HP Studies How Small Businesses Do IT

How do small businesses view the impact of technology? Where do they shop to acquire hardware and software? How do they finance those acquisitions? Hewlett Packard wanted to know, so it teamed up the Small Business Development Centers (ASBDC) to co-sponsor the “Small Business Technology Poll.” The survey was developed and supervised by COMsciences, an independent research firm. What follows is an exclusive first look at the results.

The study illustrates some very interesting findings on small- to medium-sized businesses’ buying strategies and general opinions about the current economy. HP is committed to developing a deep understanding of the challenges that SMBs continue to face, particularly in regard to IT spending.

Good, But Could Be Better
More than one-third (34 percent) of the small businesses that took part in the survey have been operating for more than 10 years. Another third are relatively new companies that have been operating for 3-5 years. The majority of participants in the pool — 78 percent — consist of small businesses with fewer than 10 employees.

The results demonstrate that SMBs are generally optimistic about the future, though not as buoyant as some organizations might purport. At the end 2003, 48 percent of small companies reported that business is at least somewhat better than last year. This includes 19 percent that reported substantially better business conditions.

Even so, the smallest businesses, those with 1-5 employees, did not fare as well as larger companies. One-third indicated 2003 sales were somewhat better than 2002, but 30 percent said comparable sales were flat and 12 percent said sales were down. The most positive economic outlook is reserved primarily to larger companies — those with more than 50 employees — 43 percent of which said business was considerably better. Only 17 percent of companies with 1-5 employees said the business climate has substantially improved.

Jack Torobin, COMsciences researcher, said he was most surprised by the number of very small companies that are not seeing any improvement in the economy.

“Most SMBs said that business was up slightly relative to last year, however it appears that the total business climate is not so good as we would believe it is,” Torobin said. “At least not as good as the government would make it out to be. It is the larger SMBs who are seeing most of the growth.”

Small, But Not Weak
According to the survey, small companies do not feel that larger competitors have a huge technological advantage. Twenty-four percent of small businesses believe that to survive in today’s economic conditions, they must be technologically on a par with, if not superior to, larger corporations.

Clearly, small businesses today feel information technology levels the playing field. To small businesses, advanced IT systems can provide a distinct edge over bigger competitors. This particular finding contradicts the age-old stereotype that small business are technologically shy, when in fact, small businesses are increasingly technologically sly.

Though many small businesses agree that up-to-date technology gives them an edge over larger rivals, current market conditions may make many reluctant to invest too heavily in office technologies in the near-term. Beyond some minor upgrades, 53 percent of small businesses reported they do not expect to make major investments in IT systems or software in 2004. Add to this figure approximately 27 percent that said they have no intention of investing in system upgrades and it’s clear — the majority of SMBs will not be spending much on IT systems this year. Equipment vendors like HP will have to fight to protect its share of the SMB market.

Familiar Territory
Those small businesses that will order new equipment this year are likely to rely on hardware and service suppliers with which they already have a working relationship. This is good news for HP, a worldwide leader in SMB space. Thirty-seven percent of those polled said they would stick with the vendors they know, rather than venture into unchartered business relations.

However, small businesses like to buy locally — 71 percent of companies with 50 or more employees depend on local suppliers. In contrast, smaller companies with 6-10 employees are far more likely to order direct from manufacturers. Nearly 45 percent of these businesses prefer online shopping to local hardware and software resellers.

In today’s economy, 51 percent of small businesses believe the trick to buying IT gear is to buy a system that can be expanded or scaled back to meet their changing needs. Many (33 percent) are also trying to get by with less people, so they feel quite strongly that up-to-date information technology is even more important than in the past. Torobin said the fact is that SMBs now see the need to be more flexible.

“They need to expand or contract rapidly and are not necessarily going to see steady growth,” Torobin said. “SMBs need to be able to adjust their business operations to meet the changing conditions.”

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