Study: Small And Midsize Companies Will Lead IT Spending

Small and midsize businesses will lead the way in IT spending growth in 2004, Forrester Research said Tuesday in a just-released report.

According to Forrester analyst Meredith Child, the author of a survey which polled more than 1,000 technology decision makers at small and midsize companies in North America, small and midsize business will increase their IT spending by 6.6% this year from 2003. That compares with an anticipated 1.7% uptick in IT spending for large companies, said Child--so 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 these companies are opening the wallet wider than larger businesses. They're especially eager to spend 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," Child said. Three out of every four small and midsize company executives polled said they would invest in new security technology in 2004, compared with 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 market." Those in the financial and manufacturing vertical industries are most eager for more security, the Forrester poll indicated, with 82% of the former and 79% of the latter planning 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.

Small and midsize businesses also have an appetite for servers, storage, and desktop PCs. Of those polled, 74% plan to buy new servers and 65% to purchase new storage. On average, they expect to replace about a quarter of their existing PCs this year.

The preferred vendor is definitely Dell, according to Forrester. "Dell seems to be the clear winner; it's all over the map here," Child said. Small and midsize companies prefer to deal direct and cut out the middleman, such as value added resellers--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 they are most likely to purchase hardware directly. "Vendors that aren't well positioned here will be in for a disappointment," she said.

But smaller businesses recognize the need to manage the growing number of servers, storage devices, and desktops, she added, and are increasingly turning to systems-management software to help them, copying their bigger corporate brothers. Nearly half of midsize 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% had no interest in pursuing the open-source operating system); a push to put Office 2003, Microsoft's newest application suite, into play (within 12 months, 61% expect to be running that edition); and a splurge on bandwidth (70% of those surveyed will spend more in 2004 to add Internet bandwidth).