Nearly two-thirds of the UK's small and medium-sized enterprises (SMEs) will invest in their businesses again this year after most froze spending last year.
However, SMEs are now more likely than ever to outsource IT to service providers to avoid the large upfront costs of hardware and software.
The research carried out by ICM found that 64% of SMEs are planning to invest in their businesses. IT was the biggest area of investment for small businesses last year, said the report. But SMEs are keen to "pay as they go" for technology through subscription models with suppliers providing the infrastructure.
A total of 40 of the 100 SMEs interviewed said upfront cost of IT equipment was the biggest barrier to IT purchases and 23% were concerned about ongoing running costs.
Steve Holford of cloud and hosting service provider Rise, which commissioned the study, said, "Businesses are buying IT in different ways. Large upfront costs such as hardware and infrastructure are increasingly being met by service providers who offer applications and services on demand for predictable, manageable subscription fees."
Rise is not alone in recognising the pent up demand for outsourced IT in the SME sector. Indian IT giant Tata Consultancy Services (TCS) is running a trial SME cloud services in India. If successful, the services could become available in the UK.
Cloud and hosted services also make sense for suppliers targeting the SME sector. Speaking to Computer Weekly last month. TCS' UK head AS Lakshmi said SMEs have the same requirements as large companies but it is difficult to service them because they are very fragmented. This means the costs for each sale is proportionately higher than in the corporate space because there are more smaller deals from customers with diverse business models. But software packages delivered via the cloud computing can overcome the fragmentation by reducing the overheads for suppliers.