- Context
- Top 10 Global Predictions for SMB Digital Transformation
Context
IDC forecasts that in 2019 worldwide SMB IT spending will approach $630 billion in 2019, which is $27 billion over 2018 levels. A shift in emphasis from traditional 2nd Platform hardware (PC, server, and network) to 3rd Platform (social, mobile, cloud, and big data) resources and software solutions will continue, something both small businesses (SBs; with fewer than 100 employees) and midsize firms (MBs; with 100–999 employees) should keep in mind as they plan for technology investments next year and beyond. Most small and midsize businesses will budget for continuing spending increases (4–5% on average), but IDC believes the rate of the increase for software and services should be greater than that for hardware. The coordination of on-premises and cloud resources should also be a focus for investment, especially as firms continue to add cloud resources as anticipated. IDC’s guidance for small and midsize firms is that their technology investment thinking should continue to focus on solutions, whether on-premises or cloud, to at least maintain and ideally enhance their competitive position. The traditionally fragmented and improvisational nature of SMB IT spending should be replaced by the coordinated and managed approaches seen in larger firms.
Decentralized technology acquisition, often led by line-of-business (LOB) departments, will continue to characterize the purchasing of smaller firms, but at the same time, IDC expects to see a growing share of SMBs leveraging technology investments in more comprehensive ways, with greater coordination among different constituencies in keeping with digital transformation. We strongly encourage firms to move in this direction, so that technology investment will have maximum long-term impact.
This IDC study provides the top 10 predictions and underlying drivers that we expect to impact SMBs in 2019 and beyond.
“Effective senior executives, business unit heads, and IT managers in small and midsize businesses worldwide will be looking to harness a wide range of technology to support positive business outcomes in challenging times. While SMBs will always seek the near-term benefits of new technology, the most successful will also invest at the same time to support a long-term vision in keeping with digital transformation.” — Raymond Boggs, vice president, Small and Medium Business research at IDC
Top 10 Predictions for SMB Digital Transformation
Prediction 1: SMB IT Spending Worldwide Will Expand 4.6% in 2019 to Total Almost $630 Billion
The worldwide SMB IT spending forecast provides a macroeconomic total of all the different microeconomic investment decisions made by small and midsize firms. “Following what others” do is not necessarily a good idea, but total spending growth does serve as a useful benchmark, especially when compared with previous years. Pressure on SMB IT environments will continue to come from larger and smaller competitors in different industries. In addition, the changing nature of available, affordable technology and the changing preferences and needs of staff and managers for different technology solutions will provide new opportunities to invest in innovative ways. In addition to reflecting the overall health of the economy (recall your company’s likely reduction in IT spending in 2008), total IT spending will be linked to changing prices, changing investment priorities, and changing competitive environments. Two major goals will continue to drive SMB IT spending growth: the desire for near-term productivity improvement and long-term competitive advantage.
Prediction 2: By 2021, the Integration of On-Premises and Cloud Resources Will Be a Top IT Spending Priority for Half of SMBs — in Both Developed and Developing Countries
Cloud-based capabilities will continue to transform how SMBs deploy technology. For the past five years, cloud applications and infrastructure have become integral parts of SMB technology thinking, resulting in the new challenge of integrating and coordinating diverse on-premises and cloud resources. SMBs will continue to add new cloud applications even while they are in the process of upgrading internal on-premises infrastructure. This alignment between updating the old and adopting more cloud services and applications will be at the heart of digital transformation for SMBs in the coming years.
Prediction 3: By 2021, 60% of SMBs Worldwide Will Use Alternative Channels for Technology Procurement, Including Various Service Providers and Self-Service Sources
While SMBs have long relied on convenient retail channels (like office or computer superstores) for what can be called “transactional purchases,” a range of advanced technology solutions are now being provided by these and related channels. The efficient, direct selling efforts of firms like Dell and CDW have shifted SMB channel preferences to a more self-service/self-managed/self-paced purchasing model. In addition, the growth of cloud services has come with increasing use of service providers, including internet service providers, managed service providers, communications service providers like telcos, and traditional VARs that also provide hosted services. Positive consumer experiences with app stores are influencing business buying preferences, which can also ease deployment and management chores of IT departments if the right rules are in place for technology acquisition and governance.
