While IT spending may not grow all that much in 2019, it turns out how those budgeted dollars are being allocated is shifting, especially among small-to-medium businesses (SMBs)
A new survey of 700 SMBs published by the market research firm Capterra, a unit of Gartner, finds that over the next two years the lion’s share of SMBs’ IT budget will be applied to finance and accounting, cloud computing, data security, and digital marketing.
Just over half of respondents (53.6 percent) say that they will be setting aside a portion of their budget for finance and accounting applications. The primary reason finance and accounting applications are at the top of the IT agenda is that most SMBs struggle to manage cash flow. In fact, the report’s authors note that the key reason most businesses fail, is cash flow. The report finds that, on average, SMB organizations in the transportation and wholesale businesses sectors are budgeting between $50,000 and $55,000 for finance and accounting software in the next 12 to 24 months. SMBs in the media, government, manufacturing, banking, and retail sectors are budgeting between $30,000 and $40,000 for finance and accounting tools in the next 12 to 24 months.
Over the next two years the lion’s share of SMBs’ IT budget will be applied to finance and accounting, cloud computing, data security, and digital marketing.
Cloud computing comes in second with 47.8 percent of SMBs setting aside budget for it. The survey notes that nearly 50 percent of the businesses with $5 million to $100 million in revenue are budgeting for cloud computing. That compares to 33.4 percent for businesses under $5 million in revenue. In terms of verticals: insurance, transportation, and government agencies allocated the most budgeted dollars to cloud computing at 40,000 or more on average.
Data security, meanwhile, comes in at a close third with 47 percent of respondents budgeting for it. Government sectors top the industry list of the percentage of organizations with a budget for data security, and the average spend is $49,000. The report’s authors note the cost of recovering from a data security attack exceeds the amount of money most SMBs allocated to data security.
Finally, 45.1 percent of SMB respondents plan to budget for digital marketing campaigns and tools within the next two years. Not surprisingly, media and retail have the highest percentage of spending in these areas.
Why it’s important for MSPs to take note
SMBs typically make up most of an MSP’s customer base. The challenge MSPs continually face is convincing SMB organizations to rely on an external service provider rather than hiring their own full-time employees to manage internal IT. The amount of dollars any single SMB has allocated to IT is usually limited.
To succeed, an MSP needs to aggregate the cost of delivering a service across enough customers to turn a profit. That requires MSPs to decide where to focus their time and effort. Finance and accounting may be the largest area of spending, but their applications tend to require expertise in a vertical industry.
In contrast, cloud computing and data security are not only areas where SMBs have limited expertise, they are classes of technologies that every SMB to one degree or another will need to invest. This creates a clear opportunity for MSPs to win more managed service business.
Photo: lovelyday12 / Shutterstock.