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SMB IT spending on software, IT services to keep rising through 2019

Small and medium-sized businesses (SMBs) are spending more on software and IT services, and these investments will continue to rise through 2019, according to IDC’s Worldwide Small and Medium-Sized Business Forecast. One main reason for this projected increase, wrote report author Raymond Boggs, is that SMBs are looking to new business resources such as alternative technology to help gain competitive advantage.

“Increasing investment in technology is an appealing way for firms to expand their capabilities without necessarily increasing their head count,” Boggs wrote.

IDC forecasted that total SMB IT spending will increase 4.4% year over year, from $560.3 billion last year to $694.5 billion in 2019. Drilling down, software spending will see the greatest increase, growing 6.8% annually through 2019; IT services will grow 4.7% annually, and telecom equipment takes third place at 4.4%.

This increased spending on software and services is in keeping with SMBs placing greater emphasis on solutions, particularly related to cloud and mobility, according to Boggs.

Meanwhile, spending on PCs and peripherals, systems, and storage, will grow at a slower rate, less than 3.5% annually. However, Boggs noted that in both categories, “the transitions to mobility and new technology approaches will still provide attractive growth opportunities.”

Compass Intelligence analyst Stephanie Atkinson agreed that SMBs are looking to more sophisticated solutions, particularly in the cloud, as they struggle to maintain expertise in-house in the midst of rapid technology change.

“The SMB sector continues to look for simplification opportunities when buying technology and telecom services, and cloud-based services provide just that,” she wrote in a blog post. One driver is that many cloud-based services, such as backup, collaboration and storage solutions, offer flat-rate billing or a recurring monthly fee.

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Source: Compass Intelligence

“SMBs are often faced with managing cash flow on a week-to-week basis, and having a planned and fixed budget for IT/telecom services is highly preferred,” Atkinson wrote.

According to Compass Intelligence research, the cloud computing and services market is currently experiencing a 40% compound annual growth rate, and will continue to do so through 2016, at which point the market will hit $50 billion (see chart).