Small Business IT Budgets Drop, but Some Spending Remains

Small business and midmarket business are decreasing their operating IT budgets by 4 percent in 2009 and their IT capital budgets by 2 percent to 3 percent in 2009, even as they strive for the most part to keep compensation and headcount about the same.

That’s according to a new report from Forrester Research which surveyed businesses during Q2 of this year.

The survey found that top priorities are improving IT efficiency and streamlining business processes. Fifteen percent say that this is a critical priority while 45 percent of SMBs say they are working on initiatives around this. Forrester also notes that more SMBs are now tracking their energy costs and looking to cut them.

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Top goals within IT organizations are improving end-user work force productivity, managing customer relationships, and acquiring and retaining customers.

As many other surveys before it have found, the new Forrester research shows that hardware spending is facing more cuts than software spending. Software spending is being led by security technologies – 25 percent of SMBs say they plan to increase spending here while 29 percent say they plan to decrease it. And hardware spending is being led by server and networking equipment, but still more SMBs plan to cut spending on these technologies than do SMBs planning to increase it.

Forrester says spending on IT services and outsourcing was a mixed bag. Consulting and systems integration project work at 21 percent and network and telecommunications managed services at 20 percent make up the biggest pieces of the IT services budget, according to the Forrester survey.

“SMBs will spend in order to save: Reducing costs and improving performance are top drivers for outsourcing,” Forrester states in its report. “While reducing consulting and systems integration spending tops the list of priorities – with one-third of SMBs considering it to be a critical or high priority – demand for these services for business process improvements is not too far down the list, with 26 percent of SMBs saying that it is a critical or high priority.”

As for staff headcount and compensation, more than half of SMB IT departments are planning to keep headcounts steady in 2009, but 29 percent expect cuts with 13 percent planning to reduce staff by 5 percent or more. About half of the companies are planning no changes in compensation in 2009 and 31 percent are planning decreases.