Ask Steve: How Has the Recession Impacted SMB Technology Initiatives?

By Steve Hilton

I’m not the first to tell you the economic situation is challenging. Small businesses, large businesses, channel partners, vendors: everyone is feeling the pinch. How have SMBs scrimped and saved? Which SMB-facing technology sectors are faring better? Yankee Group has some new survey data addressing these questions.

Q: What kind of impact has the recession had on small businesses? Do you have any data to share for free?

— Jocelyn from Little Rock, Ark.

A: Thanks for asking for free data, Jocelyn. This is an SMB hallmark: making due with as tight a budget as possible. I respect that greatly, so here are some data.

After a difficult 12 months of economic recession, business optimism is almost as low as it was during the 1979-1980 recession, according to the National Federation of Independent Business (NFIB) report, “Small Business Economic Trends, August 2009.” NFIB measures 10 indicators of small business health from the following categories: labor markets, capital spending, inventories, sales, inflation, profits, wages and credit markets. SMBs continue to anticipate difficult selling, capital and political environments.

According to the “Yankee Group Anywhere Enterprise-SMB: 2009 U.S. Transforming Infrastructure and Transforming Applications Survey, Wave 1-4,” a whole series of technology spending will face severe reductions in the next 12 to 24 months. (See chart, SMB Technology Investment Outlook.) Cloud computing/SaaS implementations face the largest hurdles. These solutions were fairly early-stage for SMBs and the recession caused SMBs to re-think new technology adoption. In addition, UC and enterprise infrastructure faces challenges in the near future.

But cutting back on technology is only one area of cost contraction for SMBs. According to the same survey, 63 percent of SMBs have cut back on travel, 51 percent have started using equipment more carefully (i.e., employees aren’t using their laptops in the bathtub anymore) and 26 percent have increased the number of conference calls. We had hoped the recession would increase the adoption of video conferencing, but in fact only 7 percent of SMBs have increased their use of video-based calls. I guess Cisco’s TelePresence will have a future day-in-the-sun for small businesses.

But let’s keep in mind that this recession will pass and SMBs will come back to the negotiating table. Where do we expect post-recession spending to be most robust? Twenty-eight percent of SMBs believe smartphone implementations are the most important tech priority in the next 24 months. Similarly, 22 percent of SMBs believe mobile-enabled applications are the most important tech priority. (See chart, SMB Technology Priorities). Obviously linked, these two priorities create great opportunities in supplying browser-based mobile-enabled applications for SMB employees.

Despite the economic maelstrom, SMBs favor mobility-related technology, compared to other technology solutions, to help them through the coming year. Mobile voice, and to a lesser extent mobile data, have become woven into the work habits of SMB employees, but we have a long way to go.

Mobile applications aren’t as embedded into critical SMB business processes as desktop-based applications. SMBs want to mobile-enable their front-end applications like CRM, merchant solutions and sales force automation, but today the complexity of doing these implementations often leaves SMBs in the lurch. We expect the vendor and service provider community to step up to the plate over the next 12 to 24 months to meet this SMB need.

Thanks again for the question, Jocelyn. And hang in there.

Send your questions to [email protected]. Please include your name, city, state and a phone number where you can be reached. First names and locations only will be published.

Steve Hilton is the vice president of Yankee Group’s Enterprise Research Group with an expertise in converged solutions for SMBs. Hilton manages a team of analysts delivering consulting, research and programs to help vendors and service providers better serve SMBs, midmarket enterprises and large enterprises globally. Visit Yankee Group online at www.yankeegroup.com.