SMEs lack clarity and funding for AI adoption

IPI Singapore says unclear goals and limited resources hinder SMEs from scaling digital transformation.

Singapore’s small and medium-sized enterprises (SMEs) may be embracing digital tools, but few are fully realising their potential. Despite 82% of SMEs having adopted at least one form of digital technology, only 4.2% are using AI. According to IPI Singapore, the gap lies in limited resources, lack of clarity, and cautious implementation.

Michael Goh, Chief Executive Officer of IPI Singapore, said the biggest hurdle is not technology itself but knowing where and how to begin. “The challenge in adopting AI digital solutions is it's always about having a clarity of what is the end in mind, particularly for many SMEs,” he explained.

He added that resource constraints and weak process planning make it difficult for smaller firms to digitalise effectively. “They need to first go through the process of understanding where the processes they wish to digitise audit. Have an internal audit on what these processes are? And then define what are the outcomes they wish to achieve,” said Goh.

Many SMEs, he noted, jump into digitalisation without mapping out their goals or expected return on investment (ROI). “Spending some money on digitalisation, it's just one perspective, but the other perspective is really about how do they get themselves ready,” he said.

Alvin How, Chief Technology Officer of IPI Singapore, pointed out that even when SMEs decide to adopt AI, execution remains a major obstacle. “Once they actually have something on hand right to implement that actually requires more than just putting it in place. It involves a lot of people, management, change management—that is really where the big challenges are,” How said.

He emphasised that employee buy-in is essential. “To get people's buy-in, in order for them to utilise the AI—that's one of the key important points that a lot of SMEs actually face,” he said.

When it comes to funding, Goh urged SMEs to think beyond government grants. He suggested breaking projects into smaller, manageable stages to reduce risk. “Do not go for the moon, shoot right from the onset. Break it down into smaller, bite-sized projects, which they can fund in a smaller piece, which means the capital outlay is more manageable,” he said.