IT sales rebound but SMBs still under spending chill

Technology sales have rebounded from their depressed state last year but small and medium sized businesses (SMBs) have become adopted a new miserly attitude towards IT spending, says an IT analyst firm.

Worldwide IT spending by SMBs grew by 5.3 per cent to $823 billion in 2010 and is expected to reach $1 trillion by 2014 but Gartner Inc., perceives some “post recession changes in buying behaviour” among businesses.

“We have spoken with medium sized businesses that have declined the use of external service providers and downgrade their service contracts in order to save money during the recession,” said Jim Browning, vice president and research director, SMB research, Gartner.

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Browning was among the panelists who took part in a recent Webcast on SMB IT infrastructure spending sponsored by hardware manufacturer Dell Inc. The discussion, titled Dell helps reinvigorate aging SMB IT infrastructures, also included Dell partners who serve the SMB market.

While IT resources have become more constrained than ever, Browning said, the scope of IT projects has become “narrow and tactical.”

He said this “new economic discipline” for evaluation IT solutions stipulates that IT purchases should have a direct relations to cost savings; reduce total cost of ownership and have a shorter return of investment. “Moving forward short term return of investment is going to be critical as businesses seek to reduce cost and concentrate on shorter ROI.”

“Midsized businesses are also more prepared to replace incumbent vendors that they have been with for 10 years or more and work with smaller vendors,” Browning said.

For instance, he explained, medium sized businesses traditionally seek out preferred vendors when buying disk storage. “However, over the last two years companies have been seeking out smaller iSCSI (Internet small computer system interface) vendors.”

Cost savings offered by virtualization strategies was a bright spot in the market, said Browning.

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IT constraints are also putting many businesses under considerable risk, according to Erik Dither, vice president and general manager, SMB, Dell.

But David Cantu, co-founder and vice president of Redapt Systems, a Redmond Wash.-based IT product and support company said many SMBs like them cannot afford to purchase top-of-the-line systems.

“A lot of our SMB clients face the challenges we do. They are looking at aged infrastructures that are two or three years old and they are facing contract renewals but don’t know what to do.” Many of these companies for instance cannot afford expensive redundant servers, he said.

Cantu said his company finds Dell products ideal for small and medium businesses because they are inexpensive and easy to install and manage. “In case of the new lower cost Dell storage platforms, data is always backed up and in case of a power failure it just keeps running.”

John Jordan, president of BusinessSuites, an Austin, Tex-based virtual office space provider, said cost cutting comes in various forms for SMB operators.

“Cutting cost is also about uptime, connectivity and productivity… you see it in the coffee shops where business people using WiFi services crowd out regular customer,” he said.

Brian Payne, director of server group for Dell, said his company’s recent releases take into account SMB concerns over running systems that are easy to install, configure and manage.

For instance, the new PowerEdge R415 and R515 rack servers can help cut pre-operating system deployment by up to 53 per cent compared to similar systems.

The systems offer full power supply redundancy and “hot swap” hard drives for business data protection.

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Another product, the PowerVault NX2000 NAS (network attached storage) tower “can help businesses move from saving data in individual PCs and access simple files on a protected centralized device,” said Payne.

Configuration of the NX200 is simple and the product’s automated wizard can get the system running in as little as 15 minute, he said. The NAS also features 2GB of RAM compared to similar systems that offer only 512MB.

“This approach is ideal for service businesses like ours that operate in data-rich environments such as real estate, insurance, accounting, law and medical office,” said Jordan of BusinessSuites.

“A centralized storage approach saves businesses time and money and makes storage easier to manage,” he said.

Nestor Arellano is a Senior Writer at Follow him on Twitter, read his blog, and join the IT Business Facebook Page.

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