The Yin and Yang SMB Economy

Research from GTIA suggests SMBs are hungry for innovation but anxious about inflation, tariffs, and the possibility of a recession.

Is the U.S. economy healthy right now? Depends on how you read the numbers.

Growth rose 3.0% on an annualized basis in Q2, we learned last week, exceeding expectations and easing recession concerns sparked by the 0.5% decline recorded in Q1. On the other hand, consumer spending barely grew at all and business investment was down sharply following a double-digit uptick earlier in the year.

That good news/bad news dynamic is consistent with what a lot of MSPs appear to be seeing, based on anecdotal data collected in hallway conversations at GTIA’s ChannelCon event in Nashville last week, not to mention a recent interview for an earlier post with Joshua Skeens, CEO of managed services giant Logically.

“Business is going relatively well, but not as good as we would like it to be,” he said. Spending slowed late last year, Skeens noted, as it generally does in the months before an election.

“Typically coming out the next year growth takes off, and we’ve just not seen that, at least not in our sector,” Skeens says. “Talking to others, they’re not seeing it either.”

And we all know why, don’t we?

“We are in an economy right now that I would describe as relatively chaotic and uncertain,” says Carolyn April, vice president of research and market intelligence at GTIA. “It doesn’t matter what day of the week it is, you’re not really sure if you’re up or you’re down.”

Some businesses are clearly up. 34% of the SMBs polled by GTIA for a new research study say they’re thriving, a number that rises to 44% for IT companies. On the flip side, just 19% of manufacturers, who are especially vulnerable to tariff anxieties, are thriving and 51% of businesses overall say they’re “holding steady.”

There’s plenty more evidence of what April aptly calls “that whole yin and yang thing” in her data. Take a look at the top list of SMB business priorities, for example. Identifying new customers and markets tops the list, but is followed closely by getting more efficient. Launching new services is fourth on the list, but hanging onto key accounts is fifth.

“It’s like cognitive dissonance,” April observes.

Now, to some extent businesses have had both making more and spending less at the top of their wish list forever. But what I see in the data is a whole lot of nervousness restraining an equally great appetite for technology-fueled innovation.

Yes, 47% of SMBs held their tech budget about the same this year, and 12% actually cut it. But 38% said that if business conditions look good through the first half of the year, they’ll spend more than planned on IT in the second half.

True, 37% of surveyed SMBs called “maintaining stable ops” the top focus of their tech budget in the last 12 months, way more than the 22% who cited “strategic initiatives”. But 63% believe AI will be the most impactful emerging technology in the next two years, and 62% increased their AI budget this year in response.

“They’re very interested in AI,” April says. “They’re willing to open up their purse for it, and they know that they need to set aside part of the budget for AI spending.”

Most tellingly of all, when asked what they’d do with an unexpected financial windfall—like a huge new account or winning lottery ticket—35% of SMBs said they’d invest it in cutting-edge technology. The second most popular option, selected by just 18% of poll participants, was hardware upgrades.

“They’re interested in building on some of the newer technologies that are going to help them expand their business and be able to differentiate in the marketplace,” April says. All most of them need, I suspect, is the excuse to act on that desire that a stable, healthy economy would provide.

Two notes about ChannelCon for MSP Chat fans

You may remember the time MJ Shoer, GTIA’s chief community officer, said on the podcast I co-host that the newly launched association’s endowment was generous enough to support a lot more charitable giving. We didn’t know how much more, though, until this week.

Answer: a lot. GTIA will donate $1.5 million this year. To put that in perspective, the $420,000 granted to over 20 non-profits just during ChannelCon nearly tripled everything CompTIA awarded all of last year.

And given all the Pax8 and GTIA talk this week, it’s worth noting that former MSP Chat interview guest Matt Lee, Pax8’s senior director of security and compliance, has been named GTIA’s 2024-2025 member of the year.

We have luminaries of all sorts on MSP Chat every week. Check it out here.