SMBs Go on an IT Spending Spree

Thursday Apr 29th 2004 by Dan Muse
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If you haven't already increased your IT spending this year, you soon will, according to a new report by Forrester Research. According to the company, spending among small and mid-size businesses will out pace that of larger enterprises.

Small and mid-size businesses are either spending more or will soon be spending more money on technology in 2004, according to Boston-based Forrester Research. According to the company's report, "The State of IT in the SMB Market," the 1,000 SMBs surveyed will increase IT spending 6.6 percent over 2003.

Forrester defines small businesses are those with between six and 99 employees and mid-sized businesses as those with between 100 and 999 employees). It's interesting to note the companies with 1,000 or more employees will increase IT spending by only 1.7 percent in 2004.

In general, according to Forrester, SMBs are more optimistic about the future than their enterprise counterparts, with 81 percent describing their current business climate as being at least moderately strong and 78 percent expecting more improvement by the end of the year.

The PCs Come Rolling in
With the economy and general business outlook showing positive signs, SMBs nearly across the board indicate that they will purchase new PCs in 2004 — 95 percent say they expect to replace one in four PCs this year. The majority, however, haven't waited for this year's new PCs to upgrade their operating systems and 61 percent report that they have moved to Windows XP. Also, 56 percent say they are currently running Windows 2000 as their operating system.

Overall, 68 percent are likely to purchase their PCs directly from the manufacturer. Forrester reports that the smaller the company, the more likely it is to buy its PCs from Dell. A whopping 79 percent indicate their preference for Dell. HP, IBM and Gateway are also popular with SMBs. Retail accounts for 27 percent of PC purchases followed by VARs (21 percent) and mail order (16 percent).

New hardware purchases aren't limited to PCs. If you are like 74 percent of SMBs, you will buy a new server some time this year. Storage is also a hot area with 65 percent planning invest in that category, according the report.

Not surprisingly, SMBS are also giving wireless networking a long look and 51 percent, Forrester reports, having at least a pilot program underway. Companies are also looking to give their Web access a boost and 70 percent indicating that they are looking to buy added Internet connectivity and bandwidth. AT&T is the preferred vendor when it comes to connectivity, Forrester reports, with 32 percent saying they are considering that service provider. Verizon (29 percent), SBC (23 percent), Sprint (22 percent) and Qwest (20) round out the top connectivity vendor list.

Is the World Going to Dell?
Despite of strength of partner programs among the major vendors, whether it's servers, storage or networking, SMBs are eager to take the direct approach with 66 percent, 58 percent and 53 percent, respectively, planning to buy straight from the manufacturer. When you combine direct sales and small business, the result is often Dell, according to Forrester. For servers, the vendors of choice are Dell (68 percent), HP (47 percent), IBM (35 percent) and Sun (20 percent). For storage purchases, the top vendors are, once again, Dell (50 percent), HP (36 percent), IBM (33 percent) and EMC (21 percent). For networking, Cisco leads the way with 67 percent, followed by 3Com (37 percent), Dell (34 percent) and Linksys (34 percent).

Given the increasing threat to PCs and networks, it's not surprising to see that Forrester reports security-related spending will increase by 75 percent in 2004 with strongest demand coming from heavily regulated industries such as financial services. Symantic and Cisco are the most-often mentioned among SMBs when comes to security, each drawing attention from 55 percent of the survey respondents. Forrester credits consumer-oriented promotions with the fact the 35 percent of small businesses have implemented firewall technology and another 22 percent are either testing or in the process of deploying firewalls.

Consultants for Customization and Commerce
When it comes to bringing in outside help, 80 percent of SMBs indicate they will employ local or regional consulting firms, independent contractors or VARs this year. The two strongest areas for outside help are custom application development and e-commerce.

Forrester reports that 87 percent of survey respondents indicate they have their own Web sites, so it's not surprising to see that 22 percent of SMBs seek help with e-commerce projects. Forrester also reports that small businesses (those with fewer than 99 employees) are 2.5 times for likely to outsource their Web hosting than mid-size businesses — 39 percent of small business report that their Web sites are hosted off-site.

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