Techaisle Blog

The IT industry is abuzz with discussion of Artificial Intelligence (AI) and blockchain. Both AI and blockchain are currently aspirational within SMBs and Midmarket firms. It is not because these firms are not open to the technologies but they have limited understanding of deployment processes.

Regardless of the aspirational nature, both the technologies are showing a very promising adoption trends within midmarket firms. Techaisle’s survey research of 1100 US firms shows that 26% of midmarket firms are currently using AI and another 28% plan to deploy within the next one year. If they stick to the plan, by mid-2020, over 50% of firms will have at least either begun trials or accomplished full deployment of AI within their organizations.

Similarly, blockchain adoption shows an important trend. Although, less than 1/5th of midmarket firms are currently using the technology, a full 40% do plan to adopt blockchain within the year. In fact, when the two datasets are combined, data shows that 42% are currently experimenting and another 42% are developing protypes. Drilling down into the data we find that 26% of midmarket firms are seriously investigating the possibility of implementing blockchain.

In contrast to midmarket’s current and planned adoption of artificial intelligence, only 5% of small businesses are currently using artificial intelligence and 10% of small businesses which are planning to deploy AI are conducting trials.

Not only is the adoption trend different between small and midmarket businesses, the expected benefits and application usages also differ. For example, 38% of small businesses believe that use of AI in marketing / advertising and 32% in improving customer experiences will be integral to their business success whereas 43% of midmarket firms believe that use of AI in process automation and 42% in improving analytics will be integral to their business success. Nevertheless, one-third of both small and midmarket firms believe that use of AI in cybersecurity will be essential for improved security.

Identical percentage, 54% of US small and midmarket businesses agree that artificial intelligence refers to a system consisting of a series of algorithms that can learn from constant inputs. 45% of small businesses and 46% of midmarket firms aspire to use AI for automating IT and a similar percentage plan to initially use AI for non-core processes and applications.

Artificial intelligence adoption within SMBs is at a stage where cloud was a decade ago. Visibly absent within small businesses but notably present within midmarket firms. However, it is not a question of when AI adoption will take firm root but how. The responsibility lies with the vendors and other suppliers for guidance, deployment alacrity and outcomes.

Today, there are several different frameworks that are being used. One of the most common is a six-step process from awareness to purchase. Techaisle’s view is that a buyer-centric marketing framework should consist of four stages which can be easily understood and actionable. Techaisle’s four-stage framework begins from the stage when a business need is generated within a firm and search begins for a technology solution. These four stages are:

1. Identification of business requirements / needs,
2. Determination of technology requirements to meet business needs,
3. Identification of potential solutions and suppliers,
4. Selection of solution and supplier

In each of the above stages it is important for the marketer to understand the decision-making unit, the decision makers and their care-abouts.

Consider these facts from Techaisle’s SMB and midmarket buyer’s journey research:

• 275% increase in number of decision makers in the last decade
• 87% of firms search for partners to help simplify technology
• 74% of IT purchases are triggered by an acute business pain point
• 70% of the buyer’s journey is complete before first meaningful contact with a potential supplier
• 56% of buyers are millennials and Gen-Zs are not far behind
• 24% of firms use six or more information sources

Techaisle SMB and Midmarket SaaS adoption data comparison from 2015 to 2019, illustrates that US SMB SaaS adoption went from widespread to practically ubiquitous. In 2015, less than 60% of microbusinesses and only 62% of all US small businesses were using SaaS, though the balance reported an intent to adopt software-as-a-service. In 2019, microbusiness use of SaaS has reached 77%, and overall small business SaaS use is up more than 29% to 80% of all US firms within the 1-99 employee segment. Looked at another way, growth from 62% to 80% means that within four years, over 47% of small businesses that weren’t already using at least one SaaS service adopted the technology.

The relative increase in the midmarket is even more striking. In 2015, 83% of US firms with 100-999 employees were using SaaS; by 2019, this figure has reached 98%, meaning that 88% of the 17% of midmarket businesses that hadn’t adopted SaaS in 2015 began using SaaS in the 2016-2019-timeframe, and leaving only 2% of US midmarket businesses without any SaaS services in use.

Data gathered from Techaisle SMB and Midmarket SaaS adoption survey suggests that the immediate planned progression of SaaS portfolios will be measured in the US but not so in most other regions. European SMB SaaS adoption is still tepid at 49%, Asia/Pacific is not far behind Europe at 46%, and Latin America is still only 36%.

As is generally the case with cloud solutions, SMB buyers who have purchased or plan to acquire SaaS applications most often approach the ISV directly. While SPs/MSPs have traditionally been the most common alternative source of SaaS solutions, new SMB customers are increasingly turning to consultants – and to specialized cloud brokers – if they are not engaging directly with the ISV. The data indicates that these cloud service brokers are emerging as an important force in the SMB SaaS market.

Add-on services represent a large and essential source of revenue for SaaS suppliers; license spend represents less than 25% of total SMB customer spending, while non-license spend on services accounts for over 75% of the total. Support for analytics/dashboards and system integration are the two most widely adopted add-on services. Current SMB users are looking to invest in systems integration, sales process design, disaster recovery and deployment services, while new SaaS buyers are adding maintenance and operations, systems integration and analytics/dashboards to their new SaaS solutions. Some services are ‘stickier’ than others. Survey also found that SMBs often drop services after initial deployment is complete, but backup/DR, data cleaning, security, and analytics support are each retained by at least three-quarters of initial SMB SaaS buyers.

Stickiness, however, is mainly a function of company size. Very small (<10 employees) businesses tend to dramatically reduce annual spend after deployment, while small and mid-sized businesses report relatively flat year-over-year spending.

System configuration (including designing reports, dashboards and analytics), customization, data and/or application integration, consulting (including sales process design) and training are the top five non-license services acquired by SMBs, as measured by percentage of total services spending.

Let us drill down into services usage with the adoption of CRM.

In 2018, 41 percent of US midmarket firms had set their ambitions on a “Holistic” digital transformation strategy, meaning that these firms believed that Internet and digital technologies impacted every aspect of their business and should be a core part of their organizational strategy. In 2019, midmarket firms have tempered their ambitions and only 27 percent believe in holistic strategy. Nevertheless, the percent of midmarket firms with “Inclusive” digital transformation has remained unchanged at 43 percent. These firms believe that digital transformation while important is still a subset of strategic planning but not seen as critical business-wide. Both the 2018 and 2019 surveys were conducted with 876 midmarket firms.

Good news is that 17 percent of midmarket firms have either completed or have substantially completed their digital transformation journey. Another 46 percent are focusing on digitally transforming their businesses in the next 1-2 years. Highest planned adoption at 41 percent is coming from high-growth midmarket firms.

So what changed in the last 1-2 years?