The research reveals that 44% of Malaysian small and medium enterprises (SMEs) expect AI to fuel business growth without increasing costs, underscoring their confidence in AI’s potential despite economic pressures. However, many businesses remain in early stages of adoption: While 36% are piloting AI projects, only 21% have scaled beyond pilots to deliver measurable results.

The study also finds that open source is emerging as a critical enabler for broader AI adoption for SMEs. Open source technologies are serving as catalysts for responding SMEs to move from experimentation to scalable impact, supporting Malaysia’s national AI ambitions.

Key findings at a glance

• AI as a growth driver: 44% of surveyed SMEs expect AI to support business growth without increasing overheads, while 41% see AI as enabling new products and services.
• Open source leads the way: 54% of respondents cite cost savings and 51% highlight flexibility as the main reasons for adopting open source AI.
• Momentum but not yet scale: 36% of respondents are piloting or experimenting with AI, but only 21% have integrated it across their organisations.
• Skills gap is the top barrier: 60% of surveyed SMEs cite lack of in-house technical expertise as the biggest hurdle; 52% highlight implementation and maintenance costs.

Cross-sector collaboration is key

The study also highlights that achieving AI maturity requires coordinated efforts across government, industry, and academia. SMEs identified stronger ecosystem support — from funding and incentives to partnerships with technology providers — as critical to scaling responsibly. As the central coordinating body for Malaysia’s national AI strategy, NAIO’s role will be pivotal in helping SMEs keep pace with the country’s digital transformation.

Supporting Quotes

Albert Chai, general manager, Rest of Southeast Asia (RoSEA), Red Hat

“Red Hat is proud to help support the growth of Malaysian SMEs as they embrace open source and AI. By lowering barriers like skills gaps, infrastructure costs and vendor lock-in, open source empowers SMEs to experiment, customize, and scale AI more responsibly. Our collaboration with NAIO aligns this vision with Malaysia’s national AI strategy — providing SMEs with the tools and confidence to turn AI potential into real impact.”

Shamsul Izhan, Head of  National AI Office (NAIO)

“To ensure Malaysia realizes its ambition of becoming a regional AI leader, SMEs must be empowered to adopt AI in ways that are affordable, trustworthy, and impactful. Open source lowers the cost of entry while giving businesses greater control over their data and their future. By working with Red Hat and other partners, NAIO is committed to democratizing AI and ensuring that its benefits reach all corners of the economy.”

Sash Mukherjee, VP Industry Insights at Ecosystm

“For Malaysian SMEs, open source AI offers more than cost savings; it enables flexibility, transparency, and long-term control. As adoption deepens, it will become a foundation for scalable, responsible AI aligned to local needs. Open source also fuels collaboration and shared standards, helping SMEs move faster and contribute to a stronger national ecosystem. To fully leverage AI, Malaysia must not just use open technologies but help shape them.”

Methodology

The study was developed by Ecosystm in collaboration with Red Hat and supported by NAIO. It surveyed 133 SMEs within Malaysia Digital Economy Corporation’s (MDEC) network, complemented by in-depth interviews with NAIO stakeholders and working groups members.