SMB Spending Grows Faster Than GDP

NEW YORK -- IT and telecom spending by US small and medium businesses increased 6.5% in 2007; this was three times GDP growth (2.2%) and the highest level in years. At 2.1% of overall GDP, small and medium businesses IT spending contributes substantially to the US economy. Recent studies, by New York-based Access Markets International (AMI) Partners, Inc., corroborate these findings.

A significant accelerator of the spending growth has been vendors’ strategies, which have become more refined since broadcasting their SMB intentions over the last few years. “We’re beginning to observe,” notes Melissa Chong, New York-based Analyst at AMI-Partners, “IT vendors — especially larger, established vendors — transforming themselves to be increasingly SMB-focused. This applies whether they are creating SMB-specific channel programs, acquiring companies with significant SMB influence or building distinct SMB product lines and ensuing marketing programs.” Even their internal organizations have to transform and restructure, to ensure the proper support groups are in place and incentivized to grow this market.

In the past—for instance, considering product lines—vendors have missed the mark in providing SMBs with fast, affordable and easy to use IT solutions that solve SMBs’ business problems. Lately, however, established vendors such as IBM and Cisco have joined web 2.0-sprung vendors such as Zoho and salesforce.com in unveiling user-friendly, easy to install and “smart” solutions that require little to minimal management.

How will SMB IT spending be affected during an economic slowdown? Like other market segments, SMB IT/telecom spending is tied to the economy. During an economic slowdown, SMB IT spending will slow too. “But given the market accelerators and healthy variance between SMB IT/telecom spending growth and GDP growth,” Chong notes, “AMI expects SMB IT/telecom spending to continue to outpace overall GDP growth.”

The maturity and sophistication of SMBs’ IT usage is a natural accelerator. An increasing proportion of U.S. SMBs are in the second and third wave of IT adoption, where technology adoption enables increased connectivity internally as well as externally with partners, suppliers and customers. Technology investments are now being tied to top-of-mind business objectives and their ability to accelerate SMBs’ business strategies. “In this phase of their adoption cycle,” notes Chong, “IT is increasingly considered essential rather than just nice to have.”Access Markets International (AMI) Partners Inc.