Small and midsize businesses are bearing the brunt of the economic downturn, as they’re finding customers less willing to spend and credit harder to come by. Nevertheless, one in four SMBs is investing more in IT and another 30 percent will maintain level IT spending through the recession, according to a new report by Microsoft.

The recently released 2009 Microsoft SMB Insight Report says SMBs view IT products and services as a means to control costs and streamline operations, giving them the ability to better weather the recession.

“IT will play a significant role in shaping how soon and how aggressively the small and midsized business community reclaims financial stability and becomes a catalyst to help lead [us] out of a global recession,” the report’s authors state.

Not surprising is that virtualization and other consolidation-enabling technologies lead the list of products in highest demand by SMBs. One-quarter of the study’s participants said that virtualization and IT consolidation are the best cost-cutting technologies. One in four said the two technologies are the best technology investment.

The conventional wisdom is that server virtualization software—such as solutions offered by VMware, Microsoft and Citrix Systems—is best suited for upper midmarket and enterprise organizations, since it consolidates data center operations, physical footprint and energy costs. But the Microsoft study found that virtualization for small businesses is often a function of optimization, in which it's used to ensure file and storage servers are operating at a higher capacity.

Given SMBs’ perception of virtualization software, it’s not surprising that nearly two-thirds of the study participants said that gaining energy efficiency or embracing green IT was not a motivating factor in their technology decision making.

“Green IT is a driver for the enterprises. For SMBs, virtualization is about getting more bang out of the utilities. Virtualization gets 70 percent utilization out of servers,” says Ross Brown, vice president of solution providers at Microsoft’s Worldwide Partner Group. “SMB virtualization is about delaying the purchase of new servers or extending the life of existing infrastructure.”

Cost containment and expense reduction are big factors among SMBs, the study found. Reductions in work force topped the list (67 percent) of means for reducing or containing costs, followed by reducing IT spending (64 percent), less travel (38 percent) and cutting back staff hours (36 percent). One in five of the survey respondents said investing in IT is a way to cope with economic pressures.

“If you have something that works well, you don’t throw it out. You just add to it and enhance it,” Brown says of the level of reinvestment and augmentation in technology among SMBs.

Software as a service (SAAS) is seen as the third best means for saving money and fourth best technology investment among SMBs. Brown says many small businesses are not migrating from on-premises platforms to cloud-based services, but looking to Web service versions of unified communication, security and storage because they have a lower barrier to entry in terms of cost and management.

For solution providers enabling or delivering SAAS applications, the SMB marketplace is an open field of opportunity, the Microsoft report states. Of the 600 companies surveyed, 34 percent are not using any form of SAAS, and only 14 percent have no plans to adopt SAAS before the end of 2009. The number of SMBs using SAAS as a percentage of their applications portfolio is low, with the majority (44 percent) utilizing less than 10 percent of their application mix in SAAS.

The Microsoft study found that solution providers and small business specialists are instrumental to ensuring that SMBs achieve their IT goals. Of the solution providers surveyed, 27 percent said they’re being called on more by SMBs to help reduce costs. Another 15 percent look to partners for the enablement of remote management solutions and “one-stop shopping,” respectively. And 13 percent are seeing an increase in supporting SMB IT integration and consolidation projects.

While SMBs predominantly buy IT goods and services from like-sized companies, solution providers with specific technology domain expertise are being called upon to service customers from the very small to the very large. Brown says customers feel a greater comfort level when the solution provider can demonstrate that it understands and appreciates their unique needs, and because of this he sees solution providers tailoring their image to different customer segments.

“We see solution providers presenting themselves as small-business specialists and then presenting themselves with a different business card to larger businesses,” Brown says. “We’re seeing partners in that space as specialists and having the ability to adapt to the customer experience.”