Tyler Smith, a partner at Troy, Mich.-based Niche Retail, is beginning to open his company's wallet for investments in new technology. Smith is one of the small business owners that large vendors such as Oracle and Microsoft are excited about, at a time when SMB spending is predicted to rise.
Smith said Niche Retail, which has fewer than 50 employees, is optimistic. The company recently purchased a dedicated server and is considering spending on other hardware and software upgrades.
"We started at the worst possible time right after the crash, and we've seen constant growth, and that opens us up for future IT investments," Smith said.
Overall, small and medium size businesses (SMBs) like Niche Retail have more of a positive outlook for 2004 than large firms do, according to a recent survey, "The state of IT in the SMB market," conducted by Cambridge, Mass.-based Forrester Research Inc. The survey was based on interviews with 1,002 technology decision makers at companies with fewer than 1,000 employees.
Forrester analyst Meredith Child said SMBs increased their planned IT spending for 2004 by 6.6% over the past year, compared with only a 1.7% increase among large companies, said.
"SMBs are more aggressive and also have a smaller base to work from and be able to grow," Child said. "Larger organizations can consolidate and share the resources they have, and they've been doing that while SMBs don't have that advantage."
Niche Retail, for example, uses NetLedger software, an online hosted ERP suite partly owned by Oracle Corp. It targets small and medium-sized businesses (with fewer than 500 users) like Niche Retail that don't need a back-office system that is as elaborate as those offered by Oracle or SAP. Smith is watching how Microsoft and Oracle respond to SMB needs.
"There's a huge Oracle presence behind NetSuite," Smith said. "My feeling has always been to watch Microsoft, to see what they're going to do to compete with this product, because I don't see them ignoring what Oracle is doing."
Like Niche Retail, the SMB firms that were surveyed said they plan to invest in new hardware, starting with new servers and storage, Child said. And as many as 74% of firms said they plan to buy new servers and 65% plan to purchase new storage during the next 12 months, Child said.
Oracle has been planning to take advantage of the server and storage trend. The company announced an agreement with Dell this month, designed to increase sales in the midmarket by bundling Dell servers with Oracle's Standard Edition One database software.
SMBs are also looking to catch up to large enterprises in content management and business intelligence (BI) adoption.
One-third of SMBs said they will buy BI software this year, and another 30% expect to buy content management software. Microsoft could gain from the trend, since it dominates market share among SMBs, according to the Forrester report.
The return on investment must be clear and immediate for SMBs, said Kevin Kline, president of the Professional Association for SQL Server (PASS) users group and director of technology for SQL Server Solutions at Quest Software. Kline said he's seeing SMB spending increase in infrastructure such as servers and blade technology.
"A lot of large businesses in the boom overbought on technology and that's less so the case for SMBs as they always tend to buy more when they need it," Kline said. "As the economy has perked up a bit and their needs have required more technology and spending, they're just pushing ahead and going for it."
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