Weathering The Economic Downturn

Every day, it seems, newspapers and cable business channels serve up fresh helpings of grim economic news, from gyrating stock prices to slackening growth rates to rising foreclosures.

Yet from where Dave Sobel sits, business looks just fine right now. “We haven’t really seen it change significantly,” says Sobel, who is CEO of Evolve Technologies, an SMB consulting firm in Fairfax, Va. Nor are his colleagues at other technology companies feeling much pain. “Everyone hears recession, but none of us is seeing it,” Sobel says. Same goes for D&H Distributing Co. Inc., which increased credit lines for its top resellers by over $7 million. “We’d like to be doing more business, but we’re doing OK, and the company’s still strong,” says Tony Warfield, the Harrisburg, Pa.-based distributor’s director of credit services

And no wonder: IT outlays will grow 3.25 percent in 2008 among small businesses and 5.34 percent among midsize companies, according to analyst firm Gartner Inc. That’s well below the 7 to 8 percent budget increases typical of recent years, notes James Browning, a research vice president at Gartner. But it’s hardly recessionary. SMBs run lean IT shops even in good times, notes Browning, so there’s usually very little fat to trim whenever a slowdown strikes. “Their IT buying patterns are recession proof,” he says.

Just the same, few channel pros doubt that the storm clouds currently dumping on other sectors of the economy will eventually reach IT providers too. And as any veteran of the dot.com crash earlier this decade will tell you, when that happens, senior leaders will need to make quick and sometimes radical changes to their companies’ sales, marketing, and management practices.

INVESTING IN PRODUCTIVITY
For now, though, SMBs continue to spend briskly on traditional priorities, Browning says. Security investments, for example, are proving relatively immune to cutbacks, as are previously scheduled PC, server, and network upgrades. Moreover, many industry observers actually expect SMBs to increase their spending on server virtualization this year. “They will be concerned with making their IT shops run leaner,” says Michael Speyer, a senior analyst at Forrester Research Inc. “Virtualization is one of a whole arsenal of things they can use to do that.”

Some resellers and solution providers also see the slowing economy heightening interest among SMBs in technologies that improve employee productivity, such as CRM applications. “Companies that are using yellow pads of paper [and] Excel spreadsheets to manage their leads and prospects are interested in making that work better,” observes Jerry Weinstock, president and CEO of Lenexa, Kan.-based solution provider Internet Business Initiatives LLC. Other channel pros say customers are showing similar enthusiasm for business intelligence systems. “In this type of economy they want to be able to monitor and track their internal KPIs [key performance indictors] and metrics,” notes Greg Henson, president and CEO of The Henson Group Inc., an integrator with headquarters in New York, N.Y.

Sobel expects collaboration solutions based on Microsoft SharePoint to hold similar appeal among SMBs. “It’s typically a technology they already have in place and haven’t done anything with,” he observes. Indeed, survey data released in March by AIIM, an enterprise content management-focused membership community based in Silver Spring, Md., shows that while one-third of organizations have deployed Share- Point, only 15 percent have a formal plan or strategy in place for using it. Tech outfits with concrete suggestions for streamlining wasteful business processes with SharePoint stand to clean up, Sobel says