Is Indonesia’s digital transformation agenda on track?

DIGITAL transformation is no longer something enterprises get to opt-in to or out of. It has become a business necessity driven by market forces.

Adopting digital technologies will – other than boost productivity in all economic sectors – ensure the economic participation of all segment of the population of an individual country.

And in a country like Indonesia, the potential is tremendous.

Indonesia already boasts of the biggest digital economy in Southeast Asia, worth US$ 28 billion, according to a recent Google – Temasek study, and is expected to grow to US$100 billion over the next seven years.

According to one McKinsey analysis, the country could add more than US$150 billion to its economic output yearly within a decade if it could fully harness the power of digitalization.

Government Initiatives

Like many other countries that have undergone a similar digital journey, Indonesia realized that a sustainable and effective transformation requires a combination of private and public sector initiatives.

Indonesia boasts of 93.4 million internet users and 71 million smartphone users, and the government is planning on improving the internet infrastructure across the country to connect the nation’s four main islands by the end of next year.

While no one government agency is directly responsible for digital transformation, the effort to boost the digital economy is shared and synchronized between a few ministries and departments in Indonesia, and spearheaded by the Ministry of Communication and Information Technology.

The government has already pledged to support the digitization of some eight million SMEs by the year 2020.

Businesses as crucial drivers of transformation

Start-ups and SMEs have been identified as critical drivers to digital adoption in Indonesia.

Technologies such as cloud services, the blockchain, and artificial intelligence are expected to be crucial in meeting the business goals of the companies in the country.

However, despite the government’s support of Indonesia’s transformation efforts, the lack of infrastructure and limited talent pool are significant hurdles that local enterprises will need to overcome.

IDC Indonesia’s Head of Consulting, Mevira Munindra said, “There are only 8 percent of local enterprises that have embarked on a digital transformation journey and experienced the full benefit of DX. Enterprises in Indonesia are still at the stage of exploring potential technologies and business models.”

So, in a nutshell, Southeast Asia’s most populous country’s digital transformation journey is still very much in its nascent stages.

While there is a vast opportunity in the market, enterprises in Indonesia need to strategically pursue transformation goals that leverage the ecosystem’s unique strengths, and at the same time, be mindful of the limitations.

Further, if the government could establish a specialized agency to guide enterprises in setting and achieving digital milestones — it could further propel the nation’s digital journey and help provide the fillip it needs to move forward quickly.

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