State of U.S.

SMB Digital
Transformation
SURVEY REPORT
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Overview
Small and medium-sized businesses (SMBs) are the backbone of the United States economy—and as such, they
are equally, if not more, impacted by the same rapidly evolving trends facing the big players. From pressures
related to digital transformation to escalating consumer expectations in the age of Amazon, to global tensions
and policies impacting all industries—SMBs must keep pace or perish. And now, due to the COVID-19 pandemic,
SMBs are facing a new and unprecedented set of challenges.

To understand how SMBs are leveraging technology to respond to new challenges and opportunities, ECI
surveyed 500 SMB IT decision-makers across the manufacturing; lumber, building materials and hardware;
residential home construction; office products; and field services verticals in November 2019. Reflecting on
the prior 12 months, findings show that prior to COVID-19, SMBs felt government regulations on trade were
the biggest threat to their businesses’ growth or success. Additional threats included skills shortages due to
retirement or lack of interest in the industry—contrary to the notorious automated job scare. To respond to these
challenges and those brought on by the pandemic and new work-from-home policies, SMBs are investing
in technology—specifically cloud-based software and business process automation—to support employees,
streamline inefficiencies, improve cybersecurity, and reduce costs. Read on to learn how SMBs navigate global
uncertainty such as trade policies, and how those strategies can apply to a post-pandemic economy.

The state of small and medium-sized businesses

The SMB workforce is in flux, with respondents either saying they’ve hired more people (44%) or part of their
workforce has retired (21%) in the past 12 months.

Workforce changes:

hired more
44%
40%
people

33%
added skills part of their
requirements to workforce has retired
handle emergency
technology downsized

attracted younger,
21% 20% their operations

post-graduate
applicants
15% haven’t
changed

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

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As of November 2019, business was growing for SMBs, with 65% of respondents saying their revenue had
increased in the last 12 months. Of those whose revenue increased, about one-quarter (26%) say it increased
21-60%, showing considerable growth.

Revenue growth over 12 months:

Revenue
13%
2%
declined
Unsure

Revenue
stayed
the same
20% 65% Revenue
increased

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

“We were averaging a 60% increase in sales

before COVID-19; now we’re at about 25%.”
—Robert Sambuco, Director of Operations, Paparone New Homes, MarkSystems ERP

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SMB revenue increases:

36% increased 1–10%

31% increased 11–20%

16% increased 21–40%

10% increased 41–60%

7% increased
more than 60%

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

The impact of the current administration on SMB growth

When asked to define the biggest threat to their businesses’ growth or success, respondents say government
regulations on trade is the #1 threat. Yet only 26% of respondents say the current administration’s global trade
policies impacted their bottom line negatively last year. Thirty-four percent say it actually had a positive
impact on their bottom line, and 30% say it had no effect at all.

Biggest threats to SMB growth or success:

The #1 threat to SMB

1. Government regulations on trade
2. Skills shortages due to retirements
3. Rise in ecommerce usage business growth and
4. Skills shortages due to lack of success is government
applicants/interest in their industry
5. Cybercrime
regulations on trade.

Even so, SMBs made changes in response to what they consider their #1 threat. Almost one-third (32%) of
respondents say they increased investments in their technology infrastructure in response to the current
administration’s global trade policies. This finding points to the trend of SMBs modernizing their IT to become
more resilient, agile businesses.

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SMB responses to global trade policies:

made more financially
34% conservative decisions

33% increased product/service prices

increased investment
32% in technology infrastructure

30% hired more U.S.-based employees

26% reduced product/services prices

23% took more financial risks

accelerated plans to open

22% new offices in global locations

paused plans to open new

17% offices in global locations

closed global offices and moved

16% staff to the U.S. (i.e. reshoring)

17% haven’t made any changes

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

“As an aerospace manufacturer, the biggest

threat to our business during the pandemic
was the lack of people flying.”
—Tony Ryan, ERP specialist, Takumi, M1 ERP customer

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SMB investments in technology

Whether it’s to fuel growth or respond to global change, SMBs are investing in technology across the board.
Eighty-two percent of respondents say their business increased investments in overall technology in the last
12 months. Of those respondents, more than three-quarters (76%) increased their investments in technology
by more than 25%—showing that SMBs are making modernization a priority. In fact, very few SMBs decreased
investments in overall technology. Of the 15% of businesses that did not increase investments in technology, 55%
of those say they did not decrease investments either.

SMBs use cloud-based software the most out

of any technology, with 65% of respondents
currently using it and another 28% interested 82% of respondents
in using it.
say they increased
Respondents are also interested in using investments in technology
robotic process automation (52%), predictive
analytics (49%), artificial intelligence (48%) and in the last 12 months.
connected machinery (45%).

