A new study by Amazon Web Services (AWS) highlights a rapidly evolving landscape for artificial intelligence (AI) adoption among businesses in the Philippines, revealing critical insights that small business owners cannot afford to ignore. While large enterprises often have the resources to invest in cutting-edge technology, nimble startups are proving to be the frontrunners in successfully implementing AI solutions.
In just a year, the number of businesses adopting AI in the Philippines surged, with an impressive 80,000 establishments embracing the technology in 2024 alone—equating to over nine businesses per hour. Currently, 250,000 businesses, or about 21% of the national total, have implemented AI, reflecting a remarkable year-on-year growth rate of 50%. These figures underscore the significant economic potential AI holds; 64% of businesses using AI reported an average 18% revenue increase, while 66% anticipate cost savings averaging 22%.
This data, derived from a collaborative survey between AWS and Strand Partners, aimed to gauge AI adoption levels among various businesses. However, the findings also caution that most existing deployments remain basic. A staggering 78% of Philippine businesses utilize AI primarily for enhancing efficiencies rather than undertaking innovative projects that could disrupt their industries. Only 11% have reached an intermediate level of AI application, and a mere 8% operate at the transformative stage—where AI becomes integral to decision-making and product development.
Interestingly, the divide between startups and established firms is pronounced. According to the survey, 45% of startups employ AI, with a significant 40% developing new AI-driven products. This is in stark contrast to large enterprises, where only 41% have adopted AI, and only 7% have progressed to transformative applications. One-third of startups (33%) are leveraging the full potential of AI, significantly outpacing their larger counterparts.
Nick Bonstow, Director at Strand Partners, remarked on this phenomenon, stating, “Larger enterprises are also at risk of being left behind by the nimbler, faster-paced startups. The resulting ‘two-tier’ AI economy could have lasting implications on a country’s future economic development.” Small business owners should take note; if they fail to adapt, they risk being eclipsed by more agile competitors.
However, this rapid adoption does not come without challenges. The report identified a skills gap as a significant barrier to deeper AI integration, with 57% of businesses citing a lack of qualified personnel for AI-related roles. Despite having the technology and vision, many companies struggle to find the talent necessary to fully leverage AI, potentially hindering the Philippines’ global competitiveness. Moreover, skills in AI are projected to be critical for 61% of jobs in the next three years, leaving many businesses unprepared.
Additionally, regulatory uncertainty looms large, with 42% of surveyed businesses concerned that new AI legislation could stifle innovation. Many are also bracing for rising compliance costs, with reports indicating that approximately $19 out of every $100 spent on technology is allocated to compliance—an expense projected to increase over the next few years.
To address these hurdles, the research proposes several recommendations aimed at bridging the AI gap between startups and larger enterprises. First, it advocates for the development of industry-specific digital skill programs to cultivate a workforce ready to drive AI-led innovation. Second, it calls for streamlined regulations that promote pro-growth environments, encouraging deeper AI adoption. Lastly, public sector digital transformation—particularly in education and healthcare—should be prioritized to inspire innovation through public procurement.
AWS has committed significant resources to nurture local talent and support startups, having invested $230 million globally in 2024 to foster innovation, including initiatives tailored to Philippine startups focused on generative AI. Since 2016, AWS has also engaged in extensive upskilling programs that have benefited over 100,000 Filipinos in cloud technologies.
Precious Lim, Country Manager at AWS Philippines, captured the sentiment succinctly: “Businesses in the Philippines are keen to innovate with AI… However, the research shows how serious barriers remain, especially for larger enterprises.” Addressing these challenges will be crucial for maintaining the Philippines’ competitive edge as a burgeoning hub for AI development.
For small business owners evaluating the implications of this research, the key takeaway is clear: Rapid AI adoption presents both opportunities and challenges. Those who embrace technology and adapt to the changing landscape stand to gain significant advantages, while those who lag behind may find themselves at a growing disadvantage in an increasingly competitive market.
For more detailed insights, the original study can be accessed at AWS Press Release.
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