SMB Tech Spend Uptick Expected

Solution providers expect technology spending among SMBs to rise over the next 12 months, driven by a number of trends, including an increasing need for infrastructure, the growing acceptance of cloud computing and the end of support for Microsoft Windows XP.

Many of the small businesses put off technology equipment spending during the recession only to find their computers' hard drives and fans now failing, said Jerry Pape, principal at Excalibur, a Bozeman, Mont.-based solution provider. There's also a drive to update systems and make the switch to faster storage interfaces to allow for speedier backup times, according to Pape.

"Small business is gearing up right now and spending," Pape said. "The amount of data that they are acquiring is for the move to solid state. It's for the move to Thunderbolt. All of that stuff has triggered a need to move to faster, more reliable platforms."

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Pape estimates that Excalibur has installed about $40,000 worth of Cisco Meraki cloud-based networking products in the last three weeks, about $15,000 in QNAP storage gear over the last six months, and $100,000 worth of Apple iMacs, Mac minis, MacBook Pros, iPads and iPhones since November.

Pape said he's seeing work contracts coming in earlier than usual and added eight customers since the start of the year, bringing his total client roster to about three dozen. He said he expects Excalibur revenue to be up on that new business, but was unable to provide a revenue growth projection for the year.

Recent research from analyst firm NPD Group showed that the majority of SMB customers soon plan to make technology purchases. According to NPD's Quarterly Tech Monitor, 57 percent of surveyed SMBs said they plan to make a technology purchase in the next 12 months, up 4 percent from the previous quarter. Forty-seven percent plan to make technology purchases within three months, the survey showed.

Customers in the larger SMB market are more likely to spend on technology, NPD said. Over the next 12 months, 78 percent of companies with 50 to 200 employees and 79 percent of companies with 201 to 500 employees plan to make technology purchases, according to the survey. In the near term, 47 percent and 53 percent, respectively, plan to spend on technology within three months.

"Clearly, there's a lot going on in the infrastructure world -- the cloud, growth in networking and storage requirements," said NPD Vice President of Industry Analysis Stephen Baker. "People sometimes tend to think of those as big company requirements, but there [are] plenty of midsize companies that have to invest in those to stay relevant and competitive, and that's where a lot of the infrastructure investment is going today."

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Replacement of small business servers is keeping Orangevale, Calif.-based solution provider Ranvest Associates busy.

Ranvest CEO Bob Nitrio, who expects to see SMB work for his company rise over the next 18 months, said many companies he works with have been hanging onto workstations with Windows XP, for which Microsoft ended support in April. That's pushing businesses to consider their infrastructure after holding off in hopes of an extension from Microsoft, he said.

"A lot of people were taking a wait-and-see attitude, and now they're understanding this really is for real," Nitrio said.

There are also shifting attitudes about the cloud among some SMBs, which -- for those who haven't gone through a system refresh -- could present new opportunities for solution providers, Nitrio said.

"Clients that previously were more resistant to the concept of having anything in the cloud are discussing it willingly," he said. "Part of the reason for that is they're starting to see it in a consumer sort of way in advertising that's speaking about the cloud frequently. That's definitely planting seeds in the minds of people that were somewhat resistant."

Businesses also may have been resistant to spending during the recession, placing necessary investments on hold. And that's another factor causing the projected uptick in spending, Nitrio said.

"For the last several years, small businesses have been holding onto their dollar because of the state of the economy," Nitrio said. "In some cases, my clients are doing better than they were, so they're willing to invest in the future. In other cases, it's strictly a matter of necessity."

Excalibur's Pape sees a similar trend from his customers, who are now making up for their lack of spending during the recession in both time and money.

"If you don't spend your IT budget the way you should every year, when the big problem occurs, you will pay every penny you didn't pay when you should have, and then some," he said.

Channel partners can benefit from all of this by staying connected to their customer base, NPD's Baker said.

"In the long term, companies seem to be oftentimes more optimistic about their spending than in the short term," he said, "but if you're not there in front of them when they're ready to buy, you can miss those opportunities when there's a change in the budget environment."

PUBLISHED JUNE 19, 2014