Pandemic Impact on IT Investments by Small and Medium Businesses

Common sense tells us that the pandemic impact on IT investments by organizations of all sizes isn’t good. In fact, several industry research firms have already revised their forecasts. But what about the SMB sector, specifically? Techaisle surveyed 2,500 SMBs in several countries for insight on the COVID-19 impact on business and IT operations.

The results? Both small and medium-size firms face uncertainty — but not the same. More SMB companies than not expect IT to return to the usual priorities. And, more than half of SMBs are planning to increase investment in digital transformation going forward.

Techaisle’s Anurag Agrawal

“Irrespective of well-intentioned investment strategy, 32% of SMBs say they lack sufficient IT budgets and 39% are worried about cost of implementations,” writes Anurag Agrawal, founder and chief global analyst at Techaisle. “When depleted financial capacity is combined with a lack of in-house expertise and security concerns, rapid investments seem impossible. This is where an as-a-service model with deferred payments becomes beneficial.”

There’s no shortage of vendors introducing new financing options to partners and their customers to help them establish business continuity.

A Closer Look

Here’s a closer look at the pandemic impact of IT investments, according to the Techaisle survey.

Investment in collaboration will see the biggest IT investment increase and smallest spending delays (58%). That’s followed by cloud solutions (47%), security solutions (45%) and remote work/mobility solutions (43%). SMBs also expect to increase investments in PCs (39%), managed services (32%), migrating to modern IT (31%), digital transformation (25%), business continuity (10%) and analytics (2%). These figures represent spending increases that reflect delays due to the pandemic. Actual spending percentages are higher.

On the flip side, investment in IoT moved into the negative (-2%). Investment in analytics, at 2%, also took a hit as SMBs opt to delay spending.

Looking at the investment data, the report highlights what 2020-2021 future-past COVID-19 digital transformation looks like. In 2020, SMBs are focusing on reducing costs and improving operational agility. As these firms move toward 2021, their focus is on connected business to drive growth, innovation and customers intimacy.

When looking at the current pandemic impact on IT investments, Agrawal looked for lessons from recent history to attempt to understand the present.

During the financial crisis of 2008-2009, uncertainty and unpredictability led to agility and business growth among SMBs in 2009-2010. During deflation, Brexit, a weak dollar and economic uncertainty in 2015-2016, SMBs were driven toward efficiency and a value shift. And, in 2016-2017, there was optimization and digitization.

“After every downturn, SMB IT spend has rebounded higher and faster than overall (consumer + SMB + enterprise + government + education) IT spends,” he observed.

While uncertainy among SMBs currently abounds, more than half of SMB business leaders in Asia Pacific and some countries in Europe are optimistic about a V-shaped recovery as compared to U.S. and U.K. SMBs who believe in more of a U-shaped recovery.

Channel Partners Have Their Own Woes

The mixed bag of SMB survey results is probably of little comfort to channel partners also seeing the impact of COVID-19 on their businesses.

In fact, a Techaisle survey of 225,000 channel partners looked at the impact of COVID-19 on their businesses. Thirty-seven percent of partners expect to see revenue decreases, compared to 21% earlier in the year.

The top five immediate business concerns of partners:

• Business survival in the short term and improving cost efficiencies in the medium term. Both are manifestations of cash flow constraints and demand shock.
• Increasing employee empowerment and organizational productivity in the face of crushing uncertainty.
• Improving customer intimacy by innovative and empathetic communication, service and support.
• Prioritizing investments, expenditures and crisis renegotiation of contracts with suppliers to drive operational excellence.
• Long-term planning on driving business growth.