Singapore SMBs race to adopt AI amidst growing gaps

Skills shortages, unclear strategies, and poor data readiness threaten to slow AI adoption.

Singapore’s small and medium-sized businesses (SMBs) are ramping up investments in artificial intelligence (AI), with more firms shifting IT budgets toward automation and data analytics to stay competitive. However, despite strong government support and early signs of productivity gains, experts caution that structural barriers including limited expertise, integration challenges, and data fragmentation, are hindering widespread success.

According to Wee Tee Hsien, CEO of FUJIFILM Business Innovation Singapore, adoption momentum is building but remains uneven. He noted that Singapore businesses are increasingly aligning budgets toward digital transformation. “On average, local businesses are allocating around 11% of their IT budget to digital transformation initiatives that include cloud services, e-payment, cybersecurity and foundational digital upgrades. The thing is, AI, data analytics and IoT are identified as the next wave of digital investment,” he added.

Wee said government funding continues to play a pivotal role. “During Budget 2025, it announced an SGD$150M enterprise compute initiative to help enterprises access IT computing power and consultancy,” he said.

Guat Ling Ang, Managing Director of Kyndryl Singapore, said smaller firms tend to prioritise flexible, outcome-based AI solutions. “So many SMEs actually prefer subscription or managed AI services rather than building something in house,” she said. “Budgets are being focused on areas that deliver immediate results, such as customer chatbots and marketing optimisation as well as lead generation.”

Ang added that the government’s ecosystem and private partnerships are accelerating the shift. “Budgets are supplemented by government programs, such as the Kyndryl working with Google Cloud to help Singapore-based companies accelerate their transformation, and AI Cloud Takeoff Program is one of such,” she said.

Across industries, AI uptake is strongest in retail, logistics, finance, healthcare, and manufacturing. “According to IMDA, over 7,200 businesses have adopted AI-enabled, integrated and cloud-based solutions in the past year,” Wee said.

Still, many firms face mounting integration challenges. “Only 42% see positive returns, while 25% of leaders are still facing difficulties in integrating AI into their existing workflows,” Ang said.

Legal expert Frederick Tay, Director at Joyce A. Tan & Partners LLC, said that “most often than not, they realise that they have been trying to adopt AI for the sake of AI, whereas the true value in AI adoption comes with understanding your business case and purpose.” He added that “a lack of compliance measures” and a “general lack of appreciation of the types of AI technology that are available” often discourage effective use.

Wee warned that SMBs that delay adoption risk being left behind. “SMBs that delay AI adoption risk more than just slower growth; they risk losing competitiveness, efficiency and relevance in an increasingly digital economy,” he said.