Small and medium-sized enterprises (SMEs) are the backbone of many economies, driving innovation and creating jobs. However, in an increasingly competitive and technology-driven world, SMEs face numerous challenges. The rise of artificial intelligence (AI) presents both a challenge and an opportunity for SMEs. Those that fail to embrace AI risk being left behind, while those that adopt it can unlock significant benefits and gain a competitive edge. This report explores the imperative for SMEs to adopt AI in 2025, outlining the current state of AI adoption, future forecasts, and the transformative potential of AI across various business functions. The rapid advancements in AI and the increasing adoption by competitors make it crucial for SMEs to act decisively and integrate AI into their operations to ensure future success.

The Current Landscape of AI in SMEs

Despite the growing awareness of AI’s potential, its adoption among SMEs remains relatively low. According to research conducted by the British Chambers of Commerce in partnership with Pertemps Network Group, only 25% of SMEs were using AI in July 20241. A significant proportion (43%) had no plans to use AI technology at all1. This reluctance stems from various factors, including a lack of understanding of AI, concerns about its cost and complexity, and a perceived lack of skills and resources to implement it effectively

However, there are positive signs. A survey by JumpCloud found that 76% of IT professionals working at SMEs believe their organizations should be investing in AI, with 79% seeing it as a net positive This suggests a growing recognition of the potential benefits of AI among those responsible for technology implementation within SMEs.

Current statistics on AI adoption in SMEs:

• 25% of businesses are currently using AI.

• 43% of firms have no plans to use AI technology.

• 76% of IT professionals in SMEs believe their organizations should invest in AI.

• 79% of IT professionals in SMEs see AI as a net positive.

• Up to 29% of small businesses have already adopted AI.

• 82% of New Zealand SMEs are experimenting with or actively using AI tools.

These figures highlight the current state of AI adoption among SMEs, indicating a gradual but increasing uptake of AI technologies.

Future Forecasts for AI in SMEs

The future of AI in the SME sector looks promising. Forecasts predict a significant increase in AI adoption in the coming years, driven by the increasing availability of affordable AI solutions, growing awareness of its benefits, and the need for SMEs to remain competitive.

Key forecasts for the future of AI in SMEs:

• 70% of SMEs plan to invest in AI technology by 2025.

• AI has the potential to increase productivity by up to 30% in some sectors, leading to cost savings of up to $140 billion by 2025.

• The global AI market is projected to reach $190 billion by 2025.

• 94% of business leaders believe that AI will be crucial for success in the next five years.

• AI is expected to contribute $15.7 trillion to the global economy by 2030.

These forecasts underscore the growing importance of AI for SMEs and the significant impact it is expected to have on their future growth and success. Despite the relatively low current adoption, the future of AI in SMEs is promising, with significant growth expected as more businesses recognize its transformative potential.

Challenges and Opportunities of AI Adoption for SMEs

While the potential benefits of AI for SMEs are significant, it’s essential to acknowledge the challenges that come with its adoption. These challenges can be broadly categorized into technological, organizational, and financial aspects.

Technological Challenges:

• Data quality and availability: AI algorithms rely on large volumes of high-quality data to function effectively. Many SMEs struggle with collecting, cleaning, and managing data effectively, which can hinder the successful implementation of AI solutions
• Integration with existing systems: Integrating AI tools with legacy systems can be complex and require significant investment in time and resources
• AI ethics and bias: AI systems can inherit biases present in the data they are trained on, leading to unfair or discriminatory outcomes. SMEs need to be aware of these ethical considerations and implement measures to mitigate bias in AI algorithms

Organizational Challenges:

• Lack of AI skills and knowledge: Many SMEs lack employees with the necessary skills and expertise to develop, implement, and manage AI solutions. This skills gap can be a significant barrier to AI adoption9.
• Resistance to change: Implementing AI often requires changes to existing workflows and processes, which can be met with resistance from employees
• Lack of a data-driven culture: AI thrives in organizations that value data and use it to inform decision-making. SMEs need to foster a data-driven culture to fully realize the benefits of AI

Financial Challenges:

• Cost of AI solutions: The cost of acquiring, implementing, and maintaining AI solutions can be a significant barrier for SMEs, especially those with limited resources

• Return on investment (ROI): Measuring the ROI of AI investments can be challenging, making it difficult for SMEs to justify the expenditure

Despite these challenges, AI adoption presents numerous opportunities for SMEs to improve their operations, enhance customer experiences, and gain a competitive advantage.

