Forming the backbone of the nation’s economy, small and medium-sized enterprises (SMEs) are essential to Australia, accounting for 54% of the nation’s GDP, indicating the critical role they play in the country’s economic development. With over 2.5 million SMEs in Australia, they make up over 99% of all enterprises in the country. Apart from the domestic market, they have also shown a strong desire to expand their business beyond their borders.
The Australian government’s support for SME internationalisation and innovation
Given the prominence and importance of SMEs in Australia, the government has taken steps to support their growth, at both local and international scale. This year’s Budget announced several initiatives and funding schemes to support SMEs in their internationalisation journey and to drive growth; primarily with almost $400 million over four years to establish the Industry Growth Program.
This is designed to support Australian SMEs and startups to commercialise their ideas and grow their operations, as well as support for them to adopt artificial intelligence technologies to improve business processes and increase competitiveness. This effort will increase access to funding and expertise for SMEs and help them become globally competitive and innovative beyond Australia’s borders.
Challenges faced by SMEs in their internationalisation efforts
While the Australian government has laid out plans to support SMEs focused on expanding beyond Australia, these enterprises still face a range of challenges including:
- Limited funding: While the struggle of SMEs to compete for funding against larger enterprises has diminished in the past decade – thanks to investors seeking growth, this challenge has been exacerbated in the past year as investors look for safe havens. Lacking a strong and established financial track record has made this challenge harder.
- Infrastructure challenges: A similar issue of lesser resources in comparison to larger organisations exists here too – with SMEs more likely to lack the expertise, infrastructure and logistics capabilities to establish and grow a supply chain in new markets.
- Data protection compliance and sovereignty laws: Australia’s business culture surrounding data security has shifted more in the last 12 months than it has in the previous decade, prompting the need for increased investment in compliance brought on by new regulations. SMEs need to equally comply with these regulations locally and manage the adherence to a new set of requirements when expanding overseas, which can be complex and demand additional investment from an already limited pool of resources.
Most SMEs lack the expertise in managing multiple markets concurrently compared to large enterprises with international market footprint. Complex legal frameworks across multiple jurisdictions further compounds the challenge for SMEs. What works in one country is unlikely to work in another, making the initial expansion into a market even more challenging.
SMEs should ensure that they evaluate the role the cloud plays in their day-to-day operations to best set themselves up for success. Undergoing a digital transformation that leverages innovative technology and cloud solutions can better prepare SMEs for both local and international success.
Encouragingly, technology is not only an accessible tool for all businesses, its scalability and flexibility presents a series of opportunities for SMEs to engage in international expansion and address some, if not all of the inherent challenges of inter-market growth, none more so than the cloud.
When looking to expand, business leaders should consider partnering with a cloud provider equipped with existing international infrastructure and global reach. Doing so will allow businesses an easier, smoother and more efficient road expansion to markets around the world.
Mitigating internationalisation challenges by leveraging cloud solutions
In a post-pandemic world where businesses are forced to adapt to a new digital-first approach, SMEs can leverage cloud solutions and digital transformations that facilitate a lower upfront cost of acquisition while also providing the option to scale efficiently within a highly accessible framework. The key lies in working with the right cloud provider.
An important area to consider when choosing a cloud provider is interoperability – whether the solutions can be seamlessly integrated with existing IT infrastructure without disrupting current operations.
Another critical factor is reversibility or flexibility, which allows a SME to have a trial-and-error approach without being locked into a system or contract; switch to another provider; or bring their data and applications back in-house if necessary, without further unmanageable cost.
Assessing if there is adequate transparency within a provider’s pricing structure and detailed service level agreements, especially those that outline any additional charges are also key things to consider, so as not to incur unexpected costs. In addition, working with a cloud provider that is compliant in data protection regulations across multiple jurisdictions ensures data compliance and avoids penalties.
Last but not the least, with an increased awareness of reducing carbon footprint, a key consideration of SMEs when choosing a cloud provider is to assess their efforts on sustainable operating models. A cloud organisation that displays innovation in technology such as water cooling; a commitment to carbon reduction through initiatives including energy optimisation and component recycling; in addition to a robust plan to manage environment impact should be prioritised.
Empowering internationalisation efforts with cloud solutions and government support
In today’s digital landscape, cloud solutions offer significant potential to SMEs focused on the success of their expansion into international markets. Combined with the help of government support, SMEs are now more equipped than ever to not only maintain competitiveness domestically but take on the challenge of international growth while responding to emerging market opportunities as a first mover.
Terry Maiolo is vice president and general manager for APAC at OVHcloud.