Old business models under threat for Indonesian companies

Three in every four Indonesian companies that cleave to traditional methods are likely to be hit by robust competition from emerging digital players, according to the International Data Center (IDC).

A study by the IDC says that traditional companies need to adopt digital platforms in their operations if they want to stay afloat in the digital economy.

IDC Indonesia country manager Sudev Bangah on Thursday cited app-based transportation services Go-Jek and Uber, as well as lodging website Airbnb, as examples of "internet era" companies that have begun to render older methods obsolete.

"Many traditional businesses do not have the roadmap to transform themselves digitally. Many are complacent and blind to the need for digital competence," he said.

"The advent of digitally savvy competitors such as Go-Jek coming their way and disrupting the traditional business model will force them to innovate and integrate the current methods."

Sudev added that resistance to change would fade in 2016 as traditional businesses such as taxis and hotels faced "hyper competition".

Predicting the digital trends that would dominate the business environment in 2016, the IDC report stated that the adoption of digital transformation through "third-platform" technology, which includes cloud drives, big data and mobility, was vital.

Based on an earlier survey by the IDC on tech vendors and users, along with monitored market statistics, Indonesia is predicted to spend up to US$15.3 billion (S$21.6 billion) on IT development in 2016, an 8.3 per cent increase from IT spending in 2015.

That amount is about 2.7 per cent of the country's GDP, one of the lowest figures in the Asia-Pacific region, according to Sudev. In comparison, neighbouring countries such as Singapore and Malaysia spend up to 5 or more per cent of their GDP on IT development.

"Digital transformation and development must therefore be driven by the government or by public-private partnerships, as entities that do not need to prioritize commercial interests," he said.

Most of the report's predictions revolve around the need for more awareness of and sensitivity to the importance of utilizing third-platform technology in business practices.

The study also predicts that traditional businesses that persist with a non-customer-centric model will be forced to change in the face of increased competition from new digitally savvy companies that focus on an interconnected public as their initial business model.

"Many companies have always been about aggressive selling and telling you to buy their product, without properly identifying the issue the customer is facing. This will change significantly in 2016 as the more digitally savvy and customer-centric competition takes hold," Sudev said.

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