LIFE IS HARD study: 2023 bottlenecks and 2024 trends in the digitalization of SMEs in Romania

Fear of losing control of the business. Difficulty in realistically, accurately, and concretely identifying the digitization needs of their company. Shortage of consultants in the design of digitization projects, analyzing businesses, and explaining technical solutions. Available budget versus the cost of technical solutions.

These are the main barriers that SMEs in Romania had in 2023 towards the digitization of their own organizations, shows a study conducted by Cult Research for LIFE IS HARD S.A. – a technology provider for companies and communities.

The level of digitization of SMEs in Romania in 2023, according to the self-assessments of companies participating in the study conducted by Cult Research.

Companies active in sectors such as Industry (manufacturing, food, etc.) and Transport and warehousing had an average level of digitalization in 2023, according to their own assessments, while the top digital positions were occupied by telecommunications and technology firms.

Although 84% of respondents said they had heard about the national digitization programsrunning in Romania, and 27% said they had applied to them, a good proportion (26% of applicant companies) still had difficulties in understanding the technological needs of their companies and identifying appropriate solutions – a bottleneck felt most strongly in agriculture.

“The barriers that entrepreneurial companies face with digitization can be overcome with a combined effort from us, the IT industry, and government programs to educate the entrepreneurial environment. To move up the DESI rankings, where Romania is at the bottom, investment is needed. Strengthening teams of technical consultants with advanced communication skills would be one contribution we make to educating the market, as the LIFE IS HARD study clearly shows that now, most SMEs do not have a concrete representation of the benefits of digitization nor the willingness to allocate resources to understand the transformation processes. At the same time, public education programs for business digitization run by theRomanian state and synchronized with our efforts, the industry’s, would be beneficial, and catching up in digitization with neighboring countries in the CEE region would certainly bring important and much needed GDP growth points“, says Cătălin Chiș, entrepreneur and CEO of LIFE IS HARD (LIH).

Digitizing SMEs: What 2024 looks like

The study conducted by Cult Research also comes with some good news: SMEs that have overcome some of the bottlenecks and taken relevant steps to automate more of their internal processes (1 in 10, according to the study), say they are satisfied (75%) with the results they have achieved compared to their initial investments and expectations, i.e. they are factoring money for digitization into their budgets for 2024.

The study also shows that about half of Romanian SMEs have implemented a digitization solution in the last 3 years, and the most frequently used are accounting (57%), time recording(43%), sales management (40%) and cyber security (38%) solutions.

Although at a slower pace, SMEs are beginning to see digitization as a process that brings growth and added value if it goes beyond paperless and includes automation components, coupled with increased cyber security.

“More than 70% of the companies surveyed say they are considering budgets for 2024 dedicated to the digital transformation of their organizations, even if the budgeted level is not ideal. The intention shows that managers are aware that digitization has the power to boost business, even if they do not know exactly what the benefits would be,” says Cluj entrepreneur Cătălin Chiș.

In this context, LIFE IS HARD points out the 5 main trends that the market must follow in 2024 to increase the pace of digitization of SMEs in Romania.

1. Preference for the subscription working model.

There is a growing interest in subscription-based pricing models that offer predictability and affordability, instead of large one-off payments or hidden costs. 37% of survey participants cite the cost of digital solutions as a challenge for their companies and want maximum transparency in their relationship with their provider.

2. The IT industry needs a new stage of skills development: soft skills.

There is a growing demand for IT specialists who not only have technical skills but also the ability to analyze, understand and explain the business needs of SMEs. Guiding customer teams throughout the process is a vital aspect of implementing digital solutions, and investment in this area from IT players providing digitization and process automation solutions becomes a must-have in 2024.

“Increasing the level of digitization of SMEs in Romania depends on four important factors: improving the level of digital literacy of Romanian entrepreneurs, training IT specialists with skills to analyze needs and design solutions tailored to these needs, increasing entrepreneurs‘ confidence in IT companies to open up more, and adapting solutions to the budgets available from SMEs. The Romanian entrepreneurial environment needs extensive digital education programs, starting from raising awareness of digitalization needs in the company”, explains Paul Acatrini, Managing Partner of Cult Research.

3. Solutions and technologies: The need for customization and the appetite for security andAI is growing.

Survey results indicate that 52% of SMEs want technology solutions developed specifically for their business needs and specifics. At the same time, interest in cybersecurity and AI-based solutions is on an upward curve as SMEs begin to recognize the importance of data security and streamlining processes through advanced technology.

The perception of teams in those SMEs that already have automated processes shows that mostemployees are happy, and their work is becoming more efficient as the level of digital transformation increases.

4. Education campaigns can accelerate the pace of digital transformation in SMEs.

Trends indicate that managers of small and medium enterprises want to better understand IT&C options and technology to integrate them effectively into their businesses. But identifying the right solutions for the specific business requires increasing digital understanding. Done correctly and as quickly as possible, business information and education campaigns can have a direct positive impact on the development of small and medium-sized companies.

5. The power of example, an element of influence for the decision to start “wave 2″.

Those SMEs at a more advanced stage of automation act as decision influencers for companies at the beginning of their digital journey. They need confirmation and recommendations, validation that firms digitized in ‘wave 1′ have good results and suppliers they can rely on – according to theCult Research study.

“Digitalization is starting to be perceived not just as a possible competitive advantage, but as a business necessity for SMEs. It is encouraging to see that more small and medium-sized companies recognize the importance of this process and are interested in investing in technology solutions tailored to their needs. Even more so as, at the European level, one of the objectives of the Digital Decade is for 90% of SMEs to achieve a baseline level of digital technology integration in their business by 2030. We expect a 2024 in which our status as a key partner for digitization in the Insurance Industry, already gained in the market through all our products, will gradually extend to other areas“, concludes Cătălin Chiș, CEO and Chairperson of the Board of LIFE IS HARD.

The “Digitalization of SMEs” survey carried out by Cult Research is nationally representative, included both a quantitative and a qualitative component, and was conducted on a sample of 400 small and medium-sized enterprises in Romania from various business segments: Information and Communications, Industry, Consulting and Intermediation, Construction, Social Services, Transport and Warehousing, Marketing, Advertising and Media, Agriculture, Forestry andFishing and others.