The middle ground

The middle ground

SMB is undoubtedly the hottest segment of the market in terms of IT spending growth, and the industry as a whole is moving towards a more service-based model, but building profitable solutions that can be driven into the lower end of the market remains a huge challenge.

IDC research manager IT spending, Jean-Marc Annonier, claims there is a growing focus on services aimed at the mid-market.

"When you're saying there is a big push to deploying services in the SMB space I think it's more in the mid-market, because the cutting point where you start making money is about 100 employees," he said.

"Then you can have a multi-year contract, or at least a contract you can renew every year. You can actually dedicate full-time resources to these clients."

Annonier estimated we are probably about 3-4 years away from making small businesses more attractive as a services target, but that managed service providers should be looking to develop offerings for the space.

"Basically, if you can manage a big number of clients with only a handful of people, and you use technology a lot, you're a good way towards achieving service delivery to the SMB space," he said.

What the statistics show

0.3% The rate of predicted growth, or lack of it, for hardware sales in the SMB market between 2007 and 2012.

10.1% Software is expected to grow much faster in the same period. Services are expected to register compound annual growth of 4.4 per cent.

26% Small businesses (with a headcount of 1-99) account for 26 per cent of total business ICT spending. Medium-sized businesses account for 18 per cent.

37% IT services constitute 37 per cent of IT spending (not including telecommunications) in the midmarket. By 2010, IDC predicts services will replace hardware as the largest component of IT spending in this space.

86% In the small business space, 86 per cent of IT spending went into hardware; software and services account for just 7 per cent each.

99.8% The percentage of Australian businesses with less than 500 employees. These are all considered SMB under IDC classification.

11,400 The number of medium-sized businesses (100-499 employees) in Australia.

829,300 The estimated amount of small businesses operating across Australia (not including sole operators).

$1.4bn Spending on telecommunications in the small business space exceeds IT spending by $1.4 billion to reach more than $6.1 billion.

$7.4bn ICT spending in the mid-market hit $7.4 billion in 2007. In the next five years, software is predicted to have the biggest growth with a compound rate of 8.3 per cent.

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