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Study: Smaller Businesses Reluctant To Invest In Technology

A COMsciences study says small and midsize companies agree technology gives them an edge, but they're reluctant to invest in it.
A study by research firm COMsciences Worldwide reveals that small and midsize businesses agree technology gives them an edge over larger competitors, but market conditions make many reluctant to invest in the near future.

Beyond minor upgrades, 53% of the 100 survey participants will make some minor investments in hardware or software for the office this year, 26% will not, 11% have no plans, and 10% plan to invest heavily, according to the online study co-commissioned by the Association of Small Business Development Centers and Hewlett-Packard.

About 34% of the companies that participated in the survey conducted between December and January have been in existence more than 10 years, 27% have been around between five and 10 years, 33% between three and five years, and just 6% less than two years. About 90% have 50 or fewer employees.

Those that will order equipment in the coming year say they're more likely to rely on existing relationships. Given a choice between on-site service from a local provider and on-site or ship-in service from a general service center, 65% of the companies participating in the study say they prefer to work with local service providers familiar with their needs. The remainder didn't have a preference or preferred on-site or ship service to a center.

Credit cards typically are the payment option of choice, according to 46% of participants. Even those with more than 50 employees are apt to pay by credit card. Only 29% pay by cash, while 13% use vendor financing and 9% use a small business credit line.

More than half of the study participants had never heard of Section 179 of the U.S. tax law, which enables them to take an annual tax credit for business expenses of up to $100,000. The increase from $25,000 in annual deductions is part of the 2003 Tax Act and was written as a business incentive for companies that spend $400,000 and less annually. The tax rebate expires in 2006. If they did take advantage of the tax savings, 58% say they might reinvest a portion in more technology. The least-likely technology investors have been in business more than five years.

The study also examined what companies do with their old machines. Recycling tactics varied, with some companies using more than one approach: 58% say they donate old PCs to charity, 24% recycle through a PC supplier, 26% toss them in the trash, and 19% trade them in for an upgrade.

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Brian T. Horowitz, Contributing Reporter
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