IT spending boom for small firms

The growth in spending on IT products and services by small and medium-sized companies is almost double that of large...

The growth in spending on IT products and services by small and medium-sized companies is almost double that of large enterprises, according to figures from the latest Computer Weekly/Kew Associates UK IT expenditure report.

Based on information from more than 60,000 UK IT budget holders, the report shows that while IT spending in the second quarter of 2003 for companies with over 500 employees grew by 3.5% compared with the same period last year, spending on IT by businesses with less than 500 people increased by 6.8%.

Chris Wicka, managing director at Kew Associates, said the statistics reflected a long-term trend. "IT is newer to the SME sector and they are not second or third generation users. They are less mature and catching up with their IT."

He said one reason why smaller companies were investing in IT now is to improve the supply chain and communication technologies that link them with the larger companies they supply.

Federation of Small Businesses spokesman David Bishop pointed to the continuation of tax breaks for SMEs investing in IT and increased business confidence since the end of the war in Iraq as short-term reasons why smaller companies were spending on IT.

Philip Dawson, programme director at analyst firm Meta Group, said the commoditisation of computer hardware made entrance costs more attractive to smaller companies.

However, he warned that SMEs had to understand the ongoing cost of IT systems.

"While up-front costs seem more affordable to SMEs, they must still contend with the costs of people, software, managing upgrades and service agreements. These are the same things large enterprises have to deal with but scaled down," Dawson said.

The report also shows that all companies plan to spend 10% more on IT services this year compared with last year.

Read more on IT for small and medium-sized enterprises (SME)

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