Small and medium-sized businesses are getting their 2018 plans under way, putting ideas in motion to attract new customers, grow revenue and profits, and ride the waves of change in their industries. They are also likely considering the IT investments they will need to make to do all of that.
How will SMBs approach technology in 2018, and how will the changing IT landscape affect business decisions? Radical changes are unlikely next year, as trends that suffused 2017 will evolve, according to small business IT analysts.
Next year, artificial intelligence applications will become a larger part of small business’ cloud usage, according to surveys and analysts, as SMBs take advantage of AI advancements from Microsoft, Google, IBM and others.
Although small businesses have a reputation for lagging behind on emerging technology adoption, they will likely adopt Internet of Things solutions for discrete use cases.
And looming across the Atlantic will be the European Union’s General Data Protection Regulation (GDPR), which goes into effect on May 25 and will affect any business that collects data on citizens in EU countries.
Here is a look at four key trends to watch next year in the small business IT market:
1. Cloud Will Evolve to Incorporate AI
SMBs clearly have embraced the cloud. According to IDC, more than 70 percent of companies with between 10 and 99 employees use the cloud and more than 90 percent of companies with between 100 and 499 employees do.
Data from Laurie McCabe, co-founder and partner at the SMB Group (one of BizTech’s 30 Must-Read Small Business IT Blogs of 2017) also indicates that the vast majority of SMBs are using at least one SMB cloud application today, and that cloud adoption is rising across all application categories.
Both McCabe and Ray Boggs, vice president of SMB research at IDC, agree that SMB use of the cloud will evolve as businesses seek to get more than just lower costs and increased flexibility and scalability. Increasingly, SMBs will incorporate AI into their cloud-powered deployments, the analysts say.
Most SMBs are not going to build out their own AI or machine learning tools, McCabe said. “The way they are going to go about that is the applications, the public [Software as a Service] applications they are procuring in the cloud,” she says. “It kind of amplifies the importance of the cloud.”
SMBs will take advantage of AI tools being developed by larger technology companies that will filter into their cloud platforms, according to McCabe. That will translate into more advanced data-processing capabilities in cloud apps, she says. “Even a small developer can start putting these capabilities into their apps,” she adds.
Boggs expects SMBs to start using the cloud and AI for more advanced analytics, especially if there is a clear return on investment. For example, AI and cloud-based analytics will allow SMBs to “do a much sharper job in addressing the customers you are serving, in a way that is much more efficient,” Boggs says.
AI will allow SMBs to anticipate customers’ needs and identify their most profitable customers based on their behaviors, Boggs says. A small businesses’ biggest customer, for example, “may be a pain the neck” that wants special orders and discounts, and does not pay on time. However, the most profitable customers may be the ones that pay promptly and do not cause any issues, he says. “You should be really rolling out the red carpet for these guys,” he says.
The technology exists to achieve this kind of analysis, Boggs notes, giving SMBs that are proactive the opportunity to be leaders. It will require investment, but these AI-based tools that can sift through patterns are becoming more affordable and easy to use, according to Boggs, and SMBs can get technologies “that five years ago were only available to Fortune 1000 firms,” he says
2. IoT Will Gain Prominence in Specific Vertical Markets
SMBs are going to continue to adopt Internet of Things applications, but likely for vertical-specific use cases, analysts say.
Spiceworks’ 2018 State of IT report reveals that, among companies with 99 or fewer employees, 20 percent currently use IoT and 17 percent more plan to do so in the next 12 months. For firms with 100 to 499 employees, those figures jump to 26 percent and 17 percent, respectively.
SMB Group data reveals higher levels of IoT adoption. The data indicates that 36 percent currently invest in IoT and 32 percent more plan to do so in the next 12 to 25 months.
With IoT, McCabe says, there are many pragmatic use cases for SMBs, whether it is using sensors to monitor power usage and save on electricity bills, track assets in the field or monitor physical security. “There have been developers working to create these very pragmatic last-mile solutions in IoT that a business can kind of plug and play,” she says.
The IoT solutions SMBs use will likely be vertical-specific, McCabe says, including manufacturing, asset tracking and construction. For example, sensors can track concrete to make sure that when it gets to a construction site it is optimally dried.
Increasingly, McCabe says, SMBs will turn to turnkey IoT solutions that only require them to place sensors and the analytics platform will be automatically built in and turned on.
3. Cybersecurity Will Get Streamlined and Outsourced
The cybersecurity landscape is growing more complex. The more statured small businesses will understand that they have a diverse set of security needs, Boggs says, from data loss prevention to endpoint protection and threat remediation.
The idea of having one, two or three cybersecurity vendors that can provide all of the tools they need is appealing to SMBs, according to Boggs. Getting the “best of breed” solutions from numerous vendors may seem like the best approach, he says, but it actually can add a lot of time, costs and complexity. He adds that “People are getting astute about the proverbial single pane of glass,” or management tool that brings together sources and applications and displays them in a single view, like a dashboard.
McCabe says that most SMB owners don’t understand most IT security solutions. If they have IT security staff members, they “may see glimmers of it,” but she says there still needs to be a lot more education on cybersecurity.
Outsourcing cybersecurity or working with a managed service provider may make sense for many small businesses, she says.
“For a lot of SMBs, they need a vendor they work directly with, or a managed service provider, to help them do a risk assessment and then figure out” what they need to do on cybersecurity, she says. That will help small businesses come up with a more practical strategy to address their biggest risks.
4. GDPR Rules Will Cause Headaches on Data Protection
Looming in the background next year will be GDPR, which provides strict new controls on personal data.
For example, as CSO notes, “companies will need the same level of protection for things like an individual’s IP address or cookie data as they do for name, address and Social Security number.”
The GDPR leaves much to interpretation. It says that companies must provide a “reasonable” level of protection for personal data, for example, but does not define what constitutes “reasonable.” This gives the GDPR governing body a lot of leeway when it comes to assessing fines for data breaches and noncompliance.
GDPR allows for stiff penalties of up to $23.5 million (€20 million) or 4 percent of global annual revenue, whichever is higher, for noncompliance. Despite that, many SMBs have not invested much to deal with the regulations.
According to Spiceworks, as of mid-2017, 53 percent of companies with 99 employees had not invested anything to deal with GDPR and 43 percent of those between 100 and 499 employees had not done so.
In the near term, Boggs says, GDPR likely will not have a large impact on U.S. SMBs, but that it will only take a few high-profile cases on noncompliance for SMBs to wake up to the reality. Any SMB that is thinking of expanding in Europe or buying a European company will need to take steps to get into compliance. “You might as well make the effort to future-proof yourself now when it’s going to be easy, as opposed to going back and trying to retrofit when you are expanding,” he says.
McCabe says that in the SMB Group’s surveys, only a small percentage of companies are operating internationally because the regulatory, language, tax, language and cultural barriers can be overwhelming.
“For the ones that are doing business overseas, it will affect them,” she says. “And it may make it more daunting for those that do want to do business overseas.”