Small Businesses Plan IT Purchases, Buoyed by Economic Confidence

Most small businesses employing fewer than 100 employees plan to significantly increase their IT spending this year, according to an informal survey conducted by Small Biz Pipeline. Most of that increase will come from the smallest businesses, those with 10 or fewer employees.

The Small Biz Pipeline survey was completed by 165 companies. Of the 119 companies that knew whether or not they would alter their IT budgets this year, 66% said they would increase it.

While the sample size is not large enough to be considered scientific, its implications are nonetheless encouraging for the portion of the economy. The Small Business Administration says that a full 90% of the 60 million businesses in the U.S. have fewer than 20 employees, while 50% of American workers are employed in companies with fewer than 100 employees.

"Things are definitely picking up," said Mark Stephens, principal of the Stephens Group, a six-person management consultancy in Charlotte, N.C. "Not everyone's ready to pull the trigger, but at least they're making plans." Stephens himself plans to buy one replacement desktop PC this year.

Among survey respondents planning to purchase notebooks and laptops, 45% said they would buy systems from Dell. More than 50% said in a separately that reliability was a key factor in selecting a vendor.Among other survey findings:

59% of the respondents plan to buy one to five systems; 18% plan to buy six to 10; 7% plan to buy 11 to 20; and 8% plan to buy more than 20. Another 8% said they had no plans to buy PCs.

Following Dell, Hewlett-Packard/Compaq drew the most interest from potential buyers, with 13% saying they plan to buy systems from that vendor. Eight percent plan to buy IBM systems; 6%, Toshiba systems; 5%, and Gateway systems. Another 22% said they will buy systems from other manufacturers or have a reseller build a generic system from scratch.

Just over 1% said they plan to purchase a system from eMachines, the 6-year-old PC maker in Irvine, Calif. However, 13% said they are "very likely" or "somewhat likely" to buy from eMachines. They survey was conducted Feb. 4 to 12, one week after Gateway announced that it agreed to acquire privately held eMachines for 50 million shares of Gateway common stock and $30 million in cash. The combination will create the third largest PC market in the United States, with nearly 7% of the U.S. PC market and more than 25% of the U.S. retail PC market.

Respondents also expressed strong interest in buying networking equipment, particularly wireless local-area networks. For instance: 72% plan to buy at least one network server; more than 66% said they expect to buy one to five network servers; 4%, five to 10 servers; and 2%, more than 10 servers.When asked what their top networking priority is, 25% said wireless networking; 22% said network or communications servers; 20% said network security products; 14% said storage; 12% said switches and hubs; and 7% said routers.

Network or communications servers will eat up a large chunk of small businesses' IT budget, with 26% percent naming those products as their largest networking expenditure.

Not every small business expanding its network is considering WLANs, however. "Confidence in wireless networking is minus forty degrees Celsius," said Kirk Paterson, president of Paterson and Woolf Corp., a computer programming firm in Alberta, Canada.

Of those who are making any IT additions, the most commonly cited reason for their intended purchases is "attaining and keeping their competitive advantage." Twenty-seven percent of the respondents gave that response. Other priorities included: increasing revenue (24%); improving customer service (14%); reducing internal costs (12%); innovating with products or customer service (12%); and working more effectively with larger partners (9%).

Editor's note on methodology: This survey was developed by CMP Media's TechWeb Network and Small Biz Pipeline; a total of 165 responses were collected online during the week of Feb. 4-12.Respondents to the survey were qualified according to company size (less than 100) and involvement in technology purchasing decisions. The cleaned data, with a variance level of +/- 8%, served as the basis for this article.0