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Small businesses continue to trail larger organizations when it comes to harnessing the power of AI. A 2023 study by business.com found that 58% of SMBs weren’t sure if they’d adopt the technology within the year — and more than a quarter (28%) said they had no plans to do so whatsoever.
In contrast, more than half of the largest companies (those with more than 5,000 employees) report using AI. For those with more than 10,000 workers, the proportion increased to over 60%.
But that trend may be about to change, for a variety of reasons.
Room to Grow
Technology powers how work gets done in small companies, albeit perhaps not to the same extent. The US Chamber of Commerce reports that nearly all of American SMBs (95%) use at least one tech platform. And business.com has estimated that some 3.2 million employers with a headcount below 250 use cloud-based software in their HR activities.
Data from London-based technology research and consulting firm Analysys Mason shows small companies have been increasing their technology spending in recent years. And the firm estimated that tech investments by SMBs could reach $1.45 trillion in 2023.
And still, the market is far from saturated.
Research from Deloitte found that while half of SMB HR professionals use the cloud to manage their workforce, more than half (59%) still use paper to complete their work in some areas, like training.
Cost Is a Brake, but Adoption Pays
One reason SMBs have been slow to adopt new technology is cost. Cloud platforms can cost a small business around $5 to $20 per employee, per month, on top of monthly subscription fees. That can add up, especially considering that most companies require more than one solution to recruit and manage their workforce.
“[I]t is clear that there is not a one-size-fits-all solution for small to medium businesses,” business.com wrote in its report.
Small businesses tend to be pragmatic, which can also suppress spending. Since they hire, train and manage fewer employees, many SMBs find using old-fashioned, paper tools to be manageable, the business.com report stated. In fact, in many cases technology’s advanced capabilities are simply not needed.
But when they do implement HR software, SMBs usually see a financial benefit.
More than two-thirds (69%) of those surveyed said dedicated technology solutions have helped them cut down on payroll-processing time, while 25% reported improved legal compliance.
More than a third (38%) believe using HR software has led to higher employee satisfaction, while 22% said HR software has improved their retention.
Related Article: High Cost Is a Barrier for Corporate Generative AI Use, But Not for Long
Seeking Efficiency Gains
Small business owners are turning to AI for a variety of reasons, and time savings is one. A survey by the Small Business and Entrepreneurship Council, a Washington, D.C., advocacy group, found small companies save a median 13 employee hours per week by using AI solutions. The median time saved by owners themselves is also 13 hours. That equates to median financial savings of about $7,500 per year, the SBE Council said.
The Associated Press reported that some SMBs use large language models like OpenAI’s ChatGPT or Google Bard to help them create content and conduct research. Others take advantage of AI solutions to more easily access analytics or serve as a foundation for chatbots, for example. AI-based self-service platforms can improve the ways employees access information and resources, requiring less time and attention from those responsible for a small company’s HR.
“Especially in small to medium businesses, where HR teams often wear multiple hats and resources are limited, AI integration offers a transformative opportunity to streamline operations, enhance employee experiences and drive organizational success,” wrote Jay Polaki, CEO of Howard County, Md.-based HR Geckos, in a piece for Technical.ly.
Related Article: AI for HR: 5 New Tools Coming Soon
Needing Integration
SMBs tend to prefer tools that mesh neatly with their work. Geoff Webb, a contributing analyst with the Boston-based analyst firm 3Sixty Insights, said in an interview with HCM Technology Report that the key to adoption is to embed the tools into the fabric of the workflow.
To provide the most value to SMBs, AI solutions providers should prioritize embedding intelligence and capabilities that make tools easier to use and allow them to deliver more value and more capabilities, Webb said. “Not add additional buttons to push and levers to pull so that people become overwhelmed,” he explained.
Large solutions providers see this opportunity with small businesses as they continue to develop AI products. For example, AP reported, Microsoft Copilot can now help employees summarize emails, draft other messages and identify a document’s main points.
MasterCard is also joining the effort. The company is developing a product that will help SMBs access a variety of resources, including MasterCard content and licensed information from media companies like Blavity Media Group and the Spanish-language TelevisaUnivision.
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“And the good news is we’re seeing, overall in the industry, [a] good move to embedding more intelligence in these tools in a way that is easier to consume for people that just don’t have the time to spend figuring out and tinkering under the hood,” Webb said.
Small businesses know how to use technology and see real advantages to adopting AI. Yet, most of them have yet to jump in. That paints a promising picture for the providers of AI.
