Where SMB means business

With projected IT spending of US$33 billion next year, it is no wonder that the region's small and midsize businesses are on the radar of major tech vendors.

The small and midsize business (SMB) segment in the Asia-Pacific region will continue to be a hot target for tech vendors in 2006, say industry analysts.

According to AMI-Partners, SMBs in seven countries in the Asia-Pacific region are projected to spend US$33.7 billion in 2006 on IT products and services. China's SMBs are expected to be the biggest spenders in the region, generating US$20.7 billion of the total region's projected IT revenues. Countries such as India and Japan were excluded from the comparison.

Outlook.06

What's hot
The regional SMB segment continues to be a red-hot target for tech vendors

Bottom line:
The key for SMBs to staying ahead of the technology curve is to take a good look at the current business conditions and what the competitors are doing, says Gartner.

Diana Ng, a research analyst with AMI-Partners' Singapore office, said there are 8.34 million SMBs in China, and they account for 99 percent of China's business universe.

Ng said PC spending is the top driver of IT spending in these Asian countries, with desktop PCs "the highest contributor".

The second top driver is Internet-related spending, Ng noted. For example, broadband penetration will continue to increase in 2006, hence opening up markets for service providers.

According to the research firm, Singapore's SMBs continue to be the most connected, with broadband penetration projected to increase from 54 percent in 2005 to 58.8 percent in 2006. Taiwan, a distant second in terms of penetration, is forecast to increase from 38.5 percent in 2005 to 43 percent in 2006. In third place is Hong Kong, with 41.6 percent of its SMBs being broadband users, as compared to 2005's 36.4 percent.

Registering the highest growth in broadband subscription is Indonesia, with 6.4 percent of SMBs expected to subscribe to broadband in 2006. This is a growth of almost 49 percent from 2005's 4.3 percent, Ng said.

Ng attributed the increase in broadband subscription among SMBs to several reasons such as the drop in subscription rates offered by the service providers, and the limitations of dial-up access. In terms of speed and the number of users, broadband is a more convenient choice, she noted.

Another driver behind broadband adoption is the strong push by governments in the region in promoting e-transactions, she added.

The increased spending by SMBs in the region will benefit other areas, Ng said. These include enhanced data security, data backup and disaster recovery, enhanced IT storage solutions, upgrade and standardize operating systems, and IT staff training and skills enhancement.

Country
Projected SMB IT spending in 2006
China
US$20.68 billion
Taiwan
US$4.23 billion
Indonesia
US$2.70 billion
Thailand
US$2.05 billion
Malaysia
US$1.58 billion
Singapore
US$1.41 billion

Hong Kong

US$1.04 billion
Total US$33.7 billion

Source: AMI-Partners

Broader issues
Brian Prentice, a research analyst with Gartner, believes that SMBs will be focusing on other issues in 2006.

"The broader issues that I see facing SMBs are derived from the constraints that they have and which larger organizations don't necessarily have. For example, SMBs lack capital expenditure and do not have as much money upfront to put into a technology," explained Prentice.

This lack of capital expenditure, said Prentice, also translates to a smaller IT budget, given that SMBs typically generate smaller revenues as compared to larger organizations.

In addition, SMBs tend to lack access to "trained and dedicated IT people", noted Prentice.

And despite the deluge of products from companies typically associate with enterprise solutions, Prentice warned SMBs to be cautious about the offerings. "While vendors come up with an SMB version of their current product, it could still be based on the same platform for enterprises, with certain features removed. The question is: how would vendors know which features are not important and can be removed?" he noted.

The key for SMBs to staying ahead of the technology curve, Prentice said, is to take a good look at the current business conditions and what the competitors are doing.

"The size of the organization does not make any difference to the adoption of IT--these are intelligent business questions that are based on business practices and need," said Prentice. "SMBs need to make intelligent and long-lasting decisions in order to make the right technology acquisition."

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