US Small Businesses Trailing Top Economies

Annual worldwide spending on information technology (IT), Internet, and telecommunications by small- and medium-sized businesses (SMBs) is nearing $1 trillion, according to a report by Access Markets International (AMI) Partners, Inc.

AMI-Partners’ annual Global Small and Medium Business Market Study examined SMB technology spending is six leading economies, the US, France, Germany, UK, Australia, and Japan.

“Worldwide spending by global SMBs on IT, Internet, and telecom reached a staggering $800 billion in 1999,” said Andy Bose, CEO and founder of AMI-Partners. “By 2001, we expect this spending to approach an all-time high of $1 trillion.”

Of the total SMB market, the six economies surveyed are driving more than 60 percent of the world’s spending, representing one-half trillion dollars in 1999, according to the study. The six nations’ SMBs spent vigorously on wide ranging Internet solutions, which accounted for $40 billion in 1999. AMI predicts this figure will almost double to $77 billion by 2001.

While US SMBs took the lead in total spending in 1999 at $250 billion, the study revealed that these domestic businesses are seriously lagging in the adoption of two critical technologies: broadband and wireless Internet.

Germany ranked as the premiere adopter of PCs, high-speed access lines, local area networks (LANs), Web sites and e-commerce, surpassing the US in high-speed access by a factor of three times in 1999. In 1999, Germany and Japan sped ahead in broadband deployment with 59 percent and 40 percent adoption rates, respectively, while the US only adopted broadband at a 21 percent rate. This gap could significantly narrow by 2001, but only if conditions improve, the study forecasts.

The results also show that Japan, the UK, and Germany ranked as the top three countries, respectively, with the highest adoption of wireless Web phones.

US small and medium businesses have fallen behind other leading competitive economies in the horse race for broadband and wireless Internet deployment,” said Bose. He cited poor service and support, a troubling legacy infrastructure, and a complicated regulatory system among the key factors crippling the US.

The future growth of domestic Internet-enabled services, from e-commerce to Application Service Providers (ASPs), is likely to stumble in the SMB market, as well, unless broadband infrastructure and deployment is enhanced, the study found.

“As millions of small and medium businesses in the United States crawl through the Internet, the future of ASPs and other next generation Web-enabled broadband services hang in a delicate balance, serving a damaging blow to the business ecosystem,” Bose said.

The study also found that small and medium businesses could lose their competitive edge in an increasingly global economy, jeopardizing America’s growth engine.

“As financial markets continue to punish telecom service and infrastructure providers for lackluster performance, SMBs must be taken seriously as a means for new revenue streams and positive impact on the bottom line,” Bose said. “Now is the ideal opportunity for telecoms to boost their sagging financial performance.”

In the wake of poor services and infrastructure, a new generation of players, such as Managed Service Providers (MSPs), is rapidly emerging, according to the study. MSPs provide a one-stop solution offering computing and networking products, broadband and managed Web services, and IT service and support.

For the AMI study, SMBs include non-home based companies with fewer than 1,000 employees. The majority (more than 90 percent) of SMBs have fewer than 10 employees. For the study, AMI-Partners contacted more than 100,000 SMBs in six leading countries. Approximately, 3,500 participated in a comprehensive survey process based on a nationally representative sample in each country.

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