Small to midsized businesses (SMBs) are often hit the hardest during economic downturns such as the one we are currently experiencing. With unpredictable revenues, constrained cash flow and limited access to capital, SMBs naturally look for ways to curtail spending while riding out the storm.
At the same time, however, there is also evidence that strategic tech investments help build long-term business resilience.
In its research of SMB spending trends following other recent downturns, Techaisle found that small businesses tend to retrench and reduce overall spending during a financial crisis. But they also shift their focus to technologies that offer immediate productivity benefits and long-term budget relief — putting them in position to rebound quickly during a recovery.
In its review of spending data since 2007, Techaisle found that two major financial downturns forced SMBs to reevaluate their spending priorities. In each case, SMB IT spending rebounded faster than overall IT spending. Following the 2008-2010 global recession, the year-over-year growth of SMB IT spending was 1.5 times higher than the overall IT spending growth rate. Following a “mini-recession” in 2015-2016, SMB IT spending growth was 4X the overall growth rate.
Although past performance doesn’t guarantee future results, it does provide some insight. In those previous downturns, SMBs that were resilient enough to shift IT investments to technologies that could reduce costs, boost productivity and improve agility emerged in great shape to expand their market reach.
Techaisle predicts, for example, that SMBs are likely to reduce planned spending on devices such as PCs until there are strong signs of an economic recovery. In the meantime, however, they are likely to shift some of their budget to technologies needed to support work-at-home employees.
Similarly, the firm expects reductions in spending on servers, converged infrastructure and other on-premises hardware. Instead, SMBs are likely to focus on improving their cybersecurity posture and disaster recovery capabilities.
Shifting to the Cloud
Cloud spending is another strategic investment for SMBs as they continue to move workloads off premises for increased agility, flexibility and budget predictability. Techaisle predicts SMB cloud spending to remain near anticipated levels through 2020, in large part because the cloud’s pay-as-you-go model will help them align IT investments with business benefits while reducing capital expenditures.
Cloud, collaboration and remote work technologies have already proven their business-enabling value in recent months. These technologies have been essential in allowing SMBs to make the sudden pivot to supporting an entirely remote workforce. That’s why more than half of the 2,500 global SMBs surveyed by Techaisle say they plan to increase their investment in cloud, collaboration and mobility solutions going forward.
The bottom line is that IT investments help companies survive periods of economic uncertainty through increased efficiency. Ongoing technology improvements are particularly important for the survival of SMBs, which comprise more than 90 percent of global businesses.
If you’re wondering how to adjust your IT spending in light of our “new reality,” we invite you to give us a call. Our CIO would be happy to help you identify strategic technology investments that won’t wreck your budget. Additionally, we can offer some creative financing options that we’ll discuss in more detail in next week’s post.
You can also read more about how to maximize Cloud Computing Strategy in our whitepaper.