Small and medium-size businesses (SMBs) plan to increase their IT spending for 2004 by 6.6 percent over 2003, compared with a 1.7 percent increase among larger companies, according to new research from Forrester Research, Inc. (Nasdaq: FORR). Overall, SMBs are more optimistic about the future than their enterprise counterparts are, with 81 percent describing their current business climate as being at least moderately strong and 78 percent expecting more improvement by the end of the year.

For its inaugural assessment of the state of IT in the SMB market, Forrester surveyed more than 1,000 IT decision-makers at North American SMBs, which are defined as firms with fewer than 1,000 employees. Manufacturing was the most optimistic sector, with 86 percent of SMBs expecting their industry to perform at least slightly better three quarters from now. IT decision-makers at financial services SMBs were also confident; more than half described their business climate as strong or very strong, and 72 percent felt it is still improving.

All this optimism will translate into increased IT spending, primarily on hardware, security, and information management software. SMBs’ spending plans during the next 12 months include:

  • New security investments are likely for 75 percent of SMBs, with highly regulated industries like the finance sector showing the strongest demand. SMBs are far along in their deployments of personal/client firewalls, with more than half at least piloting this technology.
  • SMBs have a hearty appetite for hardware — 74 percent are planning to buy new servers, and 65 percent are planning to purchase new storage.
  • Wireless networking is a hot area for SMBs — 51 percent have at least a pilot underway, and 70 percent are looking to buy added Internet connectivity and bandwidth. And of those buying Internet connectivity and bandwidth, 85% will buy new networking hardware this year.
  • Strong hardware demands and IT growing pains are driving 46 percent of medium-size businesses to consider purchases of systems management software.
  • New PC rollouts are underway — 61 percent of the SMBs have upgraded to Windows XP somewhere in their company, and 95% percent are planning to invest in new PCs this year, expecting to replace an average of one in four of their PCs.
  • Challenges with structured and unstructured data are causing 33 percent of SMBs to buy business intelligence software this year and another 30 percent to purchase content management software.

All of this is good news for vendors, as SMBs plan to skip the middleman and deal more directly with the OEMs for these purchases. The big winners for 2004 include:

  • Dell: 79 percent of SMBs prefer to buy PCs from Dell, and it is also on the shortlist for SMBs’ server and storage purchases.
  • Microsoft: Microsoft dominates mindshare for systems management, content management, and business intelligence software.
  • Cisco: Cisco owns mindshare for the networking space with its flagship brand and Linksys small-business line.
  • Symantec: 55 percent of prospective buyers listed Symantec as their preferred vendor for security.

To learn more about Forrester’s Business Technographics® March 2004 North American SMB Benchmark Study, please read “The State Of IT In The SMB Market” and “Better Prospects Ahead For SMB Spending.” Both documents are available to WholeView 2 clients and can be found at