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SMEs and the Cloud in the Philippines

This article was first published in the Manila Bulletin [link]. Republished with permission from the author.

by Reynaldo C. Lugtu, Jr., Vice President IT Enabled Services (IG), Globe Telecom Inc, and ACCA Board Director 
19 Jun 2015

There has been modest to significant progress in the implementation of the four pillars of the ASEAN Economic Community(AEC) namely, a single market and production base, a competitive economic region, equitable economic development, and integration with the global economy.

As the AEC comes into full gear, there will come greater threats as well as opportunities for the SME sector. Threats will come in the form of new competitors from the region while challenges remain to be fully addressed. These include access to finance, finding new revenue streams, and pathways to a bigger market, and the need to scale operations and become more efficient.

One issue that needs to be addressed is access to technology. Most SMEs have poor or low-level use of technologies to enhance market presence, increase productivity, improve quality and reduce wastage. These stem from lack of funds for R&D, insufficient information, lack of capability to evaluate alternative technologies, and lack of technical know-how on shifting to more advanced technologies.

While the vast majority of ICT spend is on traditional communications services such as mobile voice, fixed-line and broadband, we are seeing tremendous growth in cloud computing adoption. Some common cloud services many SMEs use are the likes of Microsoft Office 365 or Google Apps for email and other SaaS productivity applications. IaaS use among SMEs is growing as well, which consists of a service or set of services i.e. storage capacity and processor power that are purchased by a business or organization and delivered via the Internet by a third-party provider, in which case referred to as public cloud.

It is an opportune time that the Asian Cloud Computing Association (ACCA) has recently released its landmark study on the SMEs adoption drivers and challenges. The report highlights that “cloud computing has the potential to be the ‘great leveller’ for both SMEs and developing economies. This is because cloud offers the prospect of both the access to enterprise grade tools on a pay-per-use basis making them immediately accessible and affordable, and the ability to scale up and down such access as required (elasticity of use). In other words, upfront capex requirements go down substantially”.

The report further states that the advantages of cloud computing to smaller businesses come on a number of fronts, such as “making it cheaper and easier to start and scale a business,enhancing customer acquisition, service and support, and providing access to enterprisegradetechnologies”.

Moreover, the study points to the three industries that are likely to lead cloud computing adoption among SMEs in the Philippines namely, the business process outsourcing (BPO) sector, technology start-ups and the retail sector. It is noteworthy that these sectors are experiencing phenomenal growth in recent years

All these bode well with the economic prospects of the Philippines amid the looming AEC. For one, the SME sector contributes only more than 35 percent of the country’s GDP – a far cry from the more than 50 percent contribution in developed countries as Singapore, Hong Kong, and Australia. Another is that Internet penetration in the country stands at only 37 percent. This means that there is a huge windfall in economic gains once cloud computing becomes mainstream among SMEs.

What’s working well with our country is that the country has been experiencing more that 6 percent growth in the last several years. This fuels more infrastructure projects, more government support and programs, and brisker business for SMEs – a precursor to adoption of technology in general and cloud computing in particular.

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