The recession is cutting into small and midsized businesses’ IT spending, and some industries are hurting more than others, according to the results of the latest IT Effectiveness Index (ITEI) survey.
The ITEI is a benchmarking tool that measures the technology effectiveness of small and midsized businesses. (Small Business Trends is one of the partners of the study.) According to the latest survey, the manufacturing industry has been hit hardest, with 66 percent of people in this industry delaying, halting or canceling IT projects, and a similar number reducing capital expenses.
Also hard hit were the communications industry (at 55 percent), wholesale businesses (52 percent) and service providers with 48 percent reporting an IT spending slowdown. Not surprisingly, the computer industry was the least affected – only a third of the respondents in that industry said their IT projects had been affected by the recession.
And the woes don’t end there. Half of the manufacturing industry respondents said their IT operations were either understaffed or critically understaffed. Thirty-three percent of service providers said the same, as did nearly a quarter of the respondents in the computer industry.
The survey’s results do give cause for concern. “For SMBs, technology provides a key differentiator to support business growth,” said Steve Kahan, vice president of marketing and product management with The Planet, another of the survey’s sponsors. “The results of the survey seem to indicate that capital expense budgets have been hit hard and adequate staffing of IT is a struggle in many industries.”
Is technology a differentiator for your business? Weigh in with what you think. And benchmark YOUR business.
SMBs are encouraged to participate (it’s free), and the survey is an efficient way for business owners to benchmark their businesses and audit their IT effectiveness. Upon completing the ITEI survey, participants are automatically entered to win a Dell Netbook computer and each entrant receives a follow up email with peer comparisons based on their company size and industry.
In January 2010, the ITEI Partners will publish the SMB IT Effectiveness Index Annual Report, which will be provided free to anyone who participates in the survey.
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About the Author: Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. A nationally known speaker and authority on entrepreneurship, Rieva has been covering America ‘s entrepreneurs for nearly 30 years. Follow her on Twitter @Rieva and visit SmallBizDaily to read more of her insights on small business.
I think one of the common misconceptions is that contracted-out IT support is equal to, or better than, having internal IT departments. Certainly a business can save on some labor cost with that philosophy but it is important to compare the higher ‘call-in’ costs to staff costs. And to try and track down-time and lost opportunity cost. A client of mine had cut their internal IT staff by 60% (and proud of it) but found fairly quickly that the cost of the responsive service that they needed was exorbitant! This is not always so but it’s important to look at real all-in costs when doing comparisons.
As a technology vendor that sells to small business (prime target is companies with 5-99 employees), Wasp researches its customers quarterly. One of the questions we ask relates to IT spending.
Two things stand out in our most recent survey:
1. How little money is spent on IT (all hardware and software)…almost 30% spend less than $5K per year and almost 45% spend less than $10K per year
2. Attitude and intention to spend… budgets are being reduced and sales cycles are extending. 36% expect to reduce spending in 2010 compared to 2009
So like the survey Rieva references, spending in SMB for technology is being squeezed. We find sales are not being lost, just postponed and delayed. So stay in touch with your prospects and customers… the need is there and budgets will eventually open up.
Rieva, I was wondering if the ITEI survey included Software-as-a-Service (SaaS) initiatives under “IT spending.” Could it be that spending has been reduced because they’re investing in less expensive SaaS applications? Or is it globally? As a SaaS vendor I think we’ve actually got to do a better job of letting smaller businesses know about our existence and that they don’t have to invest in expensive on-premise software with the attendant hardware costs, training, implementation and technical issues.
In response to Kris, I find that it is arguably dangerous to apply the same technology solution to everyone. One size does not fit all; best fit solutions, whether they be internal, outsourced or some combination of those, heavily depend on the business’ strategy, existing resources and culture. In addition, while cost is a factor (and needs to be an apples to apples comparison as you point out), satisfaction and productivity should be factors as well.
As a retained CIO and someone who has helped organizations who have not invested in IT until it caused serious issues, I really support addressing IT strategy. The goal should be to have a plan so when you do spend, you know it is an investment that is on the right track long term. Companies also find it helpful to understand their risks, and often times they can be addressed without significant capital outlay.