture Level-Up Programme, which was introduced in Budget 2024 to provide greater support for mid-career Singaporeans aged 40 years and above, also offers professional certifications and post-graduate courses on AI and digital.

Additional top-ups to the SkillsFuture Credit, with targeted top-ups for AI and GenAI training, can serve as a nudge in the right direction.

AI and digital are important tools for enterprises as they help enhance productivity, efficiency and competitiveness in today’s challenging business environment. Despite deterrents like high cost and lack of skills, SMEs need to recognise that leveraging AI can drive growth, streamline operations and improve customer experiences, ultimately leading to sustainable success in a rapidly evolving market.

Manik Bhandari is EY Asean AI and data leader. Chai Wai Fook is partner for tax services at EY. The views here are the writers’ and do not necessarily reflect the opinions of the global EY organisation or its member firms.