Boom Times In SMB IT Spending Ahead

Small- and medium-sized businesses (SMBs) will lead the way in IT spending growth in 2004, a research firm announced Tuesday in a just-released report.

According to Forrester Research analyst Meredith Child, the author of a survey which polled over 1,000 technology decision makers in North American SMBs, small and medium business will grow their IT spending by 6.6 percent this year over 2003. Compare that to the anticipated 1.7 percent up tick in IT spending for large companies, said Child, and it's no surprise that vendors are chasing the SMB market.

"Overall, small and medium-sized businesses are more positive about the business climate and more optimistic about where their industries are going," said Child in explaining why SMBs are opening the wallet wider than enterprises.

In particular, SMBs are eager to spend money on hardware -- both servers and PCs -- as well as on more bandwidth. And they're planning on dropping some serious dollars on security.

"Security is definitely hot across the board, but it's even more popular in SMBs than in enterprises," said Child. Three out of every four SMBs executives polled reported that they would invest in new security technology in 2004, compared to just one out of two large companies."Part of that is driven by the constant news of security threats in the media," said Child, "but it's also being driven by specific sectors of the SMB market." Those in the financial and manufacturing vertical industries are most eager for more security, the Forrester poll indicated, with 82 percent of the former and 79 percent of the latter touting plans to invest more in protection.

"In finance, the attention to security is demanded by the various regulations, while manufacturing firms typically must allow others in the supply chain -- partners and suppliers, for instance -- to access confidential information," Child said.

Other areas of SMB IT appetite are servers, storage, and desktop PCs. Of those polled, 74 percent are planning to buy new servers and 65 percent are planning to purchase new storage. On average, they expect to replace about a quarter of their existing PCs this year with new machines.

The preferred vendor is definitely Dell, which has this market more or less sewn up. "Dell seems to be the clear winner; it's all over the map here," Child said. SMBs prefer to deal direct, and cut out the middle man, such as value added resellers (VARs), both because they believe that route saves them money and because they feel confident in their own ability to deploy the new hardware.

"I didn't expect this demand for buying directly to be nearly as high as it was," Child said. About two-thirds of the businesses polled said that they were most likely to purchase hardware direct. "Vendors that aren't well positioned here will be in for a disappointment," she said.But SMBs recognize the need to manage the growing number of servers, storage devices, and desktops, she added, and are increasing turning to systems management software to help them, copying their bigger corporate brothers. Nearly half of the medium-sized businesses, those with 100 to 1,000 employees, are considering systems management software purchases.

"SMBs are most interested in investing in technology that helps them grow," said Child. "Management software is a good example. SMBs are growing and investing in their infrastructure, and they need tools to monitor it."

Other tidbits culled from the Forrester survey include a hesitancy over Linux (69 percent had no interest in pursuing the open-source OS); a push to put Office 2003, Microsoft's newest application suite, into play (within 12 months, 61 percent of the SMBs expect to be running that edition); and a splurge on bandwidth. Seventy percent of SMBs will spend more in 2004 to add Internet bandwidth.

The clear vendor winners, said Child, in the SMB market are Dell and Microsoft, Cisco for networking products, and Symantec for security solutions.

"SMBs are really on the radar screen of smart vendors," said Child.And if this spending projection turns true, woe to the vendor that doesn't get small business in its sights.