In November 1958, as Little Richard’s Good Golly Miss Molly blared on radios across the world, the Harvard Business Review published an article on the then-distant future of ‘management in the 1980s’. Writers Harold Leavitt and Thomas Whisler coined the term ‘information technology’. Today it seems quaint to read their cautious excitement about ‘techniques for processing large amounts of information rapidly epitomised by the high-speed computer’.

Yet in 2022, as Harry Styles’ As It Was streams into earbuds via Spotify, a survey by cloud-based accounting platform Xero found that around half of South African small businesses are still using spreadsheets to keep track of their accounts, while 43% are using a pen and paper. ‘It pains me to think about the amount of time small businesses are spending on these manual ways of accounting,’ says Colin Timmis, Xero’s South Africa country manager. ‘There’s a better way.’

Many SMEs are embracing it. According to Xero’s recent Time To Build report, adoption of digital tools such as cloud accounting has surged in South Africa, going from 13% of SMEs using it in 2017 to 61% in 2020. Given the mass migration to digital solutions during the COVID-19 lockdown, that percentage can only be higher in 2022.

‘Technology like cloud tools and automation are helping to level the playing field for small businesses,’ says Timmis. ‘However, many still face barriers to adoption. Our research shows more than two-thirds – 67% – of SMEs struggle to find the right talent to execute their digital strategies. This means they aren’t getting the full benefits tech − especially automation tools − can offer.’

He adds that while 47% of South African SMEs cite cash-flow issues and late payments as two of the biggest obstacles to their growth, there are digital tools available that can help those small businesses to better manage these issues. ‘For example, cloud accounting platforms allow them to automate chasing late payments, and predictive tools can give small businesses future cash-flow projections.’

Tech is, in many regards, the business landscape’s great leveller. As Zunaid Miya, MD of local fintech Hello Pay, puts it, ‘intelligent digital solutions, once only accessible to large enterprises, are now within reach for entrepreneurs and SMEs. It’s these solutions that allow SMEs to compete toe-to-toe with some of the best companies in South Africa’.

Miya believes digital solutions, including accepting card payments via a mobile phone, have the potential to level the playing field by enabling SMEs to control their costs and manage cash flows more effectively. ‘Many small businesses have been cash-based [in the past] because they had to be. Fortunately, this is no longer the case.’

However, while cloud solutions have been available for well over a decade already, South African businesses – large and small – were slow to adapt, argues Hemant Harie, MD of data management consulting company Gabsten Technologies. ‘In many ways it feels like we are still in the early stages of this journey,’ he says. ‘It could be said that the foundations for cloud computing were laid some time ago, but the technology only started delivering real business value fairly recently. Predominantly, this is because the cloud itself has evolved into a platform that now offers a wide range of services, while businesses are also learning to ask the right questions and have a better understanding of the cloud journey.’

In a survey by digital learning platform O’Reilly, 90% of respondents claimed their organisations were using cloud, while 30% said they were fully cloud-native. Andrew Cruise, CEO of cloud provider Routed, takes those numbers with a pinch of salt. He points to data from the IDC which reveals that cloud spend accounts for just 6% of total IT spend.

The numbers, he says, just don’t add up. ‘It could also be that cloud is, quite simply, cool. For years, decision-makers have been told to go big on cloud or risk losing out to competitors. And while this is certainly true, the money doesn’t lie. What organisations are saying and what organisations are doing are quite different. And, until they do make the move, some might be bluffing for fear of sounding like they’re behind.’

There’s a warning here for SMEs. Digital technologies are creating game-levelling opportunities – the likes of which were unimaginable just a few years ago. Yet to truly reap the benefits of that tech, small businesses need to be honest with themselves about how, when, and whether to use them. Simple, accessible cloud solutions may be better than pen and paper… Or they may not, depending on the nature of the business.

One area where investment in digital is a non-negotiable, though, is cybersecurity. According to research firm Barracuda, the smaller the organisation the more likely its employees are to be targeted for an attack.

‘An average employee at a small business with less than 100 employees will receive 350% more social engineering attacks than an employee of a larger enterprise,’ it states. ‘[SMEs] are an attractive target for cybercriminals because collectively they have a substantial economic value and often lack security resources or expertise.’

That’s especially true in South Africa, where SMEs account for more than 98% of all businesses and employ more than half of the country’s workforce. ‘With the shift to remote working and the introduction of numerous advanced technologies in the daily operations of even small companies, security measures need to evolve to support these sophisticated set-ups,’ says Denis Parinov, security researcher at cybersecurity company Kaspersky.

‘Cybercriminals are already way ahead of the curve, so much so that virtually every organisation will experience a breach attempt at some point. For small companies today, it’s not a matter of whether a cybersecurity incident will happen, but when.’

Yet despite the risks, Steve Flynn, sales and marketing director at software firm ESET South Africa, says that local SMEs appear reluctant to take the same digital preventative measures to secure their IT infrastructure as they would to protect their office equipment or company-owned vehicles. ‘Just as a business owner wouldn’t under-insure a tangible business asset such as a factory, SMEs shouldn’t leave their digital assets unlocked and in plain sight of criminals.

‘Estimates suggest that more than half of businesses fail within six months after a hack, making this phenomenon a critical component of business survival and success. Worse still, 61% of all data-breach victims are businesses with fewer than 1 000 employees.’

Here, again, the message is clear – there’s a wealth of digital technology available to South Africa’s small businesses, at scales and price points that enable small businesses to compete on a relatively level pegging with bigger competitors. The trick is to use the technology properly – or, in some cases, simply to use it at all.

By Mark van Dijk
Image: Gallo/Getty Images