Mid-market technology spending has reached its highest level since before the pandemic, according to Deloitte Private’s “2023 Mid-market technology trends report.” More than half (53%) of respondents said their organizations will spend more than 5% of revenue on technology in 2023, up from 43% in 2019 and a dramatic improvement from 20% mid-pandemic in 2021.
Since 2013, Deloitte Private has surveyed CEOs of private middle-market companies with annual revenues between $250 million and more than $1 billion.
Additional findings:
AI has surpassed all other technologies as the top mid-market tech investment priority. This year, 40% of respondents say AI is their top tech investment priority; by 2021, only 12% expect AI to have a significant impact on their business within a year. When compared to those who are not using or exploring AI, respondents with active AI solutions (47%) report revenue growth of 20% or higher.
Leaders appear to be seeing the benefits of a consistent focus on data security. Three-quarters of respondents (74%) have high or very high confidence in their company’s cyber security capabilities. Notably, respondents with active AI solutions are more than twice as likely to have very high confidence in their cyber security capabilities as businesses that are not using or exploring AI at all (32% vs. 11%).
Industry distinctions are becoming increasingly hazy. More than half of mid-sized businesses (51%) are aware of competitive threats outside their industry, but they appear to be prepared to expand into adjacent industries. According to the survey, 70% of respondents report that their organisations have created a monetizable asset outside of their industry; this figure rises to 81% among organisations reporting the highest ROI on their technology investments.
Mid-market companies use a variety of strategies to retain technology talent. The most successful strategies for retaining tech talent are offering competitive benefits and compensation (36%) and offering flexible/hybrid work environments and geographic options (36%), followed closely by creating flexible career paths, transparency and feedback better on performance (34%) and investment in diversity, equity and inclusion programs (34%).
Increased demand for AI skill sets increases competition for talent. However, companies are struggling to find the right talent, with respondents reporting that their business is having difficulty attracting AI strategists (40%), engineering talent (37%), as well as deep learning and data scientists (35%) .
“Private mid-market companies are enjoying the benefits of a robust technology agenda, including higher revenue growth and a greater readiness to expand outside their industry—fueled by technology spending,” said Wolfe Tone, vice president and global leader Deloitte Private. “When it comes to talent, digitization also requires these companies to use a combination of competitive approaches to develop and retain the technology skills needed not only for success today, but also to be ready for what’s needed in five or decade.”
“As the lines between traditional industries, competitors and collaborators continue to blur, private mid-market companies will likely face companies and sectors not traditionally considered competitors,” said Ryan Jones, leader and director of private equity, Deloitte Consulting LLP. “Thrive in this dynamic environment depends on adopting an innovation mindset and actively putting resources behind developing assets that can be monetized for value outside of their traditional sector to drive growth.”
