Mid-Market Companies Expect AI to Help Them Weather an Economic Downturn

Leaders of mid-market companies are feeling confident that artificial intelligence can lift their prospects for 2024, even while they prepare for a possible economic downturn.

A sentiment survey by KeyBank of 400 owners and executive leaders at mid-market companies, defined by the bank as businesses with $10 million to $2 billion in annual revenue, found that 73 percent of respondents have an “excellent or very good” outlook for their businesses in 2024. What’s more, 56 percent of those leaders said their positive outlook was mainly driven by improved efficiency in their business operations, while 54 percent said they were most encouraged by improvements in technology like generative AI.

Ken Gavrity, head of KeyBank’s commercial division, says that mid-market companies are an extraordinarily resilient part of the economy and have maintained revenue and job growth in the face of recent economic crises. According to the National Center for the Middle Market, revenues in 2023 increased for 83 percent of mid-market companies at an average rate of 12.4 percent, a new record for the segment.

As for how mid-market companies managed to achieve that growth, Gavrity says they are investing in technology that can drive efficiency, with 44 percent of mid-market business leaders reporting that they had implemented AI as a method of expansion in the past year. According to Gavrity, businesses are “dipping their toe” into AI in low-risk ways, such as creating customized onboarding content to help new employees get up to speed at a faster pace, helping contact center employees quickly surface important user information, and helping leaders quickly synthesize competitive intelligence documents. By integrating AI in these “risk-averse” methods, business owners are seeing tangible positive outcomes from the technology, and Gavrity says they're now looking at more advanced use cases.

Mid-market business leaders were less positive about the state of the broader economy, with 60 percent predicting an economic downturn before 2025 and 24 percent saying the economy was already in a downturn, with the largest negative factors being inflation and higher labor costs. And yet, Gavrity says that regardless of the broader perspective of the macro economy, these leaders are overwhelmingly investing in their businesses because “they see pipelines that are full. They see high demand from their customers, whether they’re consumers or B2B.” And, says Gavrity, they’re asking for additional expansion on the balance sheet, both via credit and by raising capital.

Also notable was that 40 percent of mid-market business leaders said that improved cybersecurity processes had contributed to their positive company outlook. Gavrity noted that he’s seen the impact of cyberattacks on mid-market businesses first-hand. “Just about every week, we get a call from a customer who says ‘I think I just wired information or money where I shouldn’t have,’ ” he says.

Gavrity adds that mid-market companies are arguably “one of the easiest attack areas” for hackers because they’ve achieved a scale where there’s “meaningful dollars available,” but often haven’t invested in high-quality, in-house cybersecurity personnel to protect those dollars. Plus, the advent of AI-powered code generation is only going to make it easier for hackers to break through security measures. But although 82 percent of business leaders said their IT networks are secure, only 50 percent said they require antivirus protection on all business computers, and just 37 percent required the use of a VPN to access company resources.