Bad Economy Triggers Belt Tightening Or Record Spending - InformationWeek
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7/1/2008
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Bad Economy Triggers Belt Tightening Or Record Spending

Right now, the economic outlook is bleak -- gas prices are up, the stock market is down, and on it goes. But how are smaller businesses responding in the face of discouraging forecasts and tightening resources? On the one hand, cost cutting is the mantra, telecommuting is up, travel is down, but then again, IT spending is at record levels.

Right now, the economic outlook is bleak -- gas prices are up, the stock market is down, and on it goes. But how are smaller businesses responding in the face of discouraging forecasts and tightening resources? On the one hand, cost cutting is the mantra, telecommuting is up, travel is down, but then again, IT spending is at record levels.According to a recent survey of small businesses conducted by RingCentral, an Internet phone service for small businesses, cost cutting is the most widespread trend -- no surprise there. There's also evidence the layoffs have sparked an increase in start-ups (22% of participants started a business after getting a pink slip).

The survey findings about how small business are responding to the current economic downturn include:

  • 59% are cutting overhead costs or changing business practices
  • 37% are reducing business travel
  • 70% have changed business practices to offset rising gas and energy costs
  • 50% are conducting more meetings by phone than in person (the RingCentral hook)
  • 24% are telecommuting

As always, every statistic has a flip side. So while the RingCentral survey paints a picture of meager resources and cost cutting, more robust numbers are readily available from AMI-Partners. According to their survey, IT and telecom spending by small and midsize businesses increased 6.5% in 2007. That's three times the 2.2% GDP growth rate and the highest level "in years." In fact, IT spending from the small and midsize segment account for 2.1% of U.S. GDP. The just released InformationWeek security survey also found IT security spending is up.

Before getting too excited about a survey of IT spending for last year, let's turn our attention to the 2008 National Small Business Association survey [PDF], for a more glum perspective. According to the survey of small business owners:

  • 71% percent say the economy is worse than five years ago; 43% thought it was worse last year
  • 45% expect a recession in the next year
  • 45% expect a flat economy
  • 9% anticipate economic expansion

Despite the downer of that data, there was a less negative nugget: 70% are confident about the future of their business; 81% felt that way last year. And that's what passes for ending on a positive note in these economic times.

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