Analysys Mason’s research reveals that American SMBs are feeling effects of economic headwinds
SMBs have slipped into a ‘strategic realignment’ mindset according to the latest update of Analysys Mason’s SMB Barometer; technology vendors need to focus on protecting their market share and improving client engagement.
Analysys Mason, a management consultancy focused on the telecoms, media and technology (TMT) industry, has revealed in the latest update of its SMB Barometer that more small and medium-sized businesses (SMBs) in the USA are feeling the effects of economic headwinds and declining business performance than in 3Q 2022. In addition, in 1Q 2023, a smaller number of SMBs than in 3Q 2022 reported that they were anticipating strong business performance and expansions.
Reportedly, 69% of SMBs anticipate a year-on-year increase in revenue, which is down slightly from 6 months previously when this figure was 73%. IT spending will continue to rise, but the rate of growth will slow down soon due to SMBs’ caution about making purchases during a period of economic uncertainty. Approximately 64% of SMBs expect an average 4.4% rise in their IT expenditure, which is a lower figure than 6 months previously (when it was 5.2%).
SMBs in the USA that were positive about their own business prospects continue to remain positive. However, some of the businesses that previously reported feeling neutral, now report feeling pessimistic.
These findings are reported in Analysys Mason’s SMB Barometer. The SMB barometer is a pioneering tool that takes the pulse of the SMB ecosystem. Geared towards vendors and telecoms operators that sell their services to SMBs, the SMB barometer can help determine how they can refine their SMB sales and marketing strategies. Underpinning the SMB Barometer are three key measures: SMBs’ perceptions about IT investment, business performance and macroeconomic. These measures are analysed to create the SMB Barometer score.
The report includes the following key findings.
- The 1Q 2023 SMB Barometer score is 62.5 SMBs have slipped into a “strategic realignment” mindset. SMBs are seeing the impact of economic conditions on their business performance. As a result, they will revaluate their IT spending priorities and are more likely to have longer sales cycles.
- SMB IT spending is expected to increase; but at a slower rate than 6 months previously. The combined effects of inflation, declining business performance and financial market volatility have caused SMBs to be more cautious about investing in IT.
- Business performance slowed down in 1Q 2023 compared to 3Q 2022. SMBs have seen a slight decrease in performance, with fewer SMBs anticipating revenue growth or expansion compared to 3Q 2022.
- Inflation continues to be a concern. As in 3Q 2022, most SMBs cite inflation as the key reason for their pessimism in 1Q 2022.
There is a slowdown in SMB spending growth and this slowdown will continue into late 2023. Vendors need to account for longer sales cycles and shifts in SMBs’ spending behaviours. Greater engagement and quantifying these shifting spending behaviours should be top priorities for vendors,” says Bob Takacs, research director and SMB IT practice leader at Analysys Mason.
The SMB IT ecosystem is affected by economic challenges, geopolitical uncertainties and supply chain problems. These factors influence SMBs’ purchasing power, willingness to spend, attitudes to, and buying behaviours of, technologies ultimately impacting the state of the SMB ecosystem. The SMB Barometer captures all these drivers and inhibitors into a single indexed score, which gives vendors and telecoms operators more insight into SMB buying behaviours and opportunities.
The report findings and implications for vendors and operators can be found in Analysys Mason’s SMB Barometer 1Q 2023.
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