• 84% of SMEs in Indonesia say that they are quite resilient in facing the challenges of a pandemic. 
  • 93% of SMEs stated that they are quite optimistic about growth over the next 12 months 

JAKARTA — A new study by SAP SE (NYSE: SAP) found that 91 percent of small and medium enterprises (SMEs) in Indonesia experience workforce instability, including many skilled workforces leaving to seek career development in other organizations. This certainly affects the process of digitizing their business—considering that 81 percent of SMEs consider digital transformation to have a critical role in the future sustainability of their organization.

This information was revealed in a study conducted by SAP with Dynata Research entitled ‘ Transformational Talent: The impact of the Great Resignation on Digital Transformation in APJ’s SMEs ‘. This research surveyed 1,363 SME owners and decision-makers in eight countries in Asia Pacific & Japan (APJ), including 210 respondents from Indonesia.

The Impact of Massive Resignations on the Digital Transformation of SMEs in Indonesia 

As the world economy begins to slowly recover from the pandemic, the Great Resignation has become a challenge for many businesses in the world. This phrase first appeared in 2021 and refers to the trend of resignations from jobs by millions of employees worldwide.

Research conducted by SAP found that this phenomenon has a major impact on SMEs in Indonesia. 25 percent of respondents agreed that more employees are leaving today compared to 12 months ago, while almost 63 percent of SMEs said they are facing difficulties coping with the impact of massive layoffs.

The labor crisis that occurred has greatly affected the ability of SMEs to continue their digital transformation process. Apart from needing workers to carry out their daily activities, SMEs in Indonesia also need other workers who are skilled at operating digital technology. This is a major challenge for the digital transformation process for Indonesian SMEs, in addition to cybersecurity and organizational budget constraints.

“This study proves that labor instability and crises are not only an existential threat to SMEs but also apply to other organizations,” said Andreas Diantoro, Managing Director of SAP Indonesia.

“Digital transformation is the most basic way for SMEs to be able to build organizational resilience and implement innovative strategies that can boost their business growth. Without the right workforce to support their development, the transformation process is hindered. Investment in the workforce must also be in line with investment in innovation so that it can help SMEs in Indonesia to survive and continue to grow.”

Investment in Manpower and Provision of Training to Anticipate Massive Resignations 

SMEs in Indonesia think that investing in their workforce can reduce the impact of massive layoffs and to improve their organizational capabilities for digital transformation.

Respondents said they were focusing on opportunities to develop skills (55 percent) in order to increase talent retention over the next 12 months. Meanwhile, to maintain the workforce, they carry out financial incentives as the next strategy (51 percent). Indonesian SMEs are also investing in flexible work patterns that offer career advancement opportunities (both 50 percent).

More than 86 percent of SMEs say that skill development is needed to support digital transformation. So that 82 percent of Indonesian SMEs will focus on digital training throughout this year.

“Massive resignations are often misinterpreted as employees leaving their jobs to pursue other goals. In fact, it’s not like that,” said Andreas.

“The workforce needs proper remuneration, flexibility, and a clearly communicated career path. We see that prioritizing skill development, career development opportunities, expanding access to technology, and selecting the right partners are the leading solutions for the welfare of the SME workforce in Indonesia.”

Optimism Increased When SMEs Shifted Their Focus from Surviving to Focusing on Company Growth 

After facing significant challenges over the past two years, SMEs in Indonesia are no longer focused solely on survival.

About 62 percent of APJ’s SMEs say that their company is fully resilient during the impact of the pandemic. Only 6 percent believed they could not survive at all.

It is this self-confidence that has led to optimism about the growth prospects of their SMEs in the future. Data shows that as many as 71 percent of SMEs in Indonesia feel quite, very, or very confident about their company’s growth over the next 12 months.

According to Andreas, such a mindset can be a positive thing for the growth of APJ’s SMEs.

“SMEs to us are pioneers for the wider economy, they make up 97 percent of businesses in Asia and employ 50 percent of the workforce. And in Indonesia, they contribute as much as 61.1% of the national economy (GDP) and have a workforce absorption capacity of 117 million workers or 97% of the workforce absorption capacity of the business world in Indonesia. I really believe that when SMEs develop, the economy will grow, and it has the potential to make Asia prosperous,” said Andreas.

“The combination of optimism, continuous innovation, commitment to developing a quality workforce, and the establishment of a strong collaboration ecosystem will be the roots of mapping success for Indonesian SMEs in the next 10 years.”

Visit this link to download the full report of the Transformational Talent study.

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