Business Spending Hit $59 billion in 2010: NPD Report

By Nathan Eddy  |  Print this article Print

PC business software sales grew 12 percent to $4.2 billion; networking routers and switches were also areas of increased investment.

Bouncing back to above pre-recession levels, sales of technology products to businesses through U.S. distributors, commercial technology resellers and office products dealers rose 12 percent to almost $59 billion in 2010, according to a report from NPD Group.

Last year’s rebound in business spending followed a 9 percent decline in 2009, according to NPD Group’s Distributor Track and Reseller Tracking Service, which includes sales of office products to business by contract office supply dealers in addition to IT hardware and software.

According to the study, PC business software sales grew 12 percent to $4.2 billion, which it labeled a "strong recovery" after a 6 percent decline in 2009. Momentum picked up in the fourth quarter as revenue jumped 17 percent from 2009. NPD Group said Microsoft’s Windows 7 and Office 2010 licensing agreements and database software were key drivers for business software spending.

Network storage products, primarily storage-area network and network-attached storage products, one of the few major business IT categories to experience growth both in 2009 and 2010, accounted for more than $1 billion in revenue last year. Networking routers and switches also posted gains; revenue in this sector grew 25 percent in 2010 to almost $7 billion.

"We saw strong growth throughout the first three quarters, but it slowed to about 9 percent in the fourth quarter due to the sales lift throughout the IT sector that was associated with the Q4 2009 Windows 7 launch," said Stephen Baker, vice president of industry analysts at NPD. "All this occurred in a relatively benign pricing environment, which was reflected in the strong earnings posted by many tech companies over the past couple of months."

An increased investment in infrastructure products from mostly small and midsize businesses helped boost total hardware spending 18 percent to more than $38 billion in 2010, and a represented a major rebound from a 10 percent decline in 2009.

The biggest hardware investments were made in the PC market. Revenue jumped nearly 33 percent to $6 billion, and unit sales increased 27 percent. The report noted that even coming off tough comps following the launch of Windows 7 in the fourth quarter of 2009, Q4 2010 PC sales increased by double digits—14 percent in units and 22 percent in dollars.

However, the report pointed to some challenges for business spending in 2010, specifically sales of commercial office supplies and printing consumables. While rebounding from 6 percent declines in 2009, sales remained soft, falling 2 percent in 2010, representing a decline of more than $1 billion in just two years. However, the end of 2010 brought improving trends as printing consumables and commercial office supplies in Q4 2010 were back to Q4 2008 levels.

"Business investments in infrastructure are an encouraging sign for the overall economy," said Baker. "Spending on IT products, especially, has traditionally been a way for businesses to invest in future company growth in an efficient and scalable manner. Spending on product segments, such as software and network products, indicates that small and medium business are putting the technology backbone in place that will enable them to deliver profitable growth as the economy improves."