By Steve MacKinnon
In the race to adopt artificial intelligence, startups and small to mid-sized businesses (SMBs) may not realize that some of the benefits of AI come with hidden costs. As the founder of a tech startup specializing in applied AI, I've had a front-row seat to the opportunities and challenges that come with leveraging these emerging and dynamic tools. My TL;DR? While AI can drive efficiency, scalability, and innovation, it’s essential to recognize and manage the less obvious expenses to get the full value of your investment.
1. Data is the Fuel… and It's Expensive
AI systems thrive on data, but gathering, cleaning, and organizing that data isn't cheap. Startups and SMBs often underestimate the resources required to maintain high-quality, relevant datasets. Poor data leads to poor outcomes - a.k.a. “garbage in, garbage out” - whether that's inaccurate predictions, flawed automation, or biased decisions. The opportunity here is that investing in better data management can improve business insights and create a competitive edge.
2. Infrastructure Costs Aren’t One-and-Done
AI requires powerful infrastructure to run effectively. From cloud computing expenses to specialized hardware, these costs can escalate as your business scales. While larger enterprises have the capital to absorb these expenses, SMBs need to balance performance with cost-effectiveness. The good news? Emerging solutions like more efficient algorithms, RAGs, and edge computing, are making high-performance AI more affordable. This is where having an AI insider in your corner to tailor a solution to your budget will pay for itself.
3. Talent is Scarce and Pricey
One of the biggest challenges for SMBs is attracting and retaining AI talent. With a limited pool of skilled data scientists and machine learning engineers, salaries and competition are high. However, leveraging pre-built AI tools, engaging fractional talent, and collaborating with specialized AI firms can fill the gap without breaking the bank. Upskilling existing employees is another way to integrate AI expertise into your team without starting from scratch.
4. Hidden Operational Costs
AI can automate tasks, but it doesn’t run itself. Ongoing maintenance, regular updates, and troubleshooting are essential. Unexpected downtime can disrupt operations, and regulatory compliance adds another layer of complexity. Businesses that plan for these ongoing expenses are better positioned to handle setbacks.
5. Ethical and Legal Considerations
With great power comes great responsibility. SMBs must navigate issues like data privacy, bias in algorithms, and the ethical implications of automation. Compliance with regulations isn’t just a legal requirement; it also builds brand trust. Balancing automation with transparency can set your business apart in a crowded market.
6. True Creativity Isn’t Machine-Made
I have seen over and over again that AI is at its best and more efficient when processes begin and end with human input. AI can automate, expedite, streamline and develop options, but humans are the gatekeepers for out-of-the box, game-changing results. Additionally, keeping humans in the loop for critical decision-making can improve outcomes and maintain trust. AI is amazing - but people are even more so.
Despite its hidden costs, AI remains one of the most transformative technologies for startups and SMBs. The key is to approach it strategically:
Start Small: Identify a specific business challenge where AI can add measurable value.
Leverage Partnerships: Collaborate with AI specialists to avoid the steep learning curve.
Invest in People and Process: Train your team and refine processes to integrate AI seamlessly.
By understanding and preparing for these hidden costs, startups and SMBs can unlock the true potential of AI and drive sustainable growth. Just keep in mind that AI isn’t a plug-and-play solution; it’s a journey.
What challenges or opportunities has your business encountered with AI? I'd love to hear your thoughts.
