U.S. SMB IT & Telecom Spending Growing 3X Faster Than GDP

NEW YORK--(BUSINESS WIRE)--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.

“But given the market accelerators and healthy variance between SMB IT/telecom spending growth and GDP growth”

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.”

The past 3 to 4 years have been significant in SMB IT adoption and spending, especially IT hardware. During this period, PC shipments have risen by 25%, and server shipments have grown even more. SMBs have been acquiring the hardware building blocks and are looking to acquire the applications that sit on top of the hardware, as well as services to manage and make the most of their investments. Of course all IT segments — hardware, software and services — are still growing. “But the latter two,” said Chong, “made up of software, security, storage and services investments are growing fastest and will continue to do so until the end of the current forecast period, or 2012, when we expect SMB IT and telecom spending to be close to 2.5% of GDP.”

About the Study

AMI’s 2007 U.S. Small Business Market Overview and Comprehensive Market Opportunity Assessment and 2007 U.S. Medium Business Market Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI’s annual surveys of SMBs across the U.S., the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail [e-mail], or visit us at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a strong focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and “go-to-market” solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 25 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.