Investment in ICT boosting sales, says report

SMEs who invest in ICT are boosting sales and increasing productivity.

Australian small businesses that spent more money on technology made on average $34,800 more sales throughout 2020, according to new research.

Picking up the pace: Trends in small business technology adoption and use, the latest small business Insight from Xero, found that there had been a 13% increase in the use of the company's ICT from small businesses in Australia during the COVID-19 pandemic.

The report found that the uptake on ICT, especially apps, was most pronounced in the professional services industry and the hospitality and manufacturing industries were using interactive apps more than others.

As well as an increase in sales, small businesses that invested in ICT saw a net gain in jobs.

Larger businesses, the survey found, were more likely to use apps frequently, and as businesses grow so too did their uptake of ICT. However, sole traders and micro-businesses actually spend more as a proportion of ICT than their larger counterparts (5.1% of expenditure). In comparison, small businesses with one to five employees spend around two per cent of the budget on ICT as a proportion of total expenditure, while businesses with more than five employees spend only around 1.2% of total expenditure on ICT.

The uptake of ICT and the increased digitalisation of SMEs is in keeping with the report released earlier this year by the Organisation for Economic Cooperation and Development. It said worldwide more than 70% of SMEs had intensified their use of digital technologies due to COVID-19.

According to the Google Cloud Retail Digital Pulse report for the third quarter of 2021 almost a quarter (23.3%) of Australian businesses said investment in digitalisation was driven by the desire to reduce costs and improve profitability, with 17.5% wanting to improve customer experience to drive revenue and/or increase KPI scores.

Businesses were spending their digitalisation budget in building customer data platforms, enhancing capabilities around marketing optimisation and the ability to drive personalisation but were facing challenges around budgets, inability to harness customer/operational data and lack of digital transformation roadmaps.

As well as customer service and data capturing, larger companies were investing in digital solutions to optimise their customer and supply chain interactions.

In another recently released report from McKinsey Global Survey of executives, larger businesses have accelerated their spend in these areas due to COVD-19 by three to four years, and their share of digital or digitally enabled products in their portfolios has accelerated by seven years.

Nearly all respondents said their companies had stood up at least temporary solutions to meet many of the new demands on them, and much more quickly than they had thought possible before the crisis and said these changes would be long lasting.

Most respondents in the McKinsey survey said they recognised technology’s strategic importance as a critical component of the business, not just a source of cost efficiencies.

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