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Fixing the SME tech crisis

Although technology can drive post-pandemic economic recovery, the gap between those businesses with sufficient IT skills and those struggling is widening

Earlier this month, during a presentation at London Tech Week, Mario Gruber, a research fellow at King’s College London, discussed the  productivity gap that exists between those companies that are able to take advantage of digital technologies and those that lag behind.

While technology is regarded as a great enabler for smaller organisations, helping them to scale up and reach a wide customer base very quickly, many fail to reap the benefits that IT and advanced digital technologies can offer.

In the Organisation for Economic Co-operation and Development (OECD)’s policy document The digital transformation of SMEs, the paper’s authors warned that the gap between SMEs and larger firms is more pronounced in the adoption of more sophisticated technologies.

They wrote that despite the benefits and opportunities that digital technologies bring, and the significant increase in take-up in recent years, many SMEs continue to lag in adoption, and for smaller SMEs with 10-49 employees, digital adoption gaps, compared to larger firms, have grown over the past decade.

Among the challenges is how to develop a tech-savvy team, especially in businesses that have traditionally favoured lower-cost labour and a less skilled workforce.

A recent study published by Tech Nation in conjunction with Adzuna and the Department for Digital, Culture, Media and Sport found that tech skills are in high demand, which is driving up salaries.

George Windsor, head of insights at Tech Nation, said: “Hiring for tech roles across the UK is now higher than pre-pandemic levels, demonstrating how confidence in UK tech has grown over the past few months. From software developers to business analysts, people can have long and rewarding careers in the sector. With nearly three million people working in the industry already, this is set to increase steadily over the next year.”

The pandemic is leading to more businesses accelerating their digitisation efforts to drive up productivity. Research from the Productivity Institute found that the top 10 businesses are three times more productive than the bottom 10, said Gruber. The less productive businesses were those with a low-wage workforce and lower levels of technology skills.

According to the OECD, some SMEs struggle with an internal skills gap that prevents managers and workers from identifying the digital technologies they need, and to adapt business models and processes.

The data from Tech Nation shows that pent-up demand for tech skills has led to salaries in the tech sector growing more quickly than any other area of the economy. “There is acute demand,” said Windsor. “There is net demand for IT system architects, machine learning engineers and high-end tech roles. We are seeing salaries grow.”

According to Tech Nation, the average tech salary is up to 50% higher than the average for all vacancies in the UK, and is rising. It reported that front-end developers and data scientists have seen the highest increase in salary over the last three years, at 34% and 31%, respectively. Tech Nation found that the average salary of a data scientist is now £60,000.

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By far the biggest demand, from a jobs advertised perspective, is data handling, with 67,866 references to this skill across more than 17 million rows of job advertisements, using data from Adzuna.

The Adzuna data also showed that the highest-paid tech skill is IT systems architect, with an average salary of £72,500 and there were more than 30,00 references to “IT architecture” among the job adverts analysed.

Discussing how SMEs can hire the right people to develop and accelerate their digital business strategies, Windsor said: “What we need to do is to develop the right talent, both domestic talent and international talent, including Europe.”

Recognising that not all tech talent will come from a traditional education route, Windsor said business owners need to take into account that not all new recruits are going to be younger people at the start of their career. Given that one-third of the jobs advertised are not in technology businesses, he recommended business leaders to look more creatively at how they fill their required tech roles.

Beyond competing in the jobs market for sought-after tech skills, Gruber said managers in SME businesses have an opportunity to develop skills internally. “Managers are the main stakeholders to provide training for workers,” he said.

However, Gruber warned that relative to other developed nations, on-the-job training in UK firms is misaligned with the skills actually relevant for business performance and productivity. He said this is largely because the managers of SMEs lack the knowhow to provide the most value-adding training.

“The most pressing issue regarding digital skills for UK SMEs is the quality of training that firms provide their own employees,” he said. “We still need to address digital skills in schools and further education, which are currently underfunded, and support a range of digital skills platforms.

“But perhaps most importantly, we must work on increasing the capacity of SME managers to link their sector-specific skill requirements to the requirements of today’s complex, knowledge-intensive world.”

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