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Internet
Drives SOHO Technology Spending
Spurred on by a desire to use the Internet, the small
office/home office segment of the business market is poised
to pump up spending. SOHO technology spending will explode
by more than 50% from nearly $39 billion in 1998 to $59
billion in 2002, according to a report from Cahners In-Stat
Group.
The SOHO market has historically not been a primary buyer
segment for technology vendors. SOHO businesses' technology
purchases will continue to be very basic, primarily PCs,
packaged software and telecommunications services. But
the SOHO market is substantial for companies that adopt
the right strategy to reach it, says Kneko Burney, Manager
of Market Segmentation for Cahners In-Stat Group.
SOHO Business
Technology Allocations
Source:
Cahners In-Stat Group
In addition to sales opportunities surrounding Internet
access, home-based businesses present technology vendors
with a pathway to push business technologies such as computer
networks into the home. The average SOHO business, composed
of firms with fewer than five workers, spends roughly
$7,200 on information technology annually, up from $2,000
in 1996, says Cahners In-Stat Group.
Several factors are driving SOHO technology spending:
- Heightened awareness of technology due to increased
use of the Internet
- Increased adoption of PCs to facilitate Internet access
- Lower PC prices
- A desire to use technology/Internet-enabled business
strategies
- Introduction of products designed and priced specifically
for the SOHO business market
SOHO businesses rely on mail order and retail outlets
as their primary technology purchase channels with roughly
40 percent of purchases through mail order and 32 percent
made through retail. Cahners In-Stat Group expects the
Internet to emerge as a key purchase channel for SOHO
businesses. When SOHO businesses adopt the Internet, they
will rely less on mail order catalogs. SOHO businesses
are looking for convenience in their technology purchase
channels, Burney says. But until Internet penetration
increases, mail order and retail outlets will continue
to be very influential in the SOHO market.
SOHO businesses spent $7.3 billion on computer hardware
in 1998. That figure will rise to $9.2 billion in 2002.
The rate of SOHO hardware market growth will actually
decline after the turn of the century due to price declines.
However, many technology backward SOHO businesses will
buy their first or second computer, keeping the market
growing.
Spending by the SOHO market for software was over $6
billion in 1998. That figure will rise to a whopping $11
billion by 2002, forecasts Cahners In-Stat Group. SOHO
businesses are expected to invest in several types of
software, primarily packaged applications and databases.
SOHO businesses will spend significant amounts on business
management tools including legal guidance and documents
and business/market planning applications.
Though some SOHO businesses will spend significantly
on network hardware, particularly those in the high tech
industry, the overall SOHO networking market will be slack.
SOHO businesses spent just $335 million on networking
hardware in 1998. By 2002, that figure will rise to $500
million. The latter is perhaps an impressive figure, but
compared to SOHO computer hardware and software spending,
networking expenditures lag significantly behind.
Report
Information
This
report focuses on the market opportunities for technology
within the SOHO market (1 - 4 employees), segments this
market, and discusses trends in the "technological advancement"
of SOHO technology buyers. Additionally, Opportunities
Abound gives clear analysis of buyers in this market and
presents straight-forward business recommendations on
how vendors can develop and cash in on this growing market.
The report includes five-year forecasts on IT spending,
technology spending by type of technology, and technology
spending growth.
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