Small Businesses 'Major Force' In U.S. Economy

By SmallBusinessComputing.com Staff
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Small- to medium-sized businesses are critical to the health of the U.S. economy. SMBs make up 99.8 percent of all employer firms, according to a recent Yankee Group report cited by the Information Technology Solution Providers Alliance (ITSPA), a national, non-profit group established to help the nation's 22 million SMBs understand how local technology providers can help them grow.

ITSPA President Russell Morgan said the Yankee Group report makes it clear that as SMBs go so does the U.S. economy.

"Following recessions or economic slowdowns, the SMB market historically pulls up the economy," Morgan said. "For example, during the 20 months after the 1991 recession our economy generated more than 600,000 jobs and more than half were created by SMBs.

"Today, SMBs employ 54 percent of all U.S. employees," said Morgan, "and there's rapid SMB growth in a number of sectors including construction, manufacturing and healthcare."

SMBs Need IT Aid
Although nearly 600,000 SMBs are formed each year, the downside is that nearly as many small companies are dissolved during the same period, according to the report. Mike Lauricella, Yankee Group's Small and Medium Business Strategies Advisory Service program manager and a member of ITSPA's Advisory Board, said this volatility reflects the fact that SMBs are very entrepreneurial and take risks that don't always work out.

"SMB decision makers have learned they must be very economical when they invest in technology to run their businesses," Lauricella said. "They must understand the importance of technology but also ensure they achieve an immediate return on investment for technology purchases."

Significant IT Issues SMBs Face
The Yankee Group report revealed the biggest issues facing SMBs are making more money, increasing productivity and caring for customers. SMBs are also challenged by a number of technology issues including:

  • Leveraging broadband communications

  • Migrating to Internet telephony

  • Building solutions and not just adopting technology

  • Transitioning to mobile technologies

  • Complying with new regulatory requirements

"SMB decision makers are inundated with information about new technologies and the problem isn't getting any better," said ITSPA's Morgan. "There are simply too many products to sort through, and one person — usually the chief financial office, chief operating offices, or chief information officer — is forced to handle all technology issues as well as run the company."

ITSPA advises SMB decision makers who need help adopting new technologies to turn to local IT solution providers. These are companies that have the technical knowledge and expertise to help SMBs with a variety of tasks such as shifting from voice to data, embracing mobile devices, building wireless networking and security, and developing applications that solve crucial business decisions in real-time.

The ITSPA is a non-profit organization dedicated to helping SMBs adopt technology and grow by using local solution providers to solve business problems.

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This article was originally published on April 15, 2004
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