Techaisle Blog

US SMB IT spend is forecast to grow by 7.6% in 2021 over 2020. In July 2020, we had written that resiliency, agility, and adaptability would accelerate recovery for SMBs. Techaisle's survey of 1720 US SMBs confirms the prognosis for the US market. Data shows that 45% of US SMBs will be in the high growth segment, with IT budget increases ranging between 7.5% to 15%. However, 12% of SMBs will experience budget decreases of more than 5%. The majority of the declining IT growth segment will be in the 1-49 employee sizes. Regardless, the small businesses will grow their IT spend. There is an apparent dichotomy appearing in how technology is likely to be acquired by SMBs. Nearly two-thirds of micro-businesses prefer acquisitions structured around leases, whereas one-fourth of midmarket firms plan to move to "as-a-service" approaches.

IT services spending will grow by 8.6%, driven by managed services, data/platform integration, cloud orchestration, and business process automation. As cloud applications increase, the demand for hybrid IT is becoming a pressing requirement for SMBs.

2021 will be the year of the midmarket segment, with IT spending forecast to grow by 8%. Data illustrates a fascinating picture showing IT budget increasing in direct proportion with size, from 100-249 to 500-999 employee firms. The upper midmarket (1000-4999 employee size segment) will have an average budget increase of 6.1%, slightly lower than the 500-999 size business.

AI will arrive as a capability integrated within other solutions

When artificial intelligence (AI) comes up in a discussion that focuses on SMBs, the first question is likely to be “how many organizations are using it – and how?”. Results from Techaisle survey on US SMB and Midmarket Analytics and Artificial Intelligence adoption research indicate that AI penetration within the midmarket, driven primarily by firms with more than 250 employees, is reasonably robust. Both small and midmarket businesses are forecasting a substantial rise in use in 2021. In both cases, “use of AI” actually means “use of systems/tools/other products that embed AI.” This is an important distinction. As an earlier-stage technology that is typically embedded when it reaches the SMB market, AI is within the top 15 IT priority list for SMBs. AI is far more likely to arrive in SMBs as capabilities within other products than as a stand-alone offering.

The survey research data indicates that SMB adoption of AI capabilities is still at an early point. Small businesses have little to lose by treating 2021 as an evaluation year, understanding how AI is being used to create real advantage within peer organizations. The situation is different for midmarket organizations, where early adopters are already gaining experience (and potentially, benefits) from AI-based systems. Midmarket firms will not alter their 2021 plans, and AI capabilities will be on IT’s radar and maybe, on evaluation lists for new tools/solutions.

SMBs are not ready to adopt AI as a core platform capability. If one reads “planning to use” as meaning “we consider AI to be a selling feature or factor in the evaluation of new solutions,” however, the SMB market for AI starts to become interesting.

Techaisle asked a follow-on question about AI deployment to respondents who reported that their organizations were currently using or planning to use: is AI currently deployed/in production within their organizations, are they presently implementing AI solutions, are they in a trial/pilot phases, or have they not yet started implementation?

With the caution that the stats below represent only the organizations committed to an AI path, AI – especially in midmarket organizations (and particularly within those with 500-999 employees) – is becoming reasonably well established. Within small businesses, 11% of the organizations using or planning to use AI report that they have AI in production. Midmarket figures are more robust: 24% of firms using/planning to use AI report having at least one AI-inclusive solution in production.

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Real production use of AI is still rare, especially for small businesses. SMBs should stay on the lookout for potential breakthrough AI-based solutions but shouldn’t feel pressured to adopt systems that don’t offer compelling value propositions and ROIs. Given the early stage of AI, these findings are indicators of interest, rather than definitive statements on market readiness. Every firm is a prospect for systems with embedded AI; the current state data mostly shows how advanced they are in their consideration of these capabilities.

Areas where AI is/will be integral to business success

To understand where AI is most likely to impact SMB businesses, Techaisle inserted two questions into the survey instrument: one asking respondents to identify areas where AI will be integral to business success. A second asks which internal functions were most likely to benefit from AI-based systems.

