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The recovery from the global recession of 2008–2009 continues to vary by region and
country, but overall SMB IT spending has rebounded to a significant degree. IDC
predicts a number of changes in the extent and nature of SMB IT engagement across
different categories as firms shift business and technology priorities in keeping with
the new competitive environment. Major SMB predictions are:
P.508.872.8200
Worldwide SMB IT spending will approach $542 billion in 2012. Spending will
grow by single digits in developed regions and by double digits in some
developing ones. Growth rates will not vary significantly between small and
midsize firms, however.
Global Headquarters: 5 Speen Street Framingham, MA 01701 USA
Cloud adoption will cross 50% in midsize firms in the United States by the end of
2012. While SMB cloud adoption will not be as high in other regions, adoption
growth rates will be higher.
SMB spending gains will cut across all technology categories, with the greatest
growth in spending on PCs/peripherals, software, and IT services.
Mobility and remote worker empowerment will expand globally among SMBs,
driven by smartphone adoption and growing interest in media tablets.
SMB interest in investing in core infrastructure improvement will grow, setting the
stage for growth in other product categories. Getting access to solutions that
support productivity gains will drive SMB technology investment, which will be the
most important purchase criterion, not low price.
More SMBs (and channel partners) will rethink how technology is acquired and
deployed, with important implications for industry participants.
SMB online promotion will reach new levels in 2012; the share of U.S. SMBs with
an online presence will top 60% for the first time.
SITUATION OVERVIEW
The worldwide SMB market in 2011 continued to build on the significant progress of
2010 in rebounding from the downturn in SMB IT spending of 2009. Growth levels
were greater than those anticipated by IDC at the start of 2011. In detail:
The major developed regions — North America, Western Europe, and Japan —
continued to account for the largest share of total SMB IT spending while
experiencing relatively modest growth. SMB IT spending in North America and
Western Europe grew 6.1% and 1.8%, respectively. Although SMBs in Japan
seemed to be on the road to recovery, with 2010 IT spending growth of 1.5%,
2011 saw a decline of 4.7% in IT spending because of a variety of factors,
including the disruption associated with the Fukushima earthquake and the rising
value of the yen, which raised the price of Japanese exports.
2011 IT spending growth in developing regions was varied, echoing the patterns
seen in 2010. SMB IT spending in CEMA grew by 5.6% in 2011 — lower than the
double-digit growth in 2010. (SMB spending growth of 13.9% in Russia in 2011
was especially notable.) Latin American SMBs posted double-digit IT spending
growth in 2011, 12.4%; BRIC member Brazil posted a slightly lower growth rate
of 11.2% although Brazil still accounts for about 44% of regional spending. SMB
IT spending in 2011 in Asia/Pacific (excluding Japan) also grew by double digits,
10.7%, led by a 14.6% increase in China.
FUTURE OUTLOOK
The sections that follow detail IDC's top 10 SMB predictions for 2012.
The continuing recovery of the worldwide economy will be reflected by growing SMB
IT spending in 2012. The $34 billion increase will represent a 6.7% increase, up from
the 5.0% increase of 2011. IDC predicts that SMB IT investments will again exceed a
half trillion dollars, underscoring the growing importance of the SMB segment in the
technology marketplace.
In keeping with past patterns, the developed regions of North America, Western
Europe, and Japan will continue to account for the largest share of worldwide SMB
technology spending. North American SMB IT spending will grow by 6.1%, the same
as the 2011 growth rate. SMB IT sales in Western Europe will grow less rapidly by
4.3% in 2012.
The recession that officially arrived in the fourth quarter of 2008 was actually felt by
small businesses in the middle of 2007 as higher fuel prices and raw material costs
squeezed profits of smaller firms, which, because of competitive pressures, could not
always raise prices. As a result, small businesses cut back on IT spending before
midsize firms did, a reversal of the traditional pattern of small firms delaying and
sometimes avoiding IT spending declines that were seen among midsize firms.
The reversal of this uncharacteristic trend will continue in 2012. In 2011, both small
and midsize firms increased their IT spending by 6.0%. IDC predicts that the same
pattern will continue in 2012, with both small and midsize firms increasing their IT
spending at the same greater rate of 6.7%. One contrarian pattern that IDC
anticipates is that upper midmarket firms (those with 500–999 employees) will
increase their IT spending at a slightly higher rate than lower midmarket firms (those
with 100–499 employees) — 6.9% versus 6.6%.
