Australian small to medium businesses favour quick time-to-value from IT more than traditional ROI, according to results of a survey by Tech Research Asia recently.
The finding is from the TRA report, The Digital Pulse of Australian SMBs, which focuses on SMBs’ business and technology priorities for the first half of the 2025 financial year.
Despite economic headwinds, TRA reported signs of robust growth in some segments.
Mark Iles, a senior analyst at TRA, pointed to “bracket creep,” where smaller companies expand into larger size categories.
“We’re seeing this kind of creep where those biggest, those mid-size and smaller companies are getting bigger,” Iles explained.
This growth wasn’t uniform across all sectors and size brackets.
While TRA found that companies with 20-199 employees were expanding, micro-businesses with 1-4 employees were having a more difficult time.
Industry-specific growth patterns were becoming increasingly evident. Iles noted.
“Healthcare, there’s 185,000 registered healthcare businesses now that’s up 30 per cent since pre-COVID,” he said.
Other sectors that showed strong growth included administrative and support services, professional services and utilities.
This uneven growth pattern underscored the importance of targeted strategies for SMBs and the technology providers serving them.
Shifting business priorities
The research revealed a shift in SMB priorities for 2024 to growth, customer focus, and cost management and innovation.
Sustainability and ESG (environmental, sustainability and governance) initiatives, while still present, have taken a backseat to these core business objectives.
This reprioritisation reflects the economic pressures facing SMBs, with gross profits down 2.5 per cent in the last quarter and wages up 6.6 per cent over the past year.
AI use skyrockets
Perhaps the most striking finding in TRA’s research was the meteoric rise in AI adoption by SMBs.
In one year, AI usage among surveyed businesses skyrocketed from 29 per cent to 85 per cent.
“AI is going to be bigger than cloud,” Iles said about the transformative potential of the technology.
The research showed that 8 out of 10 SMBs believed AI would transform how they interact, engage, and service customers.
But they data privacy and security concerns were common, followed by worries about job security among staff.
Many SMBs were also struggling to move beyond proof-of-concepts to fully implemented AI.
“We’re literally sort of driving this thing at a high speed without any real safety features,” Iles cautioned, highlighting the need for better governance and strategic implementation of AI technologies.
Need for cybersecurity strategy
Despite buzz about AI, cybersecurity remained the top technology priority for SMBs surveyed by TRA.
It found that 57 per cent of companies planned to increase their cybersecurity spending, reflecting ongoing concerns about data protection and cyber threats.
Surveyed SMBs were less focused on specific security products and more interested in overall strategy and resilience.
“They’re thinking in terms of governance and risk, culture and cyber resiliency,” Iles noted, suggesting a more mature approach to security among SMBs.
Rise of marketplaces
TRA’s found a notable increase in SMBs preferring to purchase technology through marketplaces rather than traditional reseller channels.
That was driven by the desire for simplicity and speed in procurement processes.
“If you can make the same margin, you lose the top line revenue,” Iles said.
“Another way to think about this is: if you’re doing managed services business as well for for partners, you put your percentage in your mix of annuity revenue, which just went up because it’s not being diluted by a whole bunch of top-line product revenue that’s diluting everything,” Iles explained, on the potential benefits for partners who adapt to this trend.
Modernisation and digital transformation
The push for modernisation remained strong among SMBs, according to TRA, with many looking to replace legacy systems with more agile, cloud-based solutions.
TRA reported a growing preference for SaaS applications, with forecasts suggesting the SaaS market in Australia could exceed $50 billion in the next 8-9 years.
This shift won’t be without road bumps.
Many SMBs were grappling with the complexities of cloud migration and cost optimisation, leading to a more measured approach to cloud adoption.
Talent challenge
Attracting and retaining talent remained the top business challenge for SMBs surveyed by TRA.
TRA’s research suggested that this challenge may evolve as unemployment rates rise, but for now, it remains a critical concern for SMBs looking to grow and innovate.
Advice for partners
TRA emphasised several key points for technology vendors and partners:
- Need for industry-specific solutions and targeting: generic, “vanilla” offerings are becoming less attractive. Vendors and partners need to develop deep industry knowledge and tailored solutions, according to TRA
- Shift towards outcome-based selling: SMBs are increasingly focused on business outcomes rather than specific technologies. This requires a more consultative approach by their IT partners.
- The importance of agility and quick time-to-value: speed and agility matter more than traditional ROI calculations, TRA reported. SMBs want solutions that can deliver value quickly.
- Ongoing opportunity in managed security services: With only 22 per cent of SMBs currently using managed security services, there’s significant room for growth in this area.
- The need for AI strategy and governance support: SMBs need help not just with AI implementation, but with strategic planning and governance around AI initiatives.
Another TRA analyst, Tim Dillon, cautioned against underestimating SMBs’ technical capabilities.
“SMBs have some very, very clever people with some deep technical skills,” he noted, which means partners have to bring real value and expertise to the table.
