US SMB IT spending will grow by 7.6 percent in 2021

US SMB IT spend is forecast to grow by 7.6% in 2021 over 2020. In July 2020, we had written that resiliency, agility, and adaptability would accelerate recovery for SMBs. Techaisle's survey of 1720 US SMBs confirms the prognosis for the US market. Data shows that 45% of US SMBs will be in the high growth segment, with IT budget increases ranging between 7.5% to 15%. However, 12% of SMBs will experience budget decreases of more than 5%. The majority of the declining IT growth segment will be in the 1-49 employee sizes. Regardless, the small businesses will grow their IT spend. There is an apparent dichotomy appearing in how technology is likely to be acquired by SMBs. Nearly two-thirds of micro-businesses prefer acquisitions structured around leases, whereas one-fourth of midmarket firms plan to move to "as-a-service" approaches.

IT services spending will grow by 8.6%, driven by managed services, data/platform integration, cloud orchestration, and business process automation. As cloud applications increase, the demand for hybrid IT is becoming a pressing requirement for SMBs.

2021 will be the year of the midmarket segment, with IT spending forecast to grow by 8%. Data illustrates a fascinating picture showing IT budget increasing in direct proportion with size, from 100-249 to 500-999 employee firms. The upper midmarket (1000-4999 employee size segment) will have an average budget increase of 6.1%, slightly lower than the 500-999 size business.

Midmarket will be a battleground and is likely to attract more attention from IBM, Red Hat, Cisco, Dell Technologies, SAP, Workday, VMware, Microsoft, and smaller suppliers such as Zoho. Midmarket firms are a force in local and national economies. Still, they are often constrained by a lack of targeted strategic inputs, especially concerning IT investments' business impact. Large enterprises can combine internal, cross-functional specialist teams with advice from management consultants to develop strategy blueprints. Small businesses are typically reacting to immediate requirements; strategy is not a primary consideration. However, midmarket firms need strategic framework advice and consulting to prioritize and align investments, inside and outside IT. They often rely on resellers and consultants – smaller companies focused on addressing single 'point' requirements rather than business-wide issues – for insight on specific technology solutions.

Midmarket firms use multiple platforms (conventional on-premises, SaaS, IaaS, colo, and hosted) and need to ensure that they are focused on the best options as they move forward. "Need to integrate with cloud services" is ranked high by both midmarket respondents and small businesses. It is another example of the midmarket's more pressing need for platform integration.

Digital transformation, integration, orchestration, and automation resulting in a connected business is on most SMB's agenda. Unlike many IT market terms, which tie to specific technologies or technology capabilities, digital transformation is most often used to indicate an amorphous state. It refers to how an organization can seamlessly deploy new digital capabilities to streamline current or next-step processes, eliminating the friction inherent in basing these capabilities on manual tasks and physical documents/inputs. The pandemic has brought urgency to these plans. Techaisle's discussions with SMB IT and business leaders have found general agreement that innovation is an integral component of an SMB's digital journey continuum. The idea expressed in these conversations is that technology can pave the way towards efficient digital operations; however, businesses can only realize this path's value when management can use the new capabilities to unlock business value.

In 2021, the critical focus of technology investment will be more about the work. The ways that an increasingly-connected business can support the pursuit of unattainable objectives. Customer-centric business vision has long been beyond most SMBs' operational capabilities, but it will become more attainable with increased digital transformation spending.