Tech Spending Down Slightly Among Small Businesses

Small businesses are spending less on technology in 2001 than they did in 2000, but not alarmingly less, according to a survey by International Data Corp. (IDC).

IDC’s report “Small Business Technology Outlook: Attitudes and Spending Plans in Uncertain Times” found that small businesses plan to purchase fewer PCs, but will expand their use of the Internet, high-speed services and PC networking products. While spending growth has slowed in some areas, IDC expects to see double-digit sales gains in others.

“Small businesses were surprisingly upbeat when we asked them their forecast of the economic climate,” said Raymond Boggs, vice president of IDC’s Small Business and Home Office Research. “They were divided between those who see rough weather ahead and those who see clear sailing. What’s important, though, is not the accuracy of the predictions, but the effect of expectations on buying behavior. To the extent that small firms believe a slowing economy will not affect their business, they will continue to represent an increasingly attractive segment for technology providers.”

IDC predicts that providers in the broadband Internet technology market will especially benefit from small businesses’ purchasing behaviors. The percentage of small businesses using broadband communications capabilities has increased from 11 percent in 1999 to nearly 15 percent in 2000. Plans to use broadband have also increased — more than 13 percent of small firms plan to add broadband this year, compared with 7.5 percent who planned to add broadband in 2000.

In addition to broadband providers, IDC expects noteboook PCs and Internet-based services (especially Web hosting) to be stellar performers. Potential high flyers include wireless LANs, low-priced servers and IP telephony. Desktop PCs, plain old telephone service and fax machines are considered important but losing their share of spending.

Predictions of IT spending has been all over the board in recent months. IDC predicted a decline in growth for the U.S. PC market in 2001, while Aberdeen Group found that global IT spending will remain robust through 2005. A survey of nearly 100 top IT professionals by the Patrick Marketing Group (PMG) found that future IT spending by enterprises may be more promising than previously believed.

Online interviews by PMG with IT executives at some of the nation’s largest corporations, including ADP, Honeywell, American Airlines, Sun Microsystems, Amdahl, Dollar Rent-a-Car, Sony, PricewaterhouseCoopers, Fidelity Investments, Compaq and dozens of others, revealed that almost every interview revealed plans for major, strategic investment in technologies calculated to drive top-line growth, cut operational costs or both.

Despite the shaky perceptions by execs, IT spending appears to be alive and well. According to the PMG survey, 98 percent of respondents said they are making major investments in one or more of the information technologies covered by the survey. These include CRM, data warehousing, computer telephony integration, enterprise resource planning, network security and salesforce automation.

“In addition to the surprising upside to IT spending, the survey reveals something we suspected all along,” said Craig Shields, senior PMG partner. “The business world is under terrific pressure to become more customer focused, and technology will play a critical role. Those that do not use IT as a strategic weapon will be devoured.”