INTRODUCTION

Digital transformation is changing how businesses around the world operate, compete, and create value for their customers. For small and medium-sized enterprises (SMEs), embracing digital tools has become crucial not just for boosting productivity and efficiency, but also for building resilience and ensuring long-term success.

Georgia's IT sector has grown considerably in recent years, with more technology companies emerging and digital services expanding across the market. However, there remains an important question: is this growth in the IT industry actually driving digital adoption among businesses of all sizes? While the technology sector appears to be flourishing, many companies, especially smaller ones, still struggle to implement both basic and advanced digital solutions.

This disconnect raises concerns about whether the success of Georgia's IT sector is truly benefiting the broader business community. Understanding this relationship between IT sector growth and actual digital transformation across different types of enterprises is vital for Georgia's efforts to modernize its economy and ensure that technological progress reaches businesses throughout the country.

This research note builds on ISET Policy Institute’s earlier work, which tracked private sector digitalization in Georgia first as of 2022 followed by 2023 snapshot, and offers a comprehensive assessment of digital adoption among Georgian enterprises, with a particular emphasis on SMEs. It tracks a range of indicators designed to capture both the foundational and advanced aspects of digital transformation. These include the use of business management systems such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM), uptake of frontier technologies like Artificial Intelligence (AI) and the Internet of Things (IoT), and infrastructure-related measures such as access to fast broadband, websites, including with sophisticated features, and e-commerce engagement. Collectively, these indicators represent different stages of digital maturity, and the capabilities firms require to participate in an increasingly digital economy.

The analysis disaggregates trends by firm size (small, medium, and large) and examines changes over the 2020–2024 period to capture the evolution of digitalization across the Georgian private sector. In addition to assessing internal dynamics, the note benchmarks Georgian SMEs against their counterparts in the European Union (EU) across three key dimensions: basic digital intensity, integration of digital technologies, and participation in e-commerce. This dual perspective, tracking domestic trends and positioning them in a broader international context, provides valuable insights into Georgia’s digital readiness and highlights priority areas for targeted interventions.

The structure of the note is as follows: Section 1 offers an international overview of SME digitalization, using the EU as a reference point. Section 2 presents the national picture, analyzing digital uptake across Georgian firms by size and over time. Section 3 conducts a focused comparison between Georgian and EU SMEs across selected indicators of digital maturity, identifying key gaps and opportunities for advancement.

For the complete paper, please refer to the attached research note (above).