Channel Watch

No Quick Bounceback in SMB Spending

If you're finding that technology sales out there in small to midsize business (SMB) land are tough to come by, you're not alone.

• By Scott Bekker
• May 01, 2010

If you're finding that technology sales out there in small to midsize business (SMB) land are tough to come by, you're not alone. It turns out that, once again, one of the rules we thought we knew about recessions is being rewritten in this loitering monster of a downturn.

A recent report by market researcher IDC found that the recession's effect on SMBs was nastier than anticipated.

"Moving forward, small businesses will not follow the past pattern and return to pre-recession spending levels more quickly than midsize firms. Instead, SMBs of all sizes will remain cautious with their IT spending over the next several years," warned Ray Boggs, IDC's vice president for Small/Medium Business and Home Office, in a statement accompanying the report.

IDC now predicts compound annual growth in worldwide SMB spending will be 5.5 percent during the 2010-2014 forecast period -- considerably lower than previous forecasts. In a refrain that's been common among many sectors, IDC noted that spending on SMB technology won't reach 2008 levels until 2011. Worldwide SMB IT spending is expected to hit about $630 billion in 2014, according to the latest forecast.

I asked Boggs why SMBs aren't leading us out of this recession the way they dragged us out of previous ones. His customer, channel and vendor surveys and interviews turned up a few sadly interesting factors.

One involves the lead-up to the recession. "A lot of the reserves that smaller firms draw on in hard times had already been depleted. In 2007 and 2006, costs for transportation and raw materials like metal and wood were growing. Customers said, 'I'm getting murdered,' and they drew down their reserves," Boggs explained.

Another mitigating factor that leads to early SMB recovery under more normal circumstances is small business starts. Employees get laid off, turn around and try to launch their dream companies. "That didn't happen either," Boggs said. "Typically you would mortgage your house, draw on home equity or turn to your rich Uncle Harry. Uncle Harry wasn't feeling very rich."

One other thing Boggs and the IDC team turned up in their surveys -- the SMB customers they talked to aren't very keen on cloud services. Boggs assumed SMBs would like the absence of up-front costs and the low monthly price of cloud offerings. He found that "they weren't so excited about it."

Still, some growth is called for, and IDC expects the strongest pickup to come from spending on PCs and peripherals, followed closely by packaged software outlays.

So the takeaway, if you're a Microsoft Small Business Specialist, is that in the short run, it may be better to be conversant with the benefits of Windows 7 and Office 2010 than the selling points of the Microsoft Business Productivity Online Suite.

Are you seeing signs of life in the SMB market? Send me an e-mail and let me know at [email protected].