Talent retention, securing funding for modernisation, and changing attitudes of business leaders are among the challenges that businesses feel today.
This is among the findings of Dell Technologies’ new survey results looking at digital modernisation trends among South Africa’s medium-size organisations.
Medium businesses are the backbone of modern economies. They also stand to gain significantly from digital technologies, which create new levels of efficiency and competitiveness, not to mention revenue stream opportunities.
Yet how are medium businesses – companies with fewer than 500 employees – responding to modernisation? Every market has a slightly different story to tell, so Dell Technologies and Intel commissioned IDG to develop a report on different medium business markets, including South Africa. The survey, Spotlight: The State of SMBs and IT today, is an insightful look into the motivations and challenges that medium businesses weigh as they adopt digital technologies.
“South Africa’s medium businesses are clearly not lagging behind the digital modernisation curve,” says Doug Woolley, MD of Dell Technologies South Africa. “The challenges they face are often the same as the major markets. But there are also unique approaches that fit the contexts of Africa and her many different regions. It shows a business sector in touch with its communities and customer requirements.”
The project surveyed over 1 500 respondents across 11 European countries and South Africa. Locally, more than 50 respondents provided insight and are spread across sizes of organisations from 100-199, 200-349 and 350-499 employees, but with 87% of them being in the two higher categories. They represented a wide array of sectors, with almost a quarter from the banking, finance, investment and insurance sector.
Overall, local medium businesses rated their ability to use IT for competitive differentiation very highly: 53% saw it as very good, while 43% rated it as quite good and cited budget restrictions as the greatest barrier. Just 4% rated their ability as ‘not bad’, and no company chose the lowest tier.
This reflects previous research that South African businesses have been proactive about adopting digital differentiators. Though those trends were previously identified among enterprises, it’s also the case for medium businesses.
What challenges do local medium businesses face? 51% cited competing with new competitors and startups in a changing marketplace, while 43% were concerned about cash-flow issues or lack of budget to invest in infrastructure. Nearly as many are worried about their ability to attract and retain talent and the same number, 40%, pointed to the state of the macroeconomy.
Yet, unlike their European peers, South African medium businesses are less concerned about the impact of rules and regulations. By far, growing their businesses was the primary concern among respondents.
Talent retention led the concerns around managing IT, cited by 15% of the surveyed medium businesses. This was followed by information security risks (13%), cost of in-house IT skills (13%), and vendor management of service level agreements (11%). Training staff on new software (28%), the time demands of security challenges (17%) and strategic alignment with the business (15%) dominated challenges around supporting business needs. Helpdesk response time and limited productivity budgets were also mentioned.
Despite the many challenges, South African medium businesses are upbeat: 42% ranked IT as one of their best opportunities to grow their businesses, and 40% regard it as an important source of competitive differentiation.
However, a large majority – 68% – said that, despite IT’s importance, business leaders still don’t understand its value.
The market is nonetheless excited about the opportunities that arrive through digital technologies. 47% saw data analytics as the most important opportunity, while 45% cited cloud and 42% looked towards AI. 3D printing and 5G also feature.
When asked which factors will help their companies be more creative and effective through IT, 55% cites greater use of mobile devices. 53% chose modernising systems and software. Only 2% had no plan.
The report states: “To compete more effectively against new companies, South Africa’s midsize businesses are changing quickly and showing a determination to lead in IT that should stand them in good stead in a world where every company is becoming a software company and where digitisation of processes is central to success.
“South African respondents provided highly distinct attitudes, and they clearly fall into the camp of fast movers.”