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Small Business Boasts
Big Tech Market
Firms with five to 100 employees may be small fry, but
their spending on computers is mighty. The 2.2 million
small businesses in the United States shelled out more
than $57 billion for computer hardware, operating systems
and software in 1998, according to research by Cahners
In-Stat Group. This healthy appetite for computing infrastructure
will be somewhat quenched after the turn of the century,
only to pick up steam again two years later.
What's driving small business purchases? It's no surprise.
The Internet is responsible for much of the growth in
small business computer spending. Small businesses increasingly
want access to e-mail and the Web. "The Internet spurs
demand from those without computers to buy, and prompts
demand to replace old computers for new, faster machines,"
says Kneko Burney, Manager of Markets and Opportunities
for Cahners In-Stat Group.
Also spurring small business computer spending are growth
in employment, increased popularity of mobile computing,
Y2K upgrades and vendors better serving the small business
market. There's no question that vendors now take the
small business market seriously, and with good reason.
The average annual investment made by a small business
on computer hardware is expected to increase by 25% to
$20,000 by 2002.
Small businesses are spending most of their hardware
budgets on clients, accounting for nearly two-thirds of
the $31 billion spent on hardware in 1998. Small businesses,
particularly those of 20 or more employees, will increasingly
use LANs to serve their computing needs. As a result,
small business spending on servers-$1 billion in 1998-will
double by 2002. Small business spending on computer software
will grow significantly over the next few years, jumping
to $44 billion by 2002.
Most spending will be on packaged applications such
as Microsoft Office, Adobe Pagemaker and Quicken's QuickBooks,
but other areas show signs of growth too. The increased
use of the Internet will spawn investments in e-mail,
groupware, anti-virus applications, development tools
and databases.
Source:
Cahners In-Stat Group
Firms with 50-100 employees exhibit a surprising amount
of computer sophistication, Burney says. These firms will
purchase expensive, higher-end applications such as enterprise
resource planning (ERP) products. Growth in small business
internetworking will also encourage increased software
spending as small business workers share files, trade
e-mail and use the Web more and more.
On the other hand, small businesses with fewer than
20 employees are apt to outsource their computing needs,
Burney says. From basic computer maintenance to network
management, the smallest of small businesses will entrust
outsiders to handle their information technology. Some
vendors will manage software for small businesses over
the Internet. There will be pockets of demand for tools
and middleware, but the overall small business markets
for these products will be weak. By contrast, small businesses
are expected to purchase a great deal of custom solutions
delivered by VARs and consultants.
Vendors should look at the small business market as
ripe for sales, but also one that requires education.
Several forward-thinking vendors have embarked upon seminar
series to reach this budding market segment. Small business
technology decision-makers are most likely to rely on
print articles to inform their decisions. Vendors can
reach these leaders through sponsoring print sections
in major business and technology publications.
Small businesses, even the larger ones, will require
guidance and support in creating their computer infrastructure.
They will look to vendors and service providers to form
partnerships. Burney believes it is the vendors best able
to build these types of relationships that are likely
to gain incredible advantage in this market.
Report
Information
Small businesses leverage
substantial purchase power, investing roughly $57 billion
in computer hardware and software in 1998. The substantial
multiplier effect in this market combined with a rapidly
developing buyer segment, suggests that computer hardware
and software vendors will enjoy healthy demand from the
2.2 million small business in the US. This report discusses
trends in small business computing and details current
and expected computing infrastructure including number
of clients, servers and desktop operating system. Further,
forecasts are provided for several areas of computing
infrastructure spending including client hardware, server
hardware, storage hardware, packaged applications and
databases.
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