Small Business Confidence Rises Amid IT Job Cuts and AI Growth

[00:00:02] It's Tuesday, January 21st, 2025, and I'm Dave Sobel. Four things to know today. IT layoffs slow while small business confidence soars, but AI and engagement challenges are shaping the future. Global IT growth driving AI investment for small businesses, but price hikes threaten the real value in 2025. Regulation influx, Trump revokes the AI safety order as the FCC and FedRAMP push new cybersecurity measures and

[00:00:29] CompTIA layoffs raves questions about private equity's role in restructuring the tech certification giant. This is the Business of Tech. With the U.S. federal holiday and shortened work week, I wasn't sure I would start off with market conditions. And then I saw how much data there was. The National Federation of Independent Business reported a rise in small business optimism, with its Optimism Index hitting 105.1 in December, the highest since October 2018.

[00:00:59] This increase reflects greater confidence among business owners, particularly after the recent election. Despite this, inflation and labor quality remain major concerns, with 20% and 19% citing these issues, respectively. Additionally, 24% of owners plan to raise compensation down from previous months. A recent survey by Channelnomics shows most U.S. channel partners are optimistic about Donald Trump's

[00:01:25] presidency, believing his tariffs will boost business growth this year. 54% expect positive impacts from the tariffs, while 21% foresee negative effects. The upcoming Channelnomics Partner Confidence Index also indicates that 91% of partners expect revenue growth and 88% forecast increased profits for the year. The IT market contracted for the second straight year, with nearly 71,000 IT jobs lost over two years,

[00:01:54] according to JANCO Associates. In 2024, 22,300 jobs were cut, down from 48,600 in 2023. The rise of AI has reduced traditional IT roles while creating demand for new positions like data architects and AI developers. CompTIA reports a drop in tech employment with the unemployment rate at 2%, the lowest since November 2023.

[00:02:19] Despite fewer layoffs, JANCO warns of continuing job market shrinkage this year, urging job seekers to acquire skills in AI or cybersecurity. A World Economic Forum report reveals AI is reshaping the job market, creating 11 million jobs while displacing 9 million. By 2030, executives believe AI will significantly alter business operations. The demand for tech-based roles is rising alongside traditional frontline positions.

[00:02:48] However, 39% of current skills may become outdated soon, stressing the need for continuous learning. And in a recent Gallup survey, employee engagement hit a 10-year low, with only 39% feeling cared for at work and just 30% feeling encouraged in their development. This decline aligns with slow hiring and mandatory office returns. Why do we care? There's a lot of business optimism out there with opposing thoughts on

[00:03:17] labor. While IT layoffs are slowing, there's a turbulence under the surface here to be worried about. Traditional IT roles are reducing and AI and automation are impacting these roles. Mix in a drop in employee engagement to make things interesting. It isn't new to say that focusing on people is key. That said, the data highlights that guiding staff here will be critically important to business success.

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[00:04:35] Worldwide IT spending is projected to rise to $5.61 trillion in 2025, reflecting a growth rate of 9.8% from $5.11 trillion in 2024, according to research by Gartner. However, much of this increase is expected to be offset by price hikes, meaning that actual growth in IT spending may be skewed.

[00:04:59] Key areas for increased investment include data center systems, which will see a growth rate of 23.2%, and spending on devices, which is expected to increase by 10.4%. Software spending is anticipated to rise from $1.09 trillion to $1.24 trillion, while IT services will grow from $1.58 trillion to $1.73 trillion.

[00:05:27] Despite the challenges posed by rising prices, Gartner analyst John David Lovelock noted that organizations are still investing in generative artificial intelligence technologies, although expectations for those technologies are declining. Spending on AI-optimized servers is expected to reach $202 billion.

[00:05:46] A recent survey by Verizon Business reveals a significant increase in AI usage among small and mid-sized businesses, with 39% of respondents actively using AI last year, up from just 14% the previous year. As businesses face economic challenges, many are turning to technology to enhance efficiency.

[00:06:05] The survey, conducted by Morning Consult with insights from 621 mid-sized and small businesses across the U.S., also found that 38% have added digital components to their operations over the past year, and 66% upgraded their internet bandwidth to meet growing demands. Despite concerns about inflation and financial stability, over half of the surveyed businesses believe their financial situation will improve soon.