Prediction 4: Innovation Accelerators Will Have Transformed Business and Production Processes in Half of SMBs in Key Verticals by 2022, Such as Robotics in Manufacturing and AI in Several Industries
Six innovation accelerators, identified by IDC, will provide new capabilities and performance advantage to companies over the next 10 years: next-generation security, augmented and virtual reality (AR/VR), Internet of Things, cognitive systems, robotics, and 3D printing. Many of these are already in manufacturing (robotics, 3D printing), financial services (next-generation security, cognitive systems), and logistics/distribution (Internet of Things). All are of greatest interest to larger companies and institutions, but they will also change the competitive landscape for SMBs in different industries.
Prediction 5: By 2023, Half of SMBs Will Respond to the Changing Nature of the Work, Leveraging New Talent and Sourcing Models
Generational changes will continue to pose challenges as well as opportunities for SMBs. These will encourage continuing adjustment in work policies and practices in keeping with the future of work. Millennials born after 1980 are now the largest age group in the population and represent an increasing share of the workforce, especially for SMBs. Their attitudes are shaping workspace dynamics in different ways, including technology use, resource expectations, and career options. In response to these as well as competitive forces, SMBs will increasingly apply advanced technology resources, new sourcing strategies, and new job market approaches. Intelligent technologies (cognitive systems), smart machines (intelligent robots), and the digitization of businesses, processes, and the economy will all reshape how people work, as noted in the Prediction 4. In Japan, for example, the growth of robotic process automation (RPA) will extend to SMBs challenged with worker shortages while looking to increase productivity. Tasks will be redefined to reflect new collaboration between humans and machines to augment and automate work while creating new opportunities for value creation.
Prediction 6: Half of Medium-Sized Businesses in Developed Countries Will Have Business Analytics in Place by the End of 2019, with Adoption Increasing Across All Regions
Classic accounting software has long been used by SMBs to track business progress, but more advanced business intelligence (BI) and analytics resources can provide deeper understanding of influences on business performance and, more importantly, what trends will have an impact on future performance. More SMB firms, especially in the midmarket, will be using analytics for insight about where they are going as well as where they have been.
Prediction 7: The Internet of Things Will Be Used by a Third of SMBs in Key Industries by 2021 to Collect and Evaluate Real-Time External and Internal Data
The Internet of Things is based on the online connectivity of various devices and sensors to provide detail on operating performance or analysis of outcomes. This prediction is closely tied to Prediction 6 and the need for business analytics but moves the speed and detail of available data collection and analysis to a higher level. Beyond just tracking performance levels or operating effectiveness, the adoption of IoT provides the potential ability to measure the results of management action or environmental changes in ways that can help guide future decision making.
Prediction 8: Two-Thirds of SMBs Will Have Digital Transformation as a Key Part of Their IT Strategies by the End of 2023
Digital transformation is the process by which enterprises adapt to or drive disruptive changes in their customers and markets (internal and external ecosystems) by leveraging digital competencies. The goals of DX are to innovate new business models, products, and services that blend digital and physical and business and customer experiences while improving business performance. While SMBs are only just beginning to coordinate resources in keeping with digital transformation, IDC believes DX thinking with be an important part of successful company strategy in the coming decade.
Prediction 9: By the End of 2019, the Majority of Medium-Sized Businesses in Developed Countries Will Have Implemented Cognitive/AI Software
Affordable intelligent assistants are already adding value to different applications, especially consumer-oriented smartphone apps that collect and process user data. Similar capabilities will expand the value of different SMB applications, providing more attractive, personalized engagement. Cognitive/AI capabilities will be bundled with specific applications, of course, rather than acquired as a separate product. The resulting improvement in the user experience, especially in the anticipation of preferences based on past behavior, will improve efficiency and encourage greater use, leading to even better technology performance.
Prediction 10: By the End of 2021, 60% of SMBs Worldwide Will Have Formal or Informal Mobile Worker Support in Place
In keeping with the changing nature of work (refer back to Prediction 5), a growing share of SMBs will implement mobile worker support to improve staff flexibility, empowering workers to do their jobs when, where, and how they please. This includes working from home or remote locations as well as working flexible hours, something increasingly important for firms with operations or customers in multiple time zones. For SMBs, the appeal of letting employees use their own mobile devices (bring your own device [BYOD]) was always clear from a cost savings perspective. At the same time, though, security and control issues make it important that firms manage both the devices and applications that connect to their networks.
