Article

IT spending on the rise for SMBs

Jon Panker
Two analyst reports on small and midsized businesses (SMBs) paint a rosy picture for technology spending.

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Forrester Research Inc., in Cambridge, Mass., found that on average small businesses are hiking their IT budgets 7.4% this year, and medium-sized companies are increasing 6.1%. Those gains eclipse the anticipated 2.4% jump for large companies.

InStat/MDR, a Scottsdale, Ariz.-based market researcher, expects tech spending in the midsized sector to grow between 4% and 5% annually. It estimates midmarket IT spending on products, services and personnel will hit $98 billion by 2008.

Fueling the growth is a desire among SMBs to bolster their businesses after the economic downturn. Both studies found that executives are largely optimistic about the business environment.

"They had a better view of their own firm as opposed to the [overall] economy," said Jeff Wilson, an InStat industry analyst.

InStat reported growth in telecommunications and network hardware spending, due largely to businesses eager to open up smaller offices or arm telecommuters with necessary technology.

Meanwhile, 80% of respondents told Forrester that their current business climate was moderately strong or better, and 77% said the health of their industry would improve over the next three quarters.

When asked by Forrester about their specific spending plans for the next year, 75% of SMBs said they will buy networking equipment, 74% will add servers and 65% will invest in new storage technology.

Forrester found that Dell Inc. stands to gain from the spending up tick. Companies identified the direct-computer selling giant as the vendor most likely to supply them with servers and storage. Among likely networking suppliers, Dell trailed behind only Cisco Systems Inc. and 3Com Corp.

SMBs indicated that they were likely to choose a provider on their own and call in consultants when their technology projects hit a snag.

"A lot of times, word of mouth seems to be the most popular way to make a [vendor] decision," according to Meredith Child, the author of the Forrester report.

On the applications front, 26% of SMBs plan to invest in customer relationship management (CRM) software in the next year, Forrester found. Microsoft, which entered the CRM market last year, was cited most often as supplying those applications. Thirty percent of SMBs plan to buy content management software, and 33% are investing in business intelligence applications.

InStat's study also indicated an indirect interest in CRM. After maintaining competitive advantage, the top areas for improvement were enhancing marketing and bolstering customer service.

Regarding staffing, Forrester found that only 6% of SMBs will cut IT jobs this year. The majority, 52%, are maintaining current staffing levels.

Forrester surveyed 1,002 SMB technology decision makers. It defines the sector as companies with six to 999 employees. InStat did online interviews with 306 midmarket executives at firms with 100 to 999 workers.


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