Reviving Indonesia’s Small Businesses through ‘Plug-and-Play’ Technology Solutions

High technology costs and limited financial support significantly hinder Indonesia’s small business operators, especially those in low-margin sectors. Photo: Ivan Hermawan
High technology costs and limited financial support significantly hinder Indonesia’s small business operators, especially those in low-margin sectors. Photo: Ivan Hermawan

By Priasto Aji, Jiro Tominaga

Accessible and affordable 'plug-and-play' technology solutions can play a crucial role in revitalizing Indonesia's micro, small, and medium-sized enterprises.

 Indonesia’s journey towards becoming a high-income nation by 2045 hinges significantly on the revival of its micro, small, and medium-sized enterprises (MSMEs). Accounting for 61% of the nation’s GDP and 97% of total employment in 2019, these enterprises form the backbone of Indonesia’s economy. 

As the country strives to find its path to higher and more inclusive economic growth, can it rely on digitization to give these crucial businesses a post-pandemic boost?

The transformation of the entrepreneurial landscape by digital technologies is unmistakably clear. These solutions have lowered barriers to entry for new businesses and enabled a shift from physical to digital platforms. 

In Indonesia, for instance, courier and ride-hailing services became a lifeline for many small businesses during the pandemic. According to our research, the digital platform Gojek helped 51.5% of merchants surveyed survive and 41.8% to expand their business amid economic hardships.

An ADB-supported pilot in rural Indonesia also demonstrated that simple, but tailored information services for farmers through widely available mobile phone devices can be a significant help in finding the most advantageous business opportunities.

The road to Indonesia’s digital transformation is fraught with challenges. For MSMEs, particularly those operating in low-margin segments, the high costs of technology and difficulties in accessing financial support pose significant barriers. 

A failed investment in new technology can have dire consequences for their financial stability and survival. Therefore, finding cost-effective and accessible digital solutions is essential.

 Indonesia has the potential to apply affordable “high-tech” solutions to upgrade “low-tech” processes and firms. Numerous technology solutions can be applied across various firms and sectors. For instance, digital systems for point-of-sale or customer relationship management, supply chain management software, or tools to automate digital marketing efforts can benefit a wide range of businesses. 

One approach is to identify the technology solutions that directly address common needs among Indonesian firms. By pooling resources to develop or source these solutions, a catalogue of these customizable and user-friendly “plug-and-play” technological solutions could be made available to local firms.

It’s crucial to note that what seems low-cost and user-friendly to some firms may be beyond the reach of others. Therefore, providing access to expert advice and sources of funding is also necessary for widespread deployment of these technology solutions.

The revival of Indonesian MSMEs in the post-pandemic era demands a multi-faceted approach.

There are already several initiatives that illustrate the successful adoption of low-cost, plug-and-play technology solutions:

  • In Singapore, the government helped small businesses with the cost of new technologies. Singapore's Tech Depot Initiative gave small businesses access to over 40 pre-approved technology solutions for small businesses — such as those for customer management, data analytics, and inventory tracking — with up to 70% of costs covered. This illustrates the government's role in subsidizing the adoption of new technologies.
  • In Japan, a public-private initiative is helping small businesses get "Internet of Things (IoT)” kits to help them go digital for less than $900 per kit. The Industrial Value Chain Initiative, established by Japan’s Ministry of Economy, Trade and Industry and The Japan Society of Mechanical Engineers, made these kits affordable by integrating low-cost components, such as the Raspberry Pi single-board computer. This effort is backed by seminars and advice on how to adapt these kits to individual operations.
  • In the United Kingdom, the academic sector stepped up to help small businesses use cheap tech for automation and to upgrade old machines with new tech. UK's Digital Manufacturing on a Shoestring, a collaboration between the University of Cambridge and the University of Nottingham, tries to exploit very low-cost commercially available technologies for mobile computing, sensing, and artificial intelligence to tackle the challenges associated with integrating these safely and securely into small-scale manufacturing environments.  

These examples demonstrate that the solution goes beyond just providing access to affordable technology. These solutions must also be tailored to meet the specific needs of local entrepreneurs and businesses.  The concept of 'plug-and-play' technology solutions can significantly enhance operations for small businesses, allowing them to upgrade without facing prohibitive costs or complexities.

The revival of Indonesian MSMEs in the post-pandemic era demands a multi-faceted approach. It necessitates the convergence of affordable technology, governmental support, and customized solutions that address the unique challenges faced by these enterprises. 

As Indonesia strides towards its 2045 vision, empowering its MSMEs with the tools and technologies for success is not just an economic imperative but a vital step towards inclusive growth.