Research data shows that small business and midmarket organizations have very different visions of business processes most likely to benefit from AI adoption. By a healthy margin, small business respondents are most focused on AI to impact the customer experience positively. Business intelligence and analytics, HR/recruiting are cited as potentially benefitting from AI. Several other functions – process automation, finance and operations, web/social media analytics, and marketing/advertising – are also viewed as opportunity areas.

Midmarket firms are keen to apply data to risk reduction: these respondents view fraud analytics as the most likely area to benefit from AI. Midmarket decision-makers believe that web/social media analytics, customer experience, and process automation are good targets for AI. They also see “automation of repetitive tasks” and IT automation and management as high-potential areas for AI-based solutions.

There are no doubt other variants of “AI” that will emerge as the technology and its use cases mature. AI-deployment is a potentially-fertile opportunity for SMB users and suppliers alike, but flexibility will be a critical success component.

Geo research:

Techaisle survey on Europe SMB and Midmarket Analytics and Artificial Intelligence adoption research
Techaisle survey on Asia/Pacific SMB and Midmarket Analytics and Artificial Intelligence adoption research
Techaisle survey on Latin America SMB and Midmarket Analytics and Artificial Intelligence adoption research

If you missed our 2021 Top 10 SMB and Midmarket Predictions, here is the link

Top 10 SMB and Midmarket Predictions for 2021

In all sectors, 2020 was a challenging year – and as a result, 2021 is challenging from a market planning perspective. The disconnect between 2020 and 2019 was so severe that it rendered spend forecasts virtually useless: IT suppliers reacted to shifting market trends in real-time. As we enter 2021, IT product and service suppliers look to create a context for understanding the range of outcomes that the new year may bring. Techaisle's 2021 report series illuminates issues and requirements in the vast SMB market to support that effort. To start 2021, here are our top 10 predictions.

1. Digital inequality will be more important than the digital divide
2. Quest for reinvention, innovation, resiliency will drive bursts of incremental transformation goals
3. The hybrid workplace will require HR focus and drive adoption of workspace, workflow solutions
4. Meaningful customer partners and not trusted advisors will determine supplier success
5. Pragmatism will overtake progressiveness in technology adoption for a future-ready organization
6. Requirements for automation and enhanced IT services will become time-critical
7. Security and risk mitigation will focus on a safe middle ground
8. Systems of insight will move into the analytics mainstream
9. AI will arrive as a capability integrated within other solutions
10. Open source adoption will become an indicator of cloud success

Distributed, remote, mobile – these are the realities of today’s workforce. The workspace isn’t defined by windows and walls and common area couches. For millions of SMB employees, the workspace isn’t a physical location – it’s a virtual space defined by access from multiple screens which are used from multiple locations. Consider these data points from Techaisle’s SMB survey research. Pre-pandemic, 24% of SMB global workforce was mobile. Today, the number has jumped to 51% within small businesses and 47% in midmarket firms. These numbers are down from a high of 78% during country lockdowns. The category, “mobile workers”, is increasingly indistinguishable from “workers.” This means new ways of working, taking advantage of new technologies and capabilities to build an agile, mobile, secure work-style enabled by cloud, remote work, security and collaboration. When working remotely, 47% of SMB mobile workforce are using notebook to access corporate data, 9% tablets and 44% smartphones. If the office of an SMB is defined by devices, workplace is defined by the ability to work from wherever those devices and their users are located. As a result, 64% of SMBs are increasing investments in remote work solutions, and survey data shows there will likely be a whopping 380% increase in digital workplace adoption in the next one year within small businesses and 48% increase within midmarket firms.

The key focus is about the ‘future of work’: workflow, workspaces, workforce and the ways that an increasingly-connected world can support pursuit of previously-unattainable objectives for the SMBs and midmarket firms. Their most important technology-related effort is on connectedness – connected cloud, edge, applications, security, collaboration, workspaces and insights. Cloud and mobility are navigation routes but the always-on, everywhere-connected unified platform is the destination. These SMBs are looking for benefits arising from the interconnection of all types of resources: platforms/environments, information, devices and applications. Depth discussions and quantitative survey research with SMBs and midmarket firms points to a trend that is playing out across seven key areas as shown in the chart below: