Small Business Recovery Not Complete Until 2011, Report Warns

A report from research firm IDC predicts small business spending on IT will not return to 2008 levels until 2011. IDC predicts worldwide SMB spending on information technology (IT) will increase by 5.5 percent over the 2010-2014 period, significantly lower than previously forecast.

While the impact of the global recession was no surprise, the extent to which small and midsize businesses were adversely affected was greater than anticipated, according to a report by research firm IDC.

As a result, IDC forecasts worldwide SMB spending on information technology will increase by 5.5 percent over the 2010-2014 period, considerably lower than previously forecast. Key findings from IDC's SMB forecast include findings that worldwide SMB IT spending will grow to nearly $629.3 billion in 2014, and despite the $17.4 billion spending increase expected in 2010, SMB IT spending levels will not return to 2008 levels until 2011. While SMB spending declines affected all categories of hardware, software and services, the spending recovery will vary by technology type. IDC's report said it expects SMB spending on PCs and peripherals to experience the strongest growth, followed closely by packaged software outlays, while systems and storage spending will be the slowest growing.

"The downturn had a devastating impact on SMBs worldwide," said Ray Boggs, vice president of small and medium business and home office research at IDC. "Moving forward, small businesses will not follow the past pattern and return to prerecession's spending levels more quickly than midsize firms. Instead, SMBs of all sizes will remain cautious with their IT spending over the next several years."

The report also predicted SMB spending growth will be strongest in Central and Eastern Europe, the Middle East and Africa, although spending will not recover to prerecession levels until 2011. The developing markets of Asia/Pacific and Latin America will also experience growth of more than seven percent throughout the forecast period, while SMB spending growth in developed regions will be roughly three to four percent. The firm noted North America, Western Europe and Japan collectively represent about 70 percent of worldwide IT spending by SMBs.

"The diversity of the SMB market will continue to be one of its hallmarks," said Boggs. "Given that the developed regions account for the largest share of SMB spending, and the developing regions represent the greatest opportunity for market growth, the global market really becomes a 'tale of two regions.' To succeed, technology providers need to develop separate strategies that address the distinct needs of companies in each of these settings."

The IDC study, "Worldwide Small and Medium-Sized Business 2010-2014 Forecast: Recovery and Change in SMB IT Spending by Category and Region," forecasts spending by midmarket companies across major geographic regions. Total IT spending is presented for 2010-2014, along with the baseline year of 2009. Detail on spending totals is provided for key hardware, software, and services technology areas: PCs and peripherals, systems and storage, networking equipment, packaged software, and IT services. The full 25-page report is available for $4,500.

"Technology will be playing an increasingly important role in keeping SMBs competitive on a global basis," said Boggs. "While business expansion, especially in developed regions, will not always be associated with new hiring, increasing investment in technology will allow firms to grow revenue without necessarily growing headcount. Technology spending will continue to vary by company size, geography and IT category, with PCs and servers setting the stage for advanced solutions across regions."