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SMB IT Spending Forecast: Software, Services Set to Leapfrog Hardware

During the client-server age, SMB owners certainly couldn't match enterprises on the IT front. Fast forward to present day cloud platforms and subscription services, and SMB owners can finally tap into the full power of IT.

With that reality in mind, SMB IT spending is expected to reach $684 billion in 2021, up from $602 billion in 2018, according to IDC's Worldwide Semiannual Small and Medium Business Spending Guide. That's a 4.9 percent compound annual growth rate (CAGR) over the forecast period, IDC says.

SMB IT Spending: How MSPs Must Evolve

To capture those SMB IT dollars, however, many MSPs will need to make some shifts in their current focus and business practices.

Currently, hardware is the largest spending category -- but it is expected to be replaced by spending on software in the next couple years, and then IT services over the next 5 years. This shift is understandable, as business owners, employees and consumers embrace cloud services.

Ray Boggs, vice president, SMB Research at IDC, put it this way in a prepared statement:

"SMBs around the world are increasingly interested in investing in resources to improve employee productivity and improve their competitive positions. While SMBs, especially smaller ones, have immediate tactical needs to sharpen performance, they are also looking to coordinate resources in a meaningful way. For many, this will be an important step in their Digital Transformation."

ERP, CRM and Content Management Take Hold

Some familiar terms from enterprise computing -- particularly enterprise resource management (ERM), content applications, and customer relationship management (CRM) -- are going mainstream as SMB cloud services. Collaborative applications will also see significant growth over the next several years, as digital project management will become the standard for many businesses.

As a result, MSPs must become the middleman between their clients and the software and cloud services customers will require to run their business. Reselling cloud software and services will be a major portion of MSPs revenue in the very near future, according to this research, and MSPs will need to figure out how to take advantage of this spending by SMBs.

The SMB IT spending wave will grow at varying rates worldwide. For instance:

  • The United States will remain the largest country for SMB IT spending, checking in at $186 billion.
  • China ($56 billion), Germany ($37 billion), the UK ($36 billion) and Japan ($35 billion) also figure strongly in the mix.
  • Though working from smaller SMB IT spending bases, South American countries like Peru and Chile are both on target for compound annual growth rates (CAGR) over 11%.

The IDC guide also covers such key topics as:

  1. What are the key SMB IT market hotspots around the world?
  2. How are overall SMB IT budgets allocated among different technology markets across hardware, software, and services categories?
  3. How quickly is SMB spending on enterprise software growing? Are major solutions like CRM and ERP penetrating emerging markets?
  4. How strong will near-term spending be on new capabilities like cognitive systems?
  5. How will SMB IT spending growth in various countries vary by company size category?
  6. How do SMBs in different company size categories allocate their IT spending across various technologies? How will this be changing over time?

The research guide was designed to help IT decision makers understand the scope and direction of SMB spending, but can definitely benefit MSPs by understanding where SMB owners are headed with their IT decisions over the next few years.