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SMBs will lead PC sales recovery

IDC Canada says a capital acquisition tax credit will help fuel strong SMB growth

When PC shipments begin to recover it will be the small and medium-sized business (SMB) segment that will lead the way, says an IDC Canada analyst, thanks in large part to a federal government tax credit that makes IT equipment purchases much more attractive.

While recent PC shipment numbers have been bleak, IDC Canada is forecasting a recovery beginning in the fourth quarter of 2009 and accelerating in 2010. And it will be largely driven by strength in the SMB segment said Tim Brunt, senior analyst, personal computing with IDC Canada.

The launch of Windows 7, Microsoft’s next-generation operating system, is expected to be a catalyst for improved PC shipments. But particularly in the SMB, Brunt said a federal government tax credit launched in January’s budget will be a major catalyst.

The tax provisions that will allow Canadian businesses to fully expense their investment in computer hardware and software in just one year, an acceleration of the usual write-down of 50 per cent per year. The 100 per cent Capital Cost Allowance (CCA) depreciation rate is a temporary acceleration of the usual write-down rate, and will apply to all eligible hardware and software acquired after Jan. 27, 2009 and before Feb. 1, 2011 for use in a business carried on in Canada or for the purpose of earning income from Canadian property.

“Where you’ll see strength is small businesses owned by an entrepreneur that will take advantage of this government-sponsored CCRA program to write-off 100 per cent of the value in one tax year,” said Brunt.

With light appearing at the end of the economic tunnel, Brunt expects the credit will spur many entrepreneurs to pull the trigger and buy new PCs.

And many may look to do it before the end of the year, to be able to claim the credit in the current tax year.

There’s real opportunity for the channel to make gains in the SMB by aggressively marketing around the tax credit program, said Brunt.

“Channel partners should make their customers aware of the program,” said Brunt. “If they can reach out to their customers with the program details it should pay dividends.”

When the program was launched earlier this year, former Synnex Canada CEO Jim Estilltold CDN that the tax credit, which essentially reduces the cost of PC ownership by 35 to 40 per cent, will be a real boon to resellers.

“A reseller just needs to find a profitable business and help them see how it makes good sense to upgrade their technology,” said Estill. “If I was a VAR, the story I’d sell is that it’s a way to save now, and use technology to make your business more competitive.”

Estill said the limited time factor of the program will be another lever to help resellers convince customers to pull the trigger on deals.