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Covid-19’s Impact on The Midmarket: A Mixed Bag

If we learned one thing about the impact of the COVID-19 crisis on the midmarket, it’s that it is impacting some midmarket sectors much more harshly than others. The pandemic’s effect on midsize organizations—private, non-profit, public sector and everything in between—cannot be generalized or painted with one brush.

As strange as this sounds, on a recent Midsize Enterprise Perspectives: CIO Leadership In Challenging Times Webinar, three prominent senior IT leaders said they were managing through unexpected growth and demand for their organization’s services and products. It was startling to hear given the media coverage and headlines over the past few months. This was especially true at one of the companies represented, 1-800-Contacts, where consumers have flocked to the its web site to purchase contact lenses or renew vision prescriptions due to local doctor office closures. The company’s senior IT leader said the company’s biggest challenge now is retaining all those new customers once the COVID-19 crisis subsides and the nation returns to business as usual. Of course, there are midmarket sectors such as manufacturing which have been hit hard amid plant closures and supply chain restrictions.

To gauge the crisis’ impact on the middle market the National Center for The Middle Market conducted a recent survey that found the pandemic will derail middle market performance. The vast majority of midmarket leaders had high expectations coming into 2020 for increasing sales, profits and market share. They were also preparing to invest more in technology and other capital expenditures to drive growth. But the pandemic certainly disrupted those plans, at least temporarily.
However, the center’s COVID-19 business survey found that this year “could ultimately prove catastrophic for some” midsized organizations. That news should not be taken lightly by anyone as it will have a ripple effect on suppliers and local economies. Of the 260 executives surveyed, one quarter said the impact will be devastating for their companies. Negative impact is sweeping through such key operational areas as payrolls, supply chain along with diminishing working capital. That is not surprising given the government-ordered lock down that started in March which, for the moment, seem to be easing. It may almost be too late to save the year as most leaders said the ongoing uncertainty makes it so difficult to make decisions for the future of their business.
The one area not explored in the initial survey by the National Center for the Midmarket which operates out of The Ohio State University was the COVID-19 impact on technology spending. We did not gain insight into leaders’ thoughts on how IT is helping to cut costs, raise productivity or bringing efficiencies to the table. But with 66 percent of the survey’s attendees saying they will delay capital spending, there is very little doubt it will impact the tech and services budget of midmarket CIOs.
When we shared the survey with one prominent industry CIO, he said tech is playing a role to save money while keeping his company moving forward. “We have had many opportunities to help the business be more effective or continue to remain productive during the COVID crisis. Our workload is up 30 percent driven by remote work and productivity challenges,” he said.
While it may be hard to generalize about the pandemic’s impact on the midmarket which has traditionally accounted for about one-third of U.S. GDP we know it is resilient. The survey supports that observation with this statement: “Many middle market executives believe underlying demand will persist, and they see opportunity for capitalizing on that demand when the pandemic’s grip on the nation and the world begins to loosen.”

Robert Demarzo, SVP Strategic Content, The Channel Company

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