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Growing budgets fuel SMB hardware spending

Analysts say IT budgets are on the rise for SMBs so spending is up, but SMBs still lag in adoption of new technology.

With average SMB IT budgets growing by 7.2% in 2006, major upgrades and replacements of hardware will be a priority for CIOs at small and midsized businesses.

According to a survey of 707 SMB CIOs by Forrester Research Inc. in Cambridge, Mass., 31% of companies plan major upgrades or replacements of desktop PCs and 28% plan the same for their laptops.

"We see SMB IT budgets are growing, and hardware spending is slightly on the rise," Forrester analyst Michael Speyer said.

The survey identified major upgrades and replacements of servers as the third-highest priority, with 26% of SMB CIOs saying they will make such an investment this year.

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Speyer said some SMBs might see their hardware investments limited by their cash flow. He said CIOs at those companies should look into whether vendors can offer financing plans.

"What might be important for many buyers is to get decent financing, because many vendors are becoming more creative with what financing they offer to their buyers," he said. "We don't see a huge demand, that the availability of financing is important for the vast majority of the market. But it bears consideration for any company where cash flow is challenging."

Jeff Allen, CIO at Utah Retirement Systems, said his IT budget is going up by 10% this year, mostly to cover the purchase of new servers. He said his PCs are on a four-year lifecycle. He will be replacing about 25% of them this year, which is a typical for his company, a Salt Lake City-based agency with 350 employees that manages retirement and insurance benefits for retired and active Utah public employees.

The adoption of new and emerging technologies is relatively low among SMBs, the report found. Forrester assumed that businesses with fewer than 100 employees were unlikely to consider such technologies. So it surveyed only 346 CIOs at companies with between 100 and 999 employees.

Of those CIOs, only 15% have plans to pilot networked storage devices in 2006. Only 8% have plans to adopt data center automation and only 12% will adopt automated server patch management.

"It's more to do with the complexity of the IT environment," Speyer said. "A small company that has three or four servers" doesn't need these technologies. Speyer said companies that are expanding, with up to 20 servers and multiple operating systems, might want to consider a pilot program with emerging technologies like networked storage and server virtualization.

Allen said Utah Retirement Systems will be venturing into some emerging technology this year with a telecommunications upgrade.

"One of the things we're going to look at is Voice over Internet Protocol," Allen said. "We have a fairly old PBX switch that is about ready to give up the ghost, so we're looking for a plan to replace that."

Speyer said many SMB CIOs will base their hardware vendor selection on price: "They need a balance of acquisition costs and how easy it is for them to be able to maintain the life of the product."

Let us know what you think about the story; e-mail: Shamus McGillicuddy, News Writer

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