The pandemic accelerated the digitalization of day-to-day business operations, ushering in a new era of tech-dependence, particularly around cloud migration. Now, companies of all sizes are racing to update their infrastructure, data, and critical applications to the cloud.

With spending on public cloud services projected to reach nearly $600 billion in 2023, taking advantage of cloud is now essential for businesses. Over the past few years, industry leaders have looked to Fortune 500 companies as the role models for cloud adoption. In reality, however, some of the most agile cloud adopters are small and medium-sized businesses (SMBs).

Unlike Fortune 500 companies, which are less agile because they can be weighed down by bureaucracy, SMBs can use their unique attributes to lead the charge for cloud migration. With the right support, nimble smaller businesses have the opportunity to innovate in the race to digitalization. Here are five reasons small businesses are well-positioned to lead on cloud migration:

1. They are more scalable

SMBs can leverage their more manageable size to quickly scale cloud solutions. Cloud service providers are able to carve out the exact amount of processing power and storage needed by smaller organization, helping SMBs dynamically scale operations.

Smaller companies were once limited by a lack of capital to scale on-premises resource constraints. Such was the problem faced by GrayHair Software, a mid-sized business providing data insights for mail tracking. Before moving to the cloud, GrayHair would have had to expend large amounts of time and money to manually adapt their traditional server environment to customer needs. By shifting to the cloud, they rapidly deployed computational resources to accommodate more complex systems and applications.

2. SMBs are more agile

As they transition to the cloud, SMBs will also use their agility to remain competitive in processing efficiency.

According to Dell, companies that invest in big data, cloud migration, mobility, and/or security enjoy up to 53% faster revenue growth than their competitors. Since they can more quickly transition their systems to the latest cloud technologies, SMBs have a revenue growth advantage over less nimble tech giants.

SMB cloud clients will also benefit from access to advanced technology features not yet available to on-premises facilities. Since cloud providers take on the responsibility of maintaining equipment, updating underlying server hardware and network infrastructure, SMBs can try out the latest cloud technologies without slowing revenue generation.

3. Adopting comprehensive cloud solutions slashes costs

Traditional on-premises servers are expensive to buy and maintain. Many of these expenses must be capitalized, adding budgetary stress. While larger companies may need on-premises servers to handle the sheer amount of data they process, SMBs can more easily migrate their entire systems to the cloud to save on costs.

With the cloud, smaller businesses can avoid the large upfront cost of physical installations. Instead, they can lease the computer resources needed from a provider on a monthly or yearly basis, creating a tax-deductible operating expenditure from day one.

When looking for data system technology, trying to cobble together imperfect solutions to legacy systems increases the possibility of system errors and inefficiencies. Instead, the best cloud providers offer comprehensive solutions that SMBs can more easily adopt in their entirety. While patchwork data systems can consume large companies’ IT dollars and hours, SMBs can adopt cloud systems for a leg up on functionality and data security.

4. SMBs can safeguard their digital assets

As a company grows, its digital footprint, its exposure to hackers, viruses, and human error grows with it. Costs of a data breach range from ransomware payments to unrecoverable reputation damage.

According to Salesforce, 94% of businesses claimed they saw an improvement in security once they switched to the cloud. While SMBs usually lack a dedicated team of cybersecurity professionals to protect company data, the enterprise-level data encryption, cloud backup, and disaster recovery baked into any reputable cloud service will help them quickly take their cybersecurity strategy from nonexistent to world-class with little to no additional investment.

5. SMBs have access to tax incentives to fund innovation

Digital transformation is not without costs, and Fortune 500 companies may be able to foot the bill more easily. However, savvy SMBs have a little-known advantage in one of the most powerful federal tax incentives.

The federal Research & Development tax credit was introduced in 1981 to increase technical jobs in America by encouraging businesses to invest in innovation. The credit can be claimed by taxpaying businesses that develop, design, or improve products, processes, formulas, or even software.

Small businesses making the switch to the cloud can claim this credit as one of the best opportunities to reduce tax liability and reallocate those resources to improve competitiveness.

The R&D credit for cloud-based integration ultimately creates an opportunity for SMBs to reinvest into themselves and further their efforts beyond cloud computing.

With their agility, scalability, and access to specialized tax credits, SMBs are poised to dominate cloud adoption in the years to come.