Irish small businesses still behind on adopting technology

Irish small and medium-sized businesses may still lag their European counterparts in terms of technology adoption, but the Covid crisis is helping to reduce the gap, a new study shows.

The report, which has been compiled by economist Stephen Kinsella on behalf of Vodafone Ireland, indicates that more SMEs have embraced technology as a means of surviving the pandemic. However, it also shows there are still significant barriers to digitalisation for many Irish businesses.

The study of 500 SMEs working across a number of sectors reveals that while cost remains the biggest factor affecting technology adoption, trust in suppliers, integration with legacy systems, and a lack of in-house skills are also reasons why Irish businesses have a relatively low use of tech compared to their counterparts in other European states.

Mr Kinsella said Irish SMEs realised the importance of investing in technology but many were currently unable to do so.

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The Republic currently sits mid-table for the level of digitalisation of its firms versus other European countries – behind Denmark, Croatia, Malta, Latvia and Lithuania. Nearly half of Latvian companies, for example, are described as having a high use of technology, such as e-invoicing, data analysis and cloud computing. This compares to just 31 per cent of Irish companies.

Mr Kinsella, associate professor of economics at the University of Limerick, said more Irish companies have turned to technology during the Covid crisis. Those that do typically see both improved financial returns and business performance.

He said it was not beyond possible for Irish businesses to quickly catch up with other countries in terms of tech adoption by SMEs.

“We can progress from 31 per cent to 50 per cent digitalisation for SMEs relatively easily, and the benefits of doing this would be huge for the economy as a whole.”

Internet connectivity

Mr Kinsella said policy supports were required to help increase technology adoption.

Among the recommendations he outlines are designing flexible digital investment schemes to help businesses transition to the digital economy, and ensuring equal access to high-speed internet connectivity for all companies regardless of location and size.

He also said further consideration should be given to providing supports for the upskilling of employees in SMEs.

“There has to be a focus on improving skills, and a realisation that in some instances very basic training is required. There also needs to be more work done to lower the costs of technology-adoption generally.”