SMBs Weigh IT Spending in Uncertain Economic Times

​If news headlines in the first few months of 2023 foreshadow what is to come for the rest of the year, leaders at small and medium size businesses (SMBs) will have to weigh their IT spending plans carefully as they consider buying HR technology and hiring IT professionals throughout the year.

As large tech companies cut costs, many business leaders are feeling anxious over high interest rates, a slower global economy and talk of a recession.

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One small business that is watching the economy closely is Freightwaves, a Chattanooga, Tenn.-based company that offers clients a supply-chain intelligence platform and also runs a media organization that covers transportation and logistics news.

Nicole Duquette, senior director of people at Freightwaves, said last year, the company switched vendors to manage its health savings account, flexible spending account and 401(k) systems. Now, the company is pondering whether to buy a new human resource information system (HRIS).

According to Duquette, when she began working at Freightwaves in January 2022, the company had 150 employees, but now the company has grown to a staff of 190 and projections are that the company will add two or three more employees as business continues to grow this year.

Buying an HRIS system to help manage the growing number of employees is top of mind. However, the economic climate may dampen those plans.

"If we continue to grow at last year's rate, then the payroll and the HRIS systems have to grow with the company," Duquette said. "We will research HRIS systems, and if we do find something that suits our needs better, then yes, we will probably migrate to a new system in 2023 or early 2024, but that's yet to be determined."

She added that talk of a recession—whether it occurs or not—does make SMBs cautious about spending on technology or high-priced IT skills. "Everybody just ends up being a little bit more frugal. I don't see my budget going up or down drastically, but I do see us as a company exercising more caution and discretion on the tech that we purchase."

Over at PandoLogic, a New York City-based company that offers clients a recruitment marketing and conversational AI platform, Terry Baker, the company's president and CEO, has different investment plans.

Baker said his company wants to expand its customer footprint and is eying job growth in sectors such as health care, leisure, hospitality, mining and education.

He added that PandoLogic is looking to add to its 139 employees and is focusing on hiring data scientists, software developers, DevOps engineers and sales representatives to facilitate plans to scale its platform to add to the millions of job posts and the growing number of job seekers that use the platform.

"From a vendor standpoint, we are an HR tech solution provider making big investments in conversational AI and additional capabilities to further automate the recruiting process," Baker said.

Technology investments are the last items on the budget to be cut, according to a recent Verizon survey. Compared to cutting spending on operational investments (39 percent) or employee events (59 percent), only 29 percent of small businesses have already cut or plan to cut technology investments in the next six months.

Baker's outlook is in line with that thinking. In recent years, PandoLogic has invested heavily in HR technology for its growing number of employees, including adopting the Greenhouse and Workday platforms, as well as adding learning tools and survey platforms for employee engagement. 

"We are continuing to make investments in order to bring more value to employees," Baker said.

According to Anna Shirley, senior manager of global people development at Bloomreach, every company is different, but even with difficult economic conditions, companies will have to invest in technology that helps remote and hybrid workers do their jobs better.

Headquartered in Mountain View, Calif., Bloomreach is a cloud-based software company that connects customer and product data to personalize all customer touchpoints.

"Companies will continue to invest in technology that enables transparency, encourages asynchronous workflow and collaboration between teams, and fosters a culture of empowerment," Shirley said.

With approximately 1,000 employees, Bloomreach uses Lattice, a people performance platform that the company began rolling out in 2021. It plans to further expand use of the product this year.

Shirley said Bloomreach invested in Lattice because it's easy to use and integrates with the company's review process, regular career-focused conversations and employee engagement tools.

"We made the investment because we noticed that our team members needed more visibility into quarterly and annual company goals in order to feel more empowered to own their priorities, projects and time," Shirley said.

She added that in tough economic times, companies will invest their IT dollars in user-friendly technologies that empower employees and help them do their jobs while feeling engaged in their work.

"I expect platforms that offer everything performance- or people-related under one roof to come out on top instead of using multiple one-off solutions that don't integrate as well together—or lead to the employee feeling disconnected," Shirley said.

Nicole Lewis is a freelance journalist based in Miami.