Small Businesses Focus On PCs, Networking As Outlook Brightens

Desktop and laptop computers are the top IT purchasing priority in 2004 among small businesses. Business automation software and networking products are also among the highest priorities.

Those are some of the key findings in an exclusive survey conducted among small businesses -- defined for this survey as those with fewer than 100 employees -- by Small Biz Pipeline.

Small businesses' plans to spend aggressively on PCs and networking products -- including wireless -- certainly represent good news for critical tech sectors that have been hit hard in recent years. The news is also positive because small businesses represent such a huge portion of the U.S. economy: the Small Business Administration says that a full 90% of the 60 million businesses in the U.S. have fewer than 20 employees, while 50% of American workers are employed in companies with fewer than 100 employees.

And the Small Biz Pipeline survey was completed by many of these very small companies: 62% of the 227 respondents work in companies with less than $1 million in revenue, while 62% have fewer than 10 employees.

But these companies have strong technology agendas for this year. Among survey respondents:

The survey's other findings are somewhat of a mixed bag, with both upbeat and cautious findings among respondents.For instance, 48% of small businesses plan to increase technology spending this year vs. last year. But there's less than a resounding indicator that the spending floodgates will open. Another 39% say they'll spend roughly the same as last year, while 13% say they'll spend less. Among those firms that will spend more than last year:

On the flip side of the spending equation:

Some smaller companies seem intent on making up for their lack of size with aggressive spending on technology. Nearly 50% of survey respondents say they'll spend 11% or more of their revenue on technology; 15% say they'll spend more than a quarter of their revenue on technology. Such numbers would be unprecedented in larger businesses.

The conservative approach toward tech spending that has dominated in recent years applies to smaller companies as well. In our survey, the top business objective for companies in making tech decisions is reducing internal costs to do business and improving profitability, an option chosen by just over 23% of respondents. That's been a major driver of technology strategy in businesses of all sizes for at least the last three years. Taking a more forward-looking approach, just under 23% of firms say they are looking to innovate with new products and new ways of serving their customers.

Among the biggest concerns or barriers to tech spending among sub-100-employee companies:

Asked to characterize their company's mindset toward investing in technology, given factors such as the economy, the highest percent, 43%, describe themselves as "somewhat confident" while another 19% say they're "not as confident as they'd like to be." That's nowhere near the skepticism that prevailed toward technology investment in the last couple years, but it's also not nearly as bullish as the go-go late 90s. Editor's note on methodology: This survey was developed by CMP Media's TechWeb Network and Small Biz Pipeline; a total of 227 responses were collected online during the week of Jan. 19. Respondents to the survey were qualified according to company size (less than 100) and involvement in technology purchasing decisions. The cleaned data, with a variance level of +/- 6.5%, served as the basis for this article.