SMBs Spending on IT, Not New IT Hires

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The good news: IT spending at small and midsize businesses (SMBs) continues to steadily rise. The other news: SMBs aren't spending money on new IT hires.

I say "other" news because I'm still not quite sure what to make of it: Good, bad or ugly. The most recent Spiceworks State of SMB IT report shows the average annual budget up nearly 7%, to $162,000, from its last survey conducted six months ago. (If that strikes you as a low number, bear in mind the vastness of the SMB universe -- the 1,356 IT pros who weighed in with their budget number work at firms with fewer than 20 employees all the way on up to companies with 1,000 people on the payroll. The law of averages does its thing.)

Yet while budgets are at a three-year high, hiring is stagnant. In fact, fewer firms reported plans to add IT staff (26%, down from 30% six months ago), while more say they'll stand pat with their current headcount (61%, up from 56% six months ago). This might just be the way of all trendy, statistical things. Although there's a link between IT spending and hiring, the latter tends to diverge from time to time, according to Spiceworks' executive director for vendor marketing Adam Weinroth.

"You do see the ups and downs in hiring," Weinroth said in an interview. "Part of that is tied to more macroeconomic factors. It's something that can vary a bit, and now we're on a down cycle in terms of the robustness of hiring plans."

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It could also be a sign of the times, with technology increasingly fulfilling roles once played by people. As the corporate purse strings loosen, more money is going into areas such as cloud, virtualization and mobility. Those quite often enable SMBs to offload much of their in-house IT needs.

"All of those things play into: 'What is the IT organization that I need to support my business?'" Weinroth said. "As new technologies come out, as they mature, as they become more accepted, that's going to change that outlook." The Spiceworks survey projected nearly three-quarters of SMBs will be using cloud services by early 2013, for example.

The trend is evident elsewhere, too. A recent Analysys Mason report projected revenue from SMB IT services will grow three times faster than actual SMBs over the next five years.

"SMBs are finding that IT can increasingly help them outsource things which they previously might have had in-house, for example their servers and their PBX, and this reduces the need to have in-house IT support staff," Analysys Mason analyst Patrick Rusby, who authored the report, told me via email. "If SMBs switch to buying software and infrastructure as a service, the support is provided as part of the service."

Indeed, Spiceworks' Weinroth pointed to one clear winner in the growing-budget/flat-hiring picture: Vendors that prioritize ease of use and first-class support. "If I'm an IT pro and I'm not planning to do as much hiring, [but] I am procuring more services and planning to spend more, those have to be not creating a huge need for me to hire and support all of those things," Weinroth said.

This also favors small businesses that didn't have significant IT personnel to begin with. These are the do-it-yourselfers; they might not have the chops of a seasoned CIO, but they don't need them. They're especially common in the smallest of companies. Cloud, virtualization, mobility and other areas are enabling them to build an IT infrastructure that looks a whole lot like their larger brethren, just without the corresponding staff to support it. BetterCloud's recent look at the 10,000 or so Google Apps domains among its customer base, for instance, found that among companies with 20 or fewer employees, the business owner is the cloud platform's predominant administrator. In larger firms, an IT manager or other technical staffer is more likely responsible for the Google Apps deployment; some BetterCloud customers even have dedicated Google Apps admins.

There's at least one loser in the increased-spending/flat- hiring scenario: the IT job seeker who favors SMB environments over large enterprises. The numbers suggest it's a buyer's market for hiring managers. But it's not doomsday -- one in four firms did expect to add headcount -- and relatively few firms (4%) have plans to downsize IT. I commonly hear from SMB professionals that even complete cloud transformations or similar IT overhauls require the right people in-house to ensure success. Likewise, they relish the ability for IT to become more strategic or pursue hybrid roles as it gets out of the support and maintenance game.

It might be tempting for IT pros currently working at SMBs to resist cloud, virtualization or mobility initiatives. If these technologies are making it easier for their employers to rely on external resources, the self-preservation instinct might kick in. Wrong move, according to Analysys Mason's Rusby.

"SMB IT staff need to be technology enablers," he advised. "Allowing BYOD and transitioning to cloud services is going to help SMBs to be more flexible and productive, while keeping costs under control."

In that case, everyone wins.

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