New Zealand's small and medium sized enterprises are collectively investing half a billion dollars ($501m) each year on digital solutions to help improve business operations, however half of these businesses are finding some of these tools are in fact hindering them, according to new research from business management platform, MYOB.
In a survey of more than 500 New Zealand SMEs, half (50%) say they are currently experiencing bad digitisation where some of their business management software apps and tools are running in silos, rather than seamlessly integrating with each other.
The research also unveils that this disconnection of systems is costing businesses time, money and resources, and posing a strategic risk.
"Over the past few years, we've seen a significant drive by New Zealand's SMEs to digitise and earlier this year, our tech Snapshot showed that over half of Aotearoa's SMEs now conduct half or more of their business using digital tools," says Daniel West, chief sales and support officer at MYOB.
"Now, what we are seeing is that in comparison to the digital subscription or streaming services we as consumers use and enjoy every day, businesses aren't getting the same integration and connectivity between the digital applications they're investing in and as a result, it's costing them dearly," he says.
Financial impact of digital disconnection
More than a third (34%) of the local SMEs surveyed have experienced costs blowing out because of disconnected digital tools, and across New Zealand SMEs, approximately $334m is being wasted each year on unused digital tools.
The report found 1 in 2 businesses (50%) polled admit they have given up on using some digital business solutions due to their inefficiencies but are still paying for them. When asked why they're still paying for them, the top reasons included that it was too much hassle to change, and because there is a lack of better alternatives to switch to.
"It's subscription overload for businesses," says West.
"Many consumers are cancelling subscriptions amidst rising cost of living pressures, and its an optimum time for businesses to also assess their subscription overheads, especially if some are sitting there unused," he says.
"Our research shows that New Zealand SMEs are relying on more tools and applications to run their business than their counterparts across the Tasman, but now is the right time to shift their focus from simply digitising more, to choosing tools that offer multiple services in the one place, or only paying for the features they really need.
"The potential cost savings from this could help alleviate some of the financial pressures they're feeling."
Some 1 in 10 businesses polled (13%) believe getting rid of software applications they seldom use could save them between $100 and $200 each month, and a similar proportion (9%) estimate it could be a $300 to $400 monthly saving.
Productivity cost
As New Zealand's productivity growth continues to lag behind others in the OECD, MYOB's research revealed New Zealand SMEs are currently wasting the equivalent of one working day each week (7 hours) on average on carrying out tasks caused by a lack of integration between their digital tools.
More than 9 in 10 (98%) businesses say they are wasting valuable time on manual tasks or having to duplicate jobs, such as entering information from one system to another (48%) or checking for consistency across the platforms (45%), while more than a third have found themselves fixing errors or editing data after information is transferred between systems (37%).
Growing strategic risk
Disconnection issues also pose a strategic risk. The MYOB survey revealed that more than 4 in 5 (88%) New Zealand businesses find it difficult to get a full picture of business performance based on the intel from across their various systems or find themselves making operational decisions without full visibility of their business. Almost half (46%) also say that this lack of visibility is making it difficult to add capabilities to their team and services, or adapt the business as they need to challenges ultimately stifling growth and risking opportunities for success.
"At MYOB we know there are six core business processes around managing jobs, employees, suppliers, cashflow, finances and generating revenue, that when digitised, can make a phenomenal difference to a SME's chance of survival and success," says West.
"But what's become evident from our research is that local SMEs are really struggling to find systems that truly integrate with each other, or one solution that offers all the capabilities they need in the one place," he says.
"As an industry, software companies like ours need to take this bad digitisation burden off businesses and work on creating better connected systems," says West.
"Nothing should hold back ambitious businesses, and we recognise we need to do something about it. This is why were particularly passionate about building a cohesive business management platform and investing in strategic partnerships and acquisitions that will help us deliver this for SMEs. Their productivity and growth depend on it."
Malcolm Luey, director of MBIE's Digital Boost initiative, agrees explaining that solving the challenge of disconnection requires action by both SMEs and the businesses developing the digital solutions they need.
"Often, we see that SMEs are looking for digital tools that cater to a very specific need, but as they go through this process of looking into which solution is best for them, a question they need to be considering is whether these options are interoperable with their other existing digital platforms and tools," he says.
"On the flip side however, the ICT sector as a whole has a responsibility to create the right digital environment for SMEs to thrive, and this includes consideration and action around developing solutions that are interoperable with others and being more open to working together in the market."