What Today's Economy Means for SMB IT Leaders

Woman working from home on a laptop after a global pandemic and subsequent economic headwinds

It’s already been a hectic few years for IT leaders at SMBs. Even before the global pandemic and subsequent economic shocks, small and medium sized businesses needed to adapt quickly to changing technology to stay competitive.

Cloud-computing and Cybersecurity

The two main information technology changes for SMBs in the last few years have been the switch over to cloud-based computing and storage, and increasing cybersecurity needs.

That’s according to Chris White, senior analyst at Parks Associates. He says that there was a longer-term trend for SMBs (and other businesses) investing in these two areas in recent years, which potentially had a big impact on the bottom line for a company, depending on their needs.

The Impact of the Pandemic on IT Leaders

Massive shifts in the way workers and customers operated during the pandemic meant even more challenges for IT leaders at SMBs.

After starting to invest more heavily in cybersecurity when everyone worked in an office, cybersecurity concerns were now much more prevalent as workers began working from home – often using home wifi connections or even personal computers and phones to conduct business, explains White.

“IT managers now are essentially operating – if you have a 30 person company for your SMB, you're operating 20 different locations. Maybe you only have ten or 15 people who actually come to the office and then you have other people scattered around, you have to manage all their hardware,” he says. “You have to manage their wifi networks, which is wild because they could be using a whole bunch of different providers. And you have to be handling their security and their software licensing and all that, all that remotely.”

As much as individual workers had to adapt during covid, companies – and especially IT leaders – also had to make rapid changes in how they worked and how much they could spend on tech.

Parks Associates does ongoing research around consumer tech – that’s often used in small and medium sized businesses as well. But in late 2020, they also conducted a survey of SMBs in particular, says White. And in that time period, 35 percent of the SMB owners they surveyed expected to spend more on cloud storage in the coming years; 38 percent were likely to spend more on their office wifi networks; 34 percent were likely to spend money to improve software for employees (to manage working from home; and 32 percent were likely to spend more on technical support services for employees working from home.

“Everyone is doing remote support. That's just a new normal,” White adds.

Now in a hybrid world, IT leaders have to straddle the demands of in office and at home workers at once, he says. “They're going to need more because they're now supporting a larger, more complex technical ecosystem.”

White uses the metaphor of energy supply. You need to have enough capacity to meet peak demands, even when demand is much lower than that. SMBs need to have enough capacity for cloud storage, energy use, and wifi networks for their busiest times – both in office and at homes – even when neither is filled to capacity.

“Even if everyone is back to work at your work, maybe your clients are not back to work. So you still need to retain all the capabilities of maintaining connections and delivering all of your services on a remote basis, and collaborating on a remote basis.”

On remote video conferences, half the participants might be remote while the other are in office – meaning everyone needs to use that video conference line. White adds that many SaaS deals are made as bundles, so that “even by reducing the number of remote workers you have, you might not move it below a threshold where you actually get to reduce the spend.”

Inflation and Interest Rate Hikes

Beyond switching to hybrid work, other economic strains are taking a toll on SMBs in recent months, and those impact IT leaders in particular.

To start, many people switching jobs in The Great Resignation puts strain on IT departments looking to resource and train new hires – sometimes all-remotely.

IT training resources could also be hit hard if those in the IT department resigned or moved on to other jobs, facing the same kind of staffing shortages felt elsewhere in the economy.

In other aspects of planning, SMBs have already had to adapt, and will need to continue to. After years of supply chain shortages, White says many companies changed their product strategies.

“People started having to make decisions on what they wanted to develop, what SKUs they wanted to build,” he explains. Companies that use to make a similar product in five different price points, for example, might have had to cut down to only one or two lines because of part shortages. “What that does is that it cuts people out of the market that would have previously been adopters, make them non adopters. And it also kind of deters innovation. You don't have an opportunity to try something because if it fails now, then you have a bunch of microchips in your gadgets sitting on shelves that are not selling. And you have this other thing that you know can sell.”

White points out that with rising interest rates and inflation, a similar problem is spreading to other industries, especially the tech sector. “You need to make things that you can sell now” he adds.

Looking Ahead

It’s unlikely that economic strains coming from all directions will lighten up any time soon.

“It's been a wild ride for SMB,” White says of the last few years. “Any sort of meat that's still in the bone is going to have to come away. Small medium business is going to have to continue to leverage these same tools and approaches and continue to do them even better. People have to work smart and they need to make sure that their employees are supported.”

That’s true whether you’re a larger business… or even when your business is so small that your IT leadership is really also your CEO, COO, CMO, or any other hats they might wear. Investing in security and bandwidth capability while not sacrificing your core services is vital to weather the storm.

And White points out one other aspect of IT leadership that might be overlooked, but he believes will become more prevalent in the coming years.

Right now, he says, “energy costs at home are a big deal. Do you work from home? We just run the AC all day now. And there's a whole suite of devices and a whole bunch of education that that people need to learn when we all suddenly are becoming energy managers in our lives.” That management of energy cost doesn’t stop with individuals, companies also need to increase their energy management abilities. While we think of cloud computing and networking as relatively invisible, it’s actually an industry that uses a fair amount of energy.

“It’s not going to get cheaper and consumption is going to just necessarily get higher. People are going to need to have strategies to reduce energy either by making their operations more energy efficient, or by adopting more sophisticated management of energy use. So I would say energy management is going to be a new IT challenge.”

For more insight on how small and mid-size businesses can navigate economic uncertainty, visit www.goto.com/why-goto.