Tech Refresh Time For Small Business

Small businesses are committed to increasing spending on wireless, supply chain management and CRM, among other technologies, according to CRN research.

Over the next year, 50 percent of companies with fewer than 100 employees plan to hike their technology budgets, and 72 percent of those companies expect double-digit spending increases, according to a CRN survey of 200 small-business IT executives, the findings of which were released in August. What’s more, 65 percent of businesses that plan to raise spending say they’re “extremely” or “strongly” committed to making those increases.

Technology categories that are priorities for increased spending by small companies include wireless, supply chain management, CRM, desktops, peripherals and storage, CRN research found. Notebooks also continue to exhibit strong sales, and areas such as networking hardware, antivirus, firewalls and convergence stand to see rising sales activity.

The strength in small-business IT spending stems, in part, from the technology refresh cycle and a continued upbeat view of the economy, solution providers say. “We are seeing more people who are ready to buy,” said James Huang, product marketing manager at Amax Information Technology, Fremont, Calif. “We do sense that this is picking up. We’re getting more orders from small and medium businesses.”

Huang said that at two trade shows recently, businesses solicited his company’s services, whereas at past events--such as the 2003 LinuxWorld Expo--small-business owners and executives sought product and pricing information but didn’t follow through. “This year, we’re seeing a lot more serious interest,” he said. “I had people [at trade shows] on the spot asking for quotes, with specific requirements.”

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Though agreeing that small-business IT spending is on the upswing, some VARs noted that the opportunities may be fragmented. “Sometimes, a company will need to change all of its desktop systems all of a sudden,” said Casey Ho, president of USA Systems, Walnut, Calif. “Maybe I’ll have 50 computers I’ll need to build all of a sudden. That happens all the time. But if it doesn’t happen, I’m not relying on it. I’m still OK.”

Ho said small companies are grappling with many of the same technology issues as large enterprises, particularly the inevitability of system upgrades. “They have software issues, too,” he said. “The applications they have on their equipment, they eventually have to upgrade.”

Pritt Gill, president of Mega Micro Devices, a solution provider in Fremont, Calif., said revenue driven by small-business customers has come from similar headroom issues. “They always need the more current processor, more and more memory, a faster hard drive, a bigger hard drive,” he said. “As we go along, programs are becoming bigger and bigger.”

That, combined with some analysts’ forecasts for a brighter overall economy, points to gains in the small-business segment, Gill said. “With the overall economic picture, it adds up to, yes, [IT spending] will increase,” he said. Activity in the small-business arena likely will pick up in the latter part of the year, triggered by the back-to-school spending season, he added.

Amax’s Huang said he sees opportunities in more new areas than ever before. “We’re probably going to expand our IT sales force,” he said. “We’re encouraging our [sales]people to start venturing into more high-end servers and desktop systems. There is a market out there.”

Other key findings in the August CRN Monthly Technology Spending Outlook include the following:

• Optimism for overall IT spending stretched across virtually all market segments, including enterprises, midsize businesses and government accounts.

• The Unix/RISC server space drew the least amount of optimism among VARs for near-term sales prospects, as the CRN solution provider sales expectations index for that category was down by nearly half from just a month earlier. However, monthly figures in this space are notoriously volatile.

• Newer technologies represent most of the top 10 categories where solution providers have their highest near-term sales expectations.

• Asked to rate their level of satisfaction with key IT vendors’ channel programs over the past six months, VARs gave the highest marks to Intel, Microsoft and Advanced Micro Devices, while 3Com, Citrix Systems and Lexmark received the lowest ratings for that time period.

Published for the Week Of September 20, 2004