Businesses investments in technology:

INCREASED INVESTMENTS

23% increased
by under 25% 7% increased
by 75–99%

48% increased
by 25–49% 2% increased by
100% or more

19% increased
by 50–74% 1% are unsure

DID NOT INCREASE INVESTMENTS

7% decreased
by 1–5% 5% decreased
by 25–49%

22% decreased
by 6–10% 3% decreased by
50% or more

8% decreased
by 11–24% 55% did not decrease
investments

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.
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Popular technology for SMBs:

Not using Not using and
Currently Not using but
but somewhat not interested
using very interested
interested at all
Cloud-based software 65% 18% 10% 6%
Cybersecurity software 61% 22% 9% 8%
Connected machinery 38% 28% 17% 17%
Predictive analytics 36% 31% 18% 15%
Artificial intelligence 31% 26% 22% 21%
Robotic process automation 24% 31% 21% 24%
Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

Respondents also believe cloud-based software provides the most business value—whether they have
implemented it or not. In fact, cloud-based software has likely become even more valuable—if not mission-
critical—for small businesses in the wake of COVID-19, particularly for those who have been forced to operate
remotely. After cloud-based software, respondents ranked the most valuable technologies as advanced
analytics, IoT devices, connected machinery, and simulation software—in that order.

The top 5 technologies delivering the most business value:

Cloud-based software Advanced data analytics IoT devices

Connected machinery Simulation software

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

Automation drives efficiency and cuts costs

Automation technology is also prevalent amongst SMBs; 72% of respondents say their core business processes
are automated by software. In fact, 15% of respondents have used software to automate 75-100% of their
businesses’ processes and nearly half (48%) have automated more than 50% of their processes. This automation
has been applied throughout the organization. Sixty-five percent of respondents say they have applied
business process automation to IT, 57% say they applied it to finance/accounting, and 50% say they applied it
to customer service.

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How many business processes are automated:

14% automated
under 25% 12% automated
75–99%

38% automated
25–49% 3% automated
100%

33% automated
50–74%

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

Where SMBs are applying business process automation:

65% 57% 50%

IT (data entry) finance/accounting customer service
(payroll, accounts (order management)
payable)

42% 38% 34%

HR (hiring, plant management marketing
onboarding) (shop floor) (sales)

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

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SMBs are seeing a wide variety of benefits from business process automation. Fifty-two percent say they
reduced errors and improved accuracy, and another 52% say they improved customer service. Based on how
and where automation is being applied—as well as the types of benefits SMBs are seeing—it’s clear automation
is driving efficiency rather than decreasing jobs.

92% of respondents 90% of respondents

agree that business agree that business
process automation has process automation has
allowed them to better allowed their company
service customers. to reduce costs.

The benefits of business process automation:

improved employee
job satisfaction

improved visibility and

reduced errors
52% 52% 51% control of enterprise
49% 48% 47%
and improved
accuracy processes

improved
customer service
43%
reduced costs and
increased revenue
reduced
manual effort ability to spot
and paperwork bottlenecks and
redundancies

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

“We automate reporting using M1, and now we can

just update an Excel spreadsheet every day, rather
than taking a full week to pull the report together.”
—Tony Ryan, ERP specialist, Takumi, M1 ERP customer

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In fact, automation has improved the work lives of existing employees. When asked how business process
automation has impacted the day-to-day job requirements of their team members, 60% of respondents
say it increased employee productivity. Automation has likely been especially supportive to employees
during the COVID-19 pandemic, given it helps workers maintain a better work-life balance. Remote
employees are increasingly seeking this benefit as data shows they are working longer hours due to
the work-from-home orders.

How business process automation impacts employees:

60% 54% 52%

increased removed the amount freed them up
employee of manual, repetitive to be more strategic
productivity work required

49% 48% 1%
boosted employee increased ease of no impact
engagement and team collaboration
job satisfaction

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

Cybersecurity takes center stage for SMBs

Cybersecurity is the top challenge SMBs experience when adopting technology. Yet, despite being the top
challenge facing technology adoption, SMBs believe they have a firm grip on cybersecurity:

• 88% of respondents say they know where sensitive

data is stored within their organization

• 89% of respondents say they know who has access

to sensitive data within their organization
Cybersecurity is
the top challenge
• 70% of respondents say their employees are trained
on cybersecurity best practices SMBs experience when
adopting technology.
Additionally, 61% of respondents say they are currently
using cybersecurity software, and another 31% say
they are not currently using cybersecurity software
but are interested.

This confidence extends to SMB’s ERP security. Seventy-seven percent of respondents believe they have a
strong sense of what tools run in concert with their company’s ERP platform. However, 43% of respondents feel
as though their ERP software is putting them at risk for a cyberattack.

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Consequences of a cyberattack:

forced to shut down

50% operations for at least a day

46% lost money

forced to shut down

40% operations for at least a week

32% have not fully recovered from the

attack (e.g. still recovering lost data)

30% lost customers

1% are unsure

8% saw no impact on their business

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

While the majority of respondents seem confident in

their company’s cybersecurity practices, 20% say their
company has fallen victim to a cyberattack in the last 71% of respondents
12 months alone. Of those victims, 92% say their
businesses were impacted in some way. After their
believe that storing data
cyberattack, 50% of respondents say they were in the cloud is more
forced to shut down operations for at least a day,
and 40% were forced to shut down for at least a week.
secure than storing it in
Another 46% say they lost money. their own system

Sixty-eight percent of respondents are updating their security software to ensure their company does not fall
victim to a cyberattack. Other respondents plan on limiting employee access to critical data (52%), training their
employees on digital attacks (50%), moving their company’s data to the cloud (48%), and creating a disaster
recovery plan (45%). The cloud aligns with SMBs’ initiative to improve cybersecurity. Seventy-one percent of
respondents agree that storing data in the cloud is more secure than storing it in their own system.

