Companies with less than 1,000 employees are weathering the economic downturn better than their larger counterparts, according to a study from AMI Partners.
According to the New York-based firm, IT and telecom spending by
small and mid-sized companies increased by 6.5% in 2007, constituting 2.1% of
the country’s GDP (gross domestic product). The rate of spending by small and
midsized companies was three times that of larger companies, the study found.
The reason, said analyst Melissa Chong, is because smaller
companies tend to be growing more aggressively, and that growth means they need
to buy new technology, no matter what the economic conditions.
During the past few years, IT adoption and spending, especially in
IT hardware, have risen dramatically among smaller companies. For example, PC
shipments rose by 25% during this time period, with server shipments growing
even more. While both IT and telecom spending are growing rapidly in this
sector, IT spending on hardware, software and services is growing faster than
telecom spending on hardware, software and services.
AMI Partner divides small and midsized companies into three
“waves” of maturity. Wave I includes adoption of PCs, high-speed Internet,
accounting and productivity software and basic security measures—in effect, the
basic IT infrastructure. During Wave II, the business adopts networks, servers,
firewalls/intrusion detection and SaaS (software as a service) functions to improve
internal collaboration. Wave III includes adoption of Intranet, wide area
networks, virtual private networks (VPN) and customer relationship management
(CRM) technology to improve on collaboration and external communication with
customers, partners and suppliers.
“What is key is as SMBs move between waves, so does their
dependence on IT,” Chong said. “The use
of IT moves from a ‘nice-to-have’ to a ‘must-have’ mentality as more company
functions and operations are assisted or automated by IT.”
In addition, the more sophisticated the IT use in Wave III, the
higher the IT spending per firm, which increases overall spending since most of
US small and mid-sized companies are in Waves II and III, she said.
And as companies move between waves, they face increasing
challenges by way of customer demands, product and service customization,
employee mobility and employee knowledge to service customers, and compliance,
she said. These challenges typically are met with more technology.
To meet that demand, vendors have developed midmarket-specific
products, fueling adoption. What’s more, they have created dedicated channel
programs, motivating channel partners to serve this market segment.
“The gist of it is we find that vendors’ SMB-specific strategies
are finally falling into place after years of conceptualizing and
trial-and-error, especially on the matter of reorganizing their internal SMB
focused team or group of employees,” Chong said. “These decisive factors are
coming together and further propping up the market.”
Although the SMB market is
not unaffected by the economy and IT spending will slow somewhat, it will
continue to outpace overall GDP growth. By 2012, AMI Partner estimates that IT
and telecom spending by this segment will be close to 2.5% of the U.S. GDP.
