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SMBs beginning to view IT as strategic to their business: IDC

IDC Canada reports on shifting patterns of SMB spending on IT, and the outlook for the financial services sector

In a recent Webcast examining IT spending by different customer segments and looking ahead to 2010, IDC Canada reported shifting patterns in IT buying behaviour by SMBs could change how channel partners market to and service this key segment.

While IT buying patterns aren’t changing for all SMBs, there is significant shift underway said Paul Edwards, director of SMB and channels research for IDC Canada. Traditionally, hardware has dominated the SMB spend. Last year, 63 per cent of SMB IT spending was on hardware, compared to 21 per cent on services and 16 per cent on software. Conversely, in the enterprise space, services dominated at 61 per cent of the IT spend, compared to 21 per cent on software and just 18 per cent on hardware.

The differences can be attributed to both the increased complexity of enterprise environments as well as the fact enterprises tend to view IT as more strategic to business operations. Most SMBs, said Edwards, haven’t really looked at how IT can improve their business.

“But there’s a shift in SMB toward understanding technology’s potential business value, and this will have an impact in IT spending and buying behaviours,” said Edwards. “Not every business is interested though, some are still happy just to buy a PC or a smartphone.”

However, IDC Canada’s 2010 forecast data does show a shift in SMB buying towards services and software, with splits that more closely resemble the enterprise breakdowns. While Edwards cautions the overall pie won’t grow much but just be redirected away from hardware, and some SMBs aren’t spending much at all, the shift by those that are spending does have consequences for the solution providers that the SMB segment heavily relies on.

“Many are viewing their next solution engagement as being more strategic to their business, to meet business needs rather than to meet infrastructure needs,” said Edwards. “Many are taking on attitudes and actions towards IT we traditionally see from larger companies.”

For 2010, those SMBs that will be spending are focusing on software, with customer service, project management and sales automation leading the priority list. Some 21 per cent of SMBs are also looking at software as a service (SaaS), a sign, Edwards said, that SMBs are beginning to see the value of addressing business needs with technology, and without incurring capital costs.

“If we consider channel partners as the prime delivery model for SMB, it’s important their expectation is for their software and services sales to grow faster than hardware, and for services to grow faster than other services,” said Edwards.

Tumultuous times in Financial Services

In the financial services segment, there are mixed signals from the banks, insurance providers and capital market companies when it comes to a potential recovery. There are some encouraging signs but Rob Burbach, senior analyst, financial institutions and buyer behaviour for IDC Canada, said while stabilization may be at hand a proper recovery still seams some time off.

“In 2010 we’ll see a little increase in spending, but not much. The rebound is likely some way in the future,” said Burbach.

The sector was certainly hard-hit in 2009. IDC Canada data shows at least 40 per cent of companies had their IT budgets impacted, with capital markets taking the greatest hit on IT spending. Looking ahead to 2010, banking looks to take the hardest hit. In the banking segment, 47 per cent are expecting budget freezes and 18 per cent are expecting budget cuts. Numbers were similar across the other segments.

“We can see the recession did indeed have a big impact on IT budgets. 2010 will be a story of continuing restraint, with most expecting frozen budgets,” said Burbach.

Those companies that are spending in this segment will be focusing on improving the customer experience, which was a common priority across all segments. For IT, that means investments in customer relationship management (CRM) and business intelligence (BI) solutions.

“In times of recession, a focus on customers is not surprising because the focus is on holding onto your customers and poaching the customers of others,” said Burbach.

Another common priority is improving efficiency, which means improving business processes, IT administration and front office systems. As well, risk management is a priority, which means investments around BI, improved network infrastructure to gather data, and master and enterprise data management tools to manage the data.

The Public Sector

For a report on IDC Canada’s outlook for public sector IT spending and priorities, watch for Tuesday’s edition of CDN Government Reseller.