[00:06:30] A new survey by TechAisle reveals that the adoption of AI PCs is significantly growing among SMBs and mid-market firms. The survey highlights that 77% of IT decision-makers are embracing the technology, followed by 46% of C-suite executives. Engineers and developers are also making strides, with 38% planning to use AI PCs, while data scientists mirror that interest.

[00:06:56] Business analysts and executives are not far behind, with 36% and 24% respectively. Why do we care? There's a key detail in there. Quote, much of this increase is expected to be offset by price hikes. End quote. There's a theme of do more with less that's embedded in this data. Sure, IT spending may go up, but if it's all consumed by price hikes, the end customer is not getting more. Be aware of this dynamic when working with your customers.

[00:07:24] Your IT business may be seeing some of those gains, and perhaps much being passed on to your vendors. Your customers will be looking for more outcomes related to their business, and that should be your key insight. Some moves on the legislation and regulation front, too. In a significant move, President Trump, on the first day of his presidency,

[00:07:47] rescinded an executive order established by Joe Biden in 2023 that aimed to set safety guidelines for generative artificial intelligence. The Biden era directive required developers of large AI models to share safety test results with the U.S. government and tasked federal agencies with evaluating potential risks associated with AI technologies. Trump's actions include the cancellation of 78 executive orders from the previous administration, including the one focused on safe AI development.

[00:08:16] And before the transition in power, the FCC adopted new cybersecurity rules in response to the recent Salt Typhoon hacks, which were linked to the Chinese government. The new regulations require telco providers to secure their networks against hacks with possible fines for noncompliance. The rules took effect immediately and include a proposal for annual reporting on cybersecurity risks.

[00:08:39] The Federal Risk and Authorization Management Program, or FedRAMP, is proposing to narrow the requirements for cloud service providers regarding authorizations necessary to handle federal information. A draft policy posted on GitHub suggests that only those services directly impacting the confidentiality, integrity, or availability of federal information should fall within FedRAMP's regulatory scope.

[00:09:05] This change aims to alleviate the burden on providers by allowing them to focus their efforts on significant risks rather than ancillary services that pose minimal threats. Key updates include the necessity for cloud service providers to regularly update their boundary documentation and ensure external services comply with federal standards. Additionally, systems not encompassed by the FedRAMP boundary must not access federal information without proper authorization.

[00:09:34] Independent assessors will evaluate compliance and connections to ensure data security. Why do we care? Regulations will be in flux here for a period of time. These are all updates to be aware of, and I'll likely comment more as things settle down. I'm watching for things that are done, not just set. 47 workers at the Computing Technology Industry Association, or CompTIA, based in Downers Grove, Illinois, lost their jobs as of January 9, 2025.

[00:10:04] This from a Warned Notice alerting the state of these layoffs. CompTIA, now a for-profit entity spun out from the Global Technology Industry Association, or GTIA, was a result of the investment by private equity to create the new spin-out. The reasons behind these layoffs remain unconfirmed. Why do we care? It's important to differentiate between GTIA, which is the trade association, which has nothing to do with this,

[00:10:32] and the new for-profit certification organization, which is now private equity-backed and laid off some people. With a long history of the CompTIA brand and its relevance on training still, this will be a key distinction to remember and why we care. Today's episode is supported by Huntress. You want to focus on your clients and are always looking for ways to get more time.

[00:10:58] Use Huntress' fully managed cybersecurity platform to fight off cyber threats. Huntress is more than cybersecurity software for endpoints and identities. It's a 24-by-7 security operations center. It's security awareness training, community engagement, and dedicated partner support with an average CSAT score of 99.3%. Technology can only get you so far. Human expertise is what's needed to truly elevate and protect small businesses,

[00:11:28] and you get that with Huntress. Secure your clients and help them thrive with the number one rated EDR for S&Bs on G2. Visit Huntress.com slash MSP Radio to find out more. Thanks for listening. Today is National Check Your Coverage Day, which feels important, and also National Hugging Day, which potentially is even more important. I'll be hosting two broadcasts within this week's S&B Tech Fest on Thursday and Friday.

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