Many of the hurdles and potholes challenging small business owners today can be attributed to an encompassing problem: SMBs need sophisticated technologies to compete on a global stage, yet the tools to get the job done are designed (and priced) for major conglomerates.
In the digital transformation journey, the first step for SMBs is often to migrate to the cloud. With Software-as-a-Service a bourgeoning industry, and one that increasingly targets small business customers, entrepreneurs have an opportunity to access the solutions their companies need.
Yet cloud adoption is not universal. Sixty-one percent of SMBs surveyed by cloud service firm AppDirect last year said they want to adopt more cloud services, yet nearly three-quarters are overwhelmed by all of their choices.
It's not the only barrier to cloud software adoption, however.
DexYP, a small business software provider, recently told PYMNTS that a significant hurdle can be traced back to old habits.
"Business owners are very busy, and often, if their existing paper or desktop-based processes appear to be working well, they are hesitant to explore how cloud software can offer efficiencies, cost savings and better performance," said Paige Blankenship, a spokesperson for the firm.
DexYP pointed to research from the Tech Adoption Index, which measures adoption of cloud technologies. Its 2017 report, powered by the not-for-profit Local Search Association, found that most respondents are simply happy with the technologies they have in place today, whereas only 12 percent said they are unaware of existing cloud solutions, and just 3 percent said they had a bad experience with technology.
Blankenship added that another barrier is "generational."
"Trends suggest newer businesses and younger business decision-makers correlate to higher rates of cloud adoption," she pointed out.
The Tech Adoption Index also revealed that most small business decision-makers between the ages of 18 and 34 use mobile apps to run their businesses; less than a quarter of those aged 55 and 56 said the same, however.
DexYP offers all-in-one small business solutions that combine an array of functionalities, such as customer service, invoice generation, payments processing and more. Combined offerings "level the playing field between" SMBs and large enterprises, said Blankenship, with smaller firms not having to integrate or synchronize multiple individual software solutions.
While adoption of cloud solutions is on the rise, entrepreneurs continue to struggle to invest in cloud-based tools. A report published by the 2018 International Business Festival found that only two-fifths of U.K. small businesses plan to invest in technology in the next three years, despite the fact they are relying on outdated technology (46 percent of entrepreneurs say they still use filing cabinets).
The issue, survey respondents said, is that technology is too expensive, as 45 percent believe upgrading technology is beyond their current spending capacity.
But even when a company decides to take the leap with software, the digitization process can quickly overwhelm.
"There is a broad problem with small businesses acquiring software and then failing to use it, or use it to even a fraction of its capabilities," said Charles Laughlin, project lead at the Tech Adoption Index. "The more software that a small business purchases, the greater the likelihood that it doesn't get used. The failure to engage with software is a risk factor for churn."
A 2016 study from 1E found that U.S. businesses alone wasted $30 billion on unused software over the course of four years. That means 37 percent of software spend goes to waste, and, according to 1E analysts, that figure did not drop between the time when they first began collecting data to when the report was published.
Perhaps small business owners would address this waste if they had a consolidated view of their software spend. But AppDirect's report suggested entrepreneurs are struggling to gain a streamlined view of their SaaS expenses, with 70 percent of survey respondents noting they would be willing to turn to a single software provider, such as a telecommunications firm, if it meant having all of their services on one bill.
According to Laughlin, one of the biggest reasons that software goes unused is because of a poor user experience.
"When small businesses purchase or are sold software and not offered sufficient service with the on-boarding process and ongoing support, the risk is high that the software will be underutilized or abandoned," he said. "Another risk worth noting is that when multiple software programs operate in silos, versus being integrated, opportunities are missed for greater efficiency and performance when programs do not work together."
According to Laughlin, there is not sufficient data to say for sure, but experience suggests that accounting software is among the first targets for small firms looking to step into the cloud.
"Accounting solutions have been around for a while, so SMBs are familiar with them," he said. "They also offer a core functionality – accounting – that easily expands into new services like payroll, inventory management and point of sale."
Considering that small businesses may be most likely to start with accounting when first adopting software, the risk of unused cloud-based solutions not only wastes money, but also misses the chance to improve company finances when tools are abandoned.
With the workforce welcoming waves of millennials, Laughlin said he believes the use of cloud technologies will "accelerate," particularly as younger professionals either start their own businesses or take over others.
"We believe that as younger 'digital natives' become the dominant demographic for business ownership, the use of cloud tools will grow dramatically," added Laughlin.