Significant Barriers in the Adoption of Technology Threatens Sme Recovery in Ireland Post Pandemic, According to New Vodafone Report

Vodafone Ireland has today published a new report, working in collaboration with economist, Stephen Kinsella, to investigate the impact of COVID-19 on the Irish SMEs sector and to benchmark its performance against European markets.

The report, which follows a study of 500 SMEs operating in rural and urban areas in Ireland and across a wide range of industries, examines how the sector has adapted to the COVID-19 crisis. Importantly, it highlights the role digital transformation will have in driving the sectors’ recovery post-COVID, with policy recommendations to support that growth.

The study found that nearly three in five (58%) businesses face a number of significant barriers in relation to the adoption of technology, despite a willingness to invest. Though cost is the highest obstacle (37%), trust in suppliers (36%), integration with older systems (32%), and having the right in-house capabilities (28%), are also common issues for SMEs wanting to invest.

From a European perspective, Ireland sits mid-table for the level of digitalisation of its firms versus other European countries – behind Denmark, Croatia, Malta, Latvia and Lithuania. Nearly half (49%) of Latvian firms, for example, are described as having a high use of technology, versus only 31% of Irish firms. According to the report, only 19% of smaller Irish firms are ‘highly digitalised’, while just 24% of larger firms are.

Mandatory Credit:Naoise Culhane / www.naoiseculhane.com

According to a Eurofound study in 2019, just 30% of small firms in Ireland (10-49 employees) report that they sell online. For larger firms (50-249 employees) that number jumps to 38%. This compares to 53% for larger firms in Finland, and in Slovakia, where smaller firms sell more online (42%) than larger firms (39%). Interestingly, however, sentiment in Ireland appears much more certain in relation to economic policy than other markets.

The report also shows that while Ireland experienced large amounts of volatility caused by COVID-19, both Germany and the wider EU experienced a degree more since February 2020. The latest Economic Policy Uncertainty Index shows Ireland at 285, Europe at 327, and Germany at 387, highlighting a remarkable difference in the levels of uncertainty in Ireland, relative to Germany.

This suggests Ireland was able to communicate policy certainty more adequately than its EU counterparts, due to strong policy supports by the Government. According to the survey, more than 80% of SMEs accessed a Government service during the period and interestingly, 27% felt that the Government was providing enough support.

Commenting on the report, Anne O’Leary, CEO, Vodafone Ireland, said “The tenacity, determination and innovation of Irish SMEs to carry on and to turn uncertainty into opportunity came through strongly in our study.

After some big changes to the way we work, many organisations are now doing business safely and successfully and thinking about what comes next. Digitalisation was identified as a key driver for this recovery, with noteworthy growth potential for Irish SMEs who engage in digital transformation.

However, as has been captured, due to the demographic make-up of Irish SMEs, of which the vast majority are micro-businesses, their ability to make the capital investment required is challenging.

Therefore, as the cornerstone of Ireland’s economy and a core driver of post pandemic economic recovery, it is of the utmost importance that financial support and practical policies are in place to allow SMEs invest in digitalisation and compete with EU and global SMEs within the digital economy.”

Economist, Stephen Kinsella, said: “It is clear that technology was and is a key enabler of business adaptation throughout the pandemic, with many SMEs recognising the need to make significant changes to their digital infrastructure. The trends around innovation, investment, and new market entry, enabled by digitalisation were apparent before COVID-19, but have been accelerated by the pandemic.

“In their 2019 survey of 26,000 firms across Europe, Eurofound placed Ireland solidly mid-table for the level of digitalisation of its firms. Firms will see both improved financial returns and business performance as they invest in technology and employee training. However, investing for tomorrow imposes a cost on today. It is this upfront cost that results in reticence by many SMEs to invest in these areas.

Ireland has much to learn from small, highly digitalised EU countries like Denmark, Croatia, Malta, Latvia, Lithuania, and Estonia. These countries feature highly digitalised SMEs which use lots of different technologies to build, buy, and sell.”

In addition to challenges to the adoption of new technologies, SMEs see a significant need to upskill employees in the coming years, especially in relation to digital skills. One-quarter of SMEs lack confidence in the digital skills of their employees and almost half plan to invest in digital skills training and development. This rises to 65% for larger SMEs.’

The report is available for download here