For the second year in a row, choosing the right technology for their business is deemed a top business challenge among small and meduim-sized business leaders, with 19 percent saying it is their No. 1 challenge, in a survey by Capterra.

-Capterra, an online resource for business software buyers, today released findings from its latest survey of more than 700 small and mid-size business leaders across vertical markets to understand how they manage technology investments, and the technologies they consider necessary for business now and in the future.

The survey results highlight the strong appetite among SMB leaders to use the latest technology but with equal concern about making the right investment decision.

“Small businesses are in a precarious position: They must find and deploy technology that will keep them competitive against their peers and large enterprises,” said Lauren Maffeo, senior content analyst at Capterra, in a statement.

“Companies that wait five to seven years to adopt a new technology may never catch up to competitors that started sooner. Yet, small businesses have minimal margin for error when choosing the best technologies for their business needs.”

Among the survey’s findings:

Despite Consumer Demand, Small Businesses Hesitate to Invest in Chatbots

Chatbots, or conversational user interfaces, are becoming increasingly popular thanks to the personalized experiences they offer consumers. Nearly 65 percent of U.S. millennials say they want to use chatbots when engaging with brands. However, less than 30 percent of small businesses in vertical segments such as Retail, Services, Construction, and Manufacturing are incorporating chatbots.

Banking and Financial Services leads in chatbot adoption with 35 percent of SMB leaders indicating they are deploying chatbots.

Small Businesses are Overlooking Benefits of AI to Support Business Functions

AI continues to be the definition of hype for small businesses. Capterra’s survey found that fewer than one in five small business leaders use AI, yet many more acknowledge that it’s critical for their businesses. This mindset puts small businesses at risk of not investing in cloud software that incorporates AI.

Small Business Leaders Are Investing in Digital Marketing and the IoT, But Don’t Yet Recognize Their Full Value

More than half of SMBs surveyed use digital marketing today. However, their perception of how essential it is to their business is much lower in every segment, minus Retail. This is because digital marketing is a term so broad that it can mean everything and nothing. Digital marketing is an evolving segment thanks to advancements in AI and analytics. Software features like sentiment analysis can help small business leaders tailor their marketing strategies based on audience segmentation.

IoT used only by one in three

Similarly, 47 percent of leaders surveyed say they’re currently using the IoT, yet only one in three (34 percent) say the IoT is critical for them to do business. In addition, more than one in five respondents (21 percent) have business staff handle their IT matters, which likely includes managing or supporting IoT solutions.

This scenario, Capterra says, introduces risk to small businesses since the IoT leverages business and customer data. It thus must be handled carefully from a breach and privacy perspective. Before making any IoT investments, business leaders must establish plans for IoT governance, data ownership and ethics, security, and architecture. Investments in the IoT will fail without a foundation to build on.