SMB IT Spending Holds Steady

By Allan Alter  |  Posted 02-11-2008

SMB IT Spending Holds Steady

A year ago, before the economy started going south, we reported that midmarket IT spending was rising an average of 8.6 percent. Now, when some economists say we've slipped into a recession, spending is rising a mere ... 8.3 percent.

In other words, it hasn't changed.

One reason: Companies with revenues below $500 million are focused on growth; 72 percent expect their revenues will increase by more than 5 percent in 2008. They are increasing their investments in applications to support growth--databases, e-mail, ERP and storage, for example--and applications to support sales, marketing and customer service--business intelligence and CRM, for instance. Another reason: They see opportunities to reduce infrastructure costs so they adopt virtualization, voice over IP and open source software.

Yet another: Small and midsize businesses invest in their IT staff, using outsourcers less often and increasing spending on training by a bigger percentage than larger companies.

Undoubtedly, a recession will force more SMBs to cut back. But overall, small and midsize businesses are not yet ready to pull the plug on their IT spending.

 

Cost Pressure

 

Cost Pressure

Mid-tier CIOs are not immune from concerns about IT spending. In general, corporate managers at small and midsize businesses are not quite as worried about IT spending as those at larger companies, but about two out of three SMB IT executives and managers foresee added pressure to cut costs in 2008. So, while '08 IT budgets will rise by more than 8 percent over 2007 levels, CIOs at SMBs will need to show that they are taking advantage of cost-cutting opportunities to maintain support for continued increases in IT spending.

 

Allocation of IT Budget


Allocation of IT Budget

Services are slower to take hold among SMBs. Fifty-seven percent of SMBs use outsourcers, but midmarket companies overall are more likely than larger companies to rely on their own IT staff to do IT work rather than use service providers and outsourcers. SMBs spend a smaller part of their IT budget on services and a larger share on IT staff. In addition, they are increasing spending on IT training by a bigger percentage than larger companies.

 

How SMBs Save Money on IT


How SMBs Save Money on IT

Like their counterparts at larger companies, CIOs at SMBs are likely to say that consolidation, virtualization and replacement of legacy systems are the best ways to reduce IT costs. However, since SMBs have less bargaining power with vendors, smaller IT staffs and fewer legacy systems to replace than large enterprises, they more frequently cite other approaches--notably, adopting open source software and reducing the cost of managing multiple vendors.