IDC predicts that 2012 will be a watershed year for cloud computing adoption by
midsize firms in the United States — half of midsize firms will be using some cloud
resources by the end of the year. While this is one of IDC's "stretch" predictions, it is
based on survey work that shows that over one-third of midsize firms were using
cloud resources in the summer of 2011 and almost another third (31.5%) planned to
add cloud capabilities in the next 12 months. SMBs don't always fulfill technology
acquisition plans, but cloud computing has been an exception to overstated
expectations — both small and midsize firms have lived up to their plans for the
cloud, as indicated in survey work over the past three years. With that in mind, the
50% usage threshold is well within reach even if not all citing plans to add cloud
capabilities actually do so.
The nature of technology deployment in SMBs in all regions will continue to shift in
2012 as remote worker empowerment and related productivity gains are made
possible by the increasing adoption of smartphones worldwide. Dramatic increases in
the use of media tablets will be part of the same process, as will the continuing
encouragement and support of employee-owned technology.
SMBs in some countries may be overly enthusiastic in their support for employee-
owned technology, given the potential security risks in allowing company network
resources to be accessed on personal devices. Firms may not understand the danger
associated with too liberal a policy (or no policy) in allowing access to corporate
network resources. IDC believes there will be opportunities in 2012 for firms that can
help SMBs improve remote access to customer-owned technology even as they keep
company resources secure. SMBs will need to take appropriate precautions, and
vendors have an opportunity to help ensure secure access to remote resources.
A good part of this growth will come from upgrades, replacements, and expansion.
SMBs across company size and geographies all cite upgrading PCs as an important
IT spending priority (much as they have over the past two years), and IDC expects
that 2012 will see a substantial share of firms acting on these interests. In addition to
investing a larger share of spending on notebook PCs rather than desktops, SMBs
will be moving to more tablets and smartphones, as discussed in prediction number 6.
IDC expects both device types will continue to represent supplements rather than
replacements for traditional desktop and notebook PCs, but there will be a minority
that will rely exclusively on the new form factors, especially when away from the
office. IDC will continue to monitor SMB use patterns and expects the growth of the
"third platform" of mobile operating environments to move to the center of SMB
application access before the end of the decade, if not sooner.
One factor that will slow the spending growth for systems and storage is the
expanding use of online resources, as discussed in prediction number 4. The largest
share of SMB cloud spending will continue to be in applications — software-as-a-
service (SaaS) like CRM from salesforce.com. But there will be increasing traction in
2012 and beyond for infrastructure as a service, especially in cloud storage. In
addition, the growth of server virtualization, especially when combined with storage
virtualization, whether on-premise or hosted, will expand resource access while
reducing associated costs for many SMBs. Virtualization will mean that SMBs will be
operating physical servers but spending more on equipment acquisition as they
upgrade to more advanced capabilities.
One of the bolder IDC predictions regarding SMBs in 2012 is a shift in attitude
regarding the motives for technology investment. Over the past four years, there was
a major swing toward very tactical IT spending. The goal was to reduce operating
costs or improve efficiency by putting new resources in place for near-term impact. A
60-day return on IT investment was what many were looking for, and delivering the
lowest price for a given technology was the surest way for a vendor to win business.
While many of our predictions focus on forces that will move SMBs in new areas in
general, our SMB technology channel prediction points to increasing diversity rather
than movement in a single direction. New players, new approaches, and new
alternatives will expand SMB options when it comes to acquiring and implementing
new technology. While this will likely push some SMBs and technology suppliers
outside the comfort zone of traditional approaches, it will generally speed technology
adoption and ease the acquisition process.
The blurring of roles among channel partners will mean more challenge and
disruption for many in 2012 and also new revenue sources and profit-generating
opportunities. It also means that traditional revenue streams for service providers will
be more at risk than ever (think telcos, some managed services providers, and the
many VARs that specialize in high-margin/high-complexity technology engagements).
