SMB IT spending this year will be almost flat: Forrester

There’s good news and bad news for those depending on information technology spending this year among North American small and medium organizations, according to a survey of IT managers.

They’re an optimistic group, says the study released this month by Forrester Research. Sixty-two per cent of just over 1,000 companies questioned in November were positive about the business outlook for this year, compared to 46 per cent last year.

However, that won’t translate into a leap of spending on IT. Managers estimated the increase in spending this year will only be two per cent more than last year. Only one-third of the study group expected their IT budgets will increase this year.

But don’t cry in your beer, says report author Michael Speyer, who noted IT budgets went up significantly last year over 2005.

“So what resellers can expect are budget levels similar to last year, which were pretty healthy,” he said in an interview.

About 80 Canadian companies were included in the survey.

The study also showed that investment in new hardware and software is expected to consume only a quarter of IT spending this year.

The findings that interested Speyer most were the answers to a question on what initiatives were most likely to be an IT organization’s major focus. The highest number (20 per cent) said improving IT efficiency would be the biggest ranked on a scale of 1 to 4, with 4 being top. That number which jumped to 61 per cent if you combined those who listed it at either 3 or 4.

(Other choices were – in declining order — increasing measurements of IT’s impact on business performance, defining a long-term IT risk strategy, freeing or increasing IT performance or capacity, increasing the scope of IT’s centralized or shared services, marketing IT within the organization, and adopting management processes like scorecards.)

For Speyer, this suggested an opportunity for resellers to convince customers to apply technologies that allow squeezing more out of their IT investments.

Beyond merely selling faster hardware, that could mean taking a load off the organization through server and storage virtualization, outsourcing help desk services or configuring PCs.

Among other significant findings:

–Security and disaster recovery are among the top priorities. Forty-four per cent of respondents said upgrading disaster recovery capabilities will be their main goal, followed by upgrading their security environment. These represent no change from 2005. Replacing or upgrading existing applications came fourth;

–Security and Web applications will dominate software spending. Security will consume 9 per cent of IT spending. Almost one-third (32 per cent) said their software spending on Web apps will increase over 2006, but note also that 31 per cent said their software infrastructure spending will increase over last year, which Speyer believes shows the importance SMBs place on application integrations;

–Servers and storage will be the hardware priorities this year, with most companies saying their spending on these will either increase or be the same as last year. However, very close behind was spending on PCs and networking gear, suggesting that spending on all four won’t be much different from 2006;

–Consulting and IT systems integration will lead services spending. Twenty per cent of SMBs will increase spending in these areas, with respondents estimating that project-based IT work will consume 28 per cent of their services budget.

Managed network and telecom services will be the biggest chunk (37 per cent) of that. However, the combination of application management, desktop and server outsource services will take up 47 per cent of services spending.

Perhaps not unexpectedly, the survey also showed that the number of VARs a company deals with increased relative to its size.

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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