Opportunities:

• Cost reduction: AI can automate tasks, optimize processes, and improve efficiency, leading to significant cost savings
• Improved decision-making: AI-powered analytics can provide valuable insights into business performance, customer behavior, and market trends, enabling SMEs to make data-driven decisions
• Enhanced customer experiences: AI can personalize customer interactions, provide instant support, and improve customer satisfaction
• Increased productivity: AI can automate repetitive tasks, freeing up employees to focus on more strategic and creative work
• Innovation and new business models: AI can enable SMEs to develop new products and services, explore new markets, and create innovative business models

By carefully considering these challenges and opportunities, SMEs can develop a strategic approach to AI adoption that maximizes its benefits and minimizes its risks.

Types of AI Tools Available to SMEs

A wide range of AI tools are available to SMEs, catering to various business needs and functions. These tools can be broadly categorized into the following:

• Chatbots: AI-powered chatbots can automate customer interactions, provide instant support, and answer frequently asked questions. They can be integrated into websites, messaging platforms, and social media channels
• AI-powered CRM systems: AI can enhance customer relationship management (CRM) systems by automating tasks, providing insights into customer behavior, and personalizing interactions
• Marketing automation platforms: AI can automate marketing tasks such as email marketing, social media management, and lead generation, improving efficiency and effectiveness
• Virtual assistants: AI-powered virtual assistants can automate administrative tasks, schedule appointments, manage emails, and provide information
• Predictive analytics tools: AI can analyze data to predict future trends, customer behavior, and business outcomes, enabling SMEs to make proactive decisions
• Project management tools: AI can assist with project planning, task management, and resource allocation, improving project efficiency and outcomes
• Cybersecurity solutions: AI can enhance cybersecurity by detecting and responding to threats, protecting sensitive data, and preventing cyberattacks
• Writing and editing tools: AI can assist with content creation, editing, and proofreading, improving the quality and efficiency of written communication
• HR and recruitment software: AI can automate recruitment processes, screen candidates, and identify top talent
• Inventory management systems: AI can optimize inventory levels, predict demand, and improve supply chain efficiency
• Creative branding tools: AI can assist with logo design, brand messaging, and marketing campaign creation

The choice of AI tools will depend on the specific needs and priorities of each SME. It’s essential to carefully evaluate the available options and select tools that align with business goals and objectives.

Cost of AI Adoption for SMEs

The cost of AI adoption for SMEs can vary significantly depending on several factors, including the type of AI solutions implemented, the complexity of integration, and the level of customization required.

Cost factors:

• Initial investment: This includes the cost of acquiring AI software, hardware, and any necessary infrastructure upgrades
• Ongoing costs: This includes expenses related to cloud computing, software licenses, maintenance, and support16.
• Labor costs: Hiring or training employees with AI skills can add to the overall cost
• Data preparation and cleaning: Preparing and cleaning data for AI algorithms can be a time-consuming and costly process.

Strategies for reducing AI costs:

• Start with small-scale projects: Begin with pilot projects to test the effectiveness of AI solutions before investing in large-scale implementations.
• Use pre-built AI solutions: Leverage readily available AI tools and platforms to reduce development costs16.
• Focus on high-ROI areas: Prioritize AI applications in areas with the highest potential for return on investment.
• Upskill existing employees: Invest in training and development programs to equip existing employees with AI skills.

While AI adoption requires financial investment, it’s important to consider the potential long-term savings and benefits. AI can automate tasks, optimize processes, and improve efficiency, leading to significant cost reductions in the long run