Three specific channel developments will gain greater traction in 2012, although each
will appeal to SMB prospects in different ways:
Next-generation VARs for advanced resources. VARs have long been a key
source for advanced technology resources for SMBs — especially midsize firms
with a strong vertical focus and the budgets to implement comprehensive
solutions. But the next generation of technology solutions will not require the
same level of support and handholding and will not deliver the same kinds of
profits per sale. Continuing efforts of software providers to reduce the price and
complexity of horizontal solutions will greatly expand the number of potential
customers. This in turn will open new opportunities for those VARs willing to
recast (or at least adjust) their business models and expand downmarket to
advanced small businesses that have needs similar to traditional midsize
customers, if on a more modest scale. Leveraging the selling tools that more
solutions providers are making available (automatic demonstration, configuration,
and provisioning) will let VARs expand overall revenue and profits even as both
deal sizes and margin percentages decline. Some VARs will face an identity
crisis, but for many, the changing environment will prompt a healthy shift in
business practices.
Given the "new rules" that will be part of the channel partner world in 2012, IDC
expects at least one major failure in 2012, especially in free-for-all developing
markets. Finding the balance between maintaining current revenue streams and
serving new customers in new ways will be a challenge for all channel players and an
insurmountable task for some. Partner consolidation and acquisition will be seen
among both traditional and online partners even as new players join the market.
While the share of small businesses with their own Web sites has continued to
increase modestly in recent years, it still is far from universal even where broadband
access is widespread. Where broadband is used by the minority of small businesses
(typically in developing Asia/Pacific, CEMA, and Latin American countries), the share
of total firms with their own Web sites is below 25%.
IDC has noted the frustration of registrars with the slow pace of Web site adoption by
smaller firms. After dramatic growth 15 years ago, when the number of small
businesses with their own Web sites was doubling annually, the share of home-page-
using small businesses in the United State has remained at just over 50%, with
relatively little difference by company size. Three factors will be increasing adoption
though, and IDC predicts that Web site use of U.S. SMBs will reach 60% by the end
of 2012:
Social media will serve as springboard to true home pages. While many
small businesses use both social media and their own Web sites, about one-third
of the smallest firms (<5 employees) that use social media like Facebook for
Business do not have their own dedicated Web site. As company size increases,
however, engagement with both social media and conventional Web sites
increases in a more supplemental approach. IDC expects this pattern will
continue and gradually extend into the smallest firms once introduced to the
benefits of an Internet presence through social media.
New players will bring even lower prices and ease of implementation to
Web site creation. Web page creation has typically required a choice between a
customized Web site (created by an expensive Web site designer) and a
template-based site design (which, despite standardized components, still
required time and effort on the part of the small business owner). The next
generation of design tools is making the development task easier, with a number
of major vendors like Go Daddy, HP, Intuit, Microsoft, Web.com, and Yahoo!,
along with legions of smaller players, all providing comprehensive resources.
Parallels, which supplies advanced capabilities to Web hosters, has announced
plans to support Web site development, which means the capability could be
bundled with other online services offered by hosters. IDC believes this will make
Web site deployment a standard part of online resources that SMBs, especially
small businesses, will look to benefit from.
ESSENTIAL GUIDANCE
The rising tide of SMB IT spending growth and the changing technology currents
below the surface will be driven by changing business priorities and concerns.
Looking forward to the next 12–18 months and beyond, there are three key areas
where technology providers should be especially attentive:
Refresh the SMB portfolio with an eye on both tactical and strategic needs
of customers: While global economies are definitely on the mend, there are still
vulnerabilities that will give SMBs pause (sovereign debt challenges in Greece
with potential problems elsewhere in Southern Europe and lower levels of annual
economic growth in China [potentially under 8%]). This means that building a
strong business case with near-term economic justification will continue to be
essential in appealing to SMB companies. But the classic ROI or TCO sell will
not be enough. New technology will also have to fit into a company's long-term
plans for the future. Few SMBs have a comprehensive five-year plan for
technology deployment, but all have a sense of where they would like to be in the
future. Technology compatible with a company's strategic direction
(Centralization versus decentralization? Cloud versus on-premise?) is more likely
to be embraced. This is especially true when technology supports existing
environments and processes even as it delivers improved productivity.
LEARN MORE
Related Research
Buyer Conversations: "Services Are Hot, Hardware Margins Are Not!" — Driving
a Services Mindset in Channels (IDC #AP8247521T, January 2012)
Social, Mobile, and Virtual in the SMB IT Market — The Global Productivity
Quest of 2011 and Beyond (IDC #227424, March 2011)
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