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ERP meets modern needs

ERP software has been a longtime staple of the SMB IT ecosystem. In fact, 76% of respondents say they use ERP
or business software. ERP may be so widely implemented because it offers several of the features that SMBs find
most valuable such as inventory management (90%), document management (90%), real-time data (89%), and
activity process management (89%). ERP/business software is also used for a wide variety of purposes across
operations—most popularly to reduce manual effort and paperwork (62%).

Additionally, the majority of respondents feel it is “important” or “very important” for ERP to integrate with most
of their other software solutions. This includes accounting software (88%), payroll software (85%), CRM software
(84%), marketing software (80%), ecommerce software (80%), HR software (78%) and CAD/CAM software (72%).
As ERP remains the central component of SMB IT systems, it’s critical that SMBs have solutions that can easily
integrate with ERP to improve collaboration across the business.

The most valuable ERP features for SMBs:

Inventory Document Real-time

management management data

Activity process Business process Web and mobile

management management accessibility

Business intelligence Automated workflows Built-in CRM

configurable role
Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

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SMB uses for ERP software:

gain data insights
that inform smarter
decisions
reduce manual
62% streamline transactions
effort and paper
59 % 58% 56% 55% with customers and

automate processes 53% 51 % partners

for increased efficiency improve visibility and

control of enterprise
processes
streamline
workflows
integrate functionality
between core
business functions

Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

“We saw a 10-12% reduction in time spent on

scheduling with MarkSystems. Employees don’t
chase money, don’t wait on invoices and get
paid every two weeks.”
—Robert Sambuco, Director of Operations, Paparone New Homes, MarkSystems ERP user

The SMB trend toward cloud technology also extends to ERP; in fact, 82% of respondents say at least part
of their ERP solution is cloud-based. These respondents have experienced a wide variety of benefits from
a cloud-based ERP solution, including increased flexibility (57%), improved data access (55%) and improved
productivity (54%).

Fewer SMBs are using ERP to respond to global changes. Only one-third (33%) of respondents say their business
plans to deploy ERP to manage the impact(s) of global trade policies. Of the respondents not using ERP for
this purpose, 64% say they are not making any immediate changes to manage the impact(s) of global trade
policies in general.

However, SMBs who have used ERP to respond to global changes see great results. Seventy-eight percent
of respondents say their ERP is “very-effective” or “effective” in helping them manage the impact(s) of global
trade policies (e.g., fluctuation of material prices). Specifically, ERP helps lower production costs (48%), improve
customer delivery performance (45%), and support resource planning (43%).

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Benefits of cloud-based ERP:

57% 55% 54%

increased improved data improved
flexibility access productivity

54% 54% 52%

simplified business improved data improved
processes security profitability

52% 47% 42%

reduced improved increased
operational costs collaboration scalability
Survey taken pre-COVID-19 pandemic in November 2019 and is reflective of the prior year.

82% of respondents 78% of respondents

say at least part of say their ERP is effective
their ERP solution is in helping them manage
cloud-based. the impact(s) of global
trade policies.

Survey methodology
As commissioned by ECI Software Solutions, Berg Research surveyed 500 respondents from small and medium-
sized U.S. businesses (500 employees or less) who make or influence IT decisions within their organizations
in November 2019. These IT decision-makers work across the manufacturing; lumber, building materials and
hardware; residential home constructions; office products; and field services verticals.

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Conclusion
When this survey was conducted in November 2019, SMBs were already facing a multitude of
challenges—from the pressure to modernize and deliver on rising consumer expectations, to
navigating global tensions. Yet the greatest complexity on the world stage now goes beyond
current policies. The COVID-19 pandemic has turned every industry on its head and impacted
a seeming majority of SMBs—on top of the existing problems and threats to business.

Yet, just as SMBs were taking these challenges head on at the end of 2019—investing in
technology to drive efficiency, securing information to serve customers, and hiring and training
more employees to address the skills shortage—they will continue laying the foundation for
resiliency. While times are uncertain, having a flexible, agile IT infrastructure can make all the
difference in an SMB’s response.

Cloud-based software enables a remote workforce, automation adds efficiency and

promotes work-life balance, cybersecurity software helps secure sensitive data, and
ERP helps owners keep a close eye on business when it matters most. SMBs have
already started making adjustments for the modern era and industry 4.0—and they
won’t stop now.

Contact us today to learn more about

how an ERP solution can benefit your business.
866.374.3221 | www.ecisolutions.com | How business gets done.
©2020 ECI and the ECI logo are trademarks or registered trademarks of ECI Software Solutions, Inc. All rights reserved.

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