"Spending on telecommunications will take the largest piece of the pie, while spending on IT computing – comprising PCs, servers, and printers – will contribute to more than 25 percent of the total ICT spend," says Ruth Garin, Singapore-based Research Analyst at AMI Partners. "SMBs comprise up to 99 percent of all businesses in the Philippines and are a significant contributor to technology spend."

SMB spending on computing is set to cross $800 million by the end of 2008, the bulk of it on desktops. "As the first priority, SMBs' computing investment will go to desktops," Garin says. "Small businesses will extend this investment by adding more notebooks to cater to growing mobile employees while medium businesses will spend more on servers."

Traditional telephony will continue to account for a large majority of the telecom spending and is expected to remain so in the next few years. The close association of reliability with traditional telephony is one of the key factors driving its continued growth. IP telephony, meanwhile, has also started to make inroads into the SMB market, with growth expected to be highest in the mid-market segment.

In applications, security and storage will see the fastest growth in the Philippines this year. "Both technologies are expected to register high annual double-digit growth, in excess of 20 percent,"Garin says. "The growing volume of email and use of digital media will be the top drivers for adopting or enhancing storage infrastructure. Security threats and the growing online population of the country will see growth in security software spending."

In addition, companies see business applications such as ERM and CRM as important to their businesses – whether or not they are currently using it. "SMBs may not have deployed such enterprise software but they recognize its strategic importance to their business," Ms. Garin says. "This is a crucial first step to their adoption of such applications."

Though SBs and MBs behave differently, both are on the same footing when it comes to competition. Both cited strong competition as the topmost challenge for this year. "SMBs recognize IT's role in maintaining a competitive edge and are prepared to build competencies around technology," Ms. Garin says. "The effective use of technology in product and services delivery is a key differentiator among a very competitive market."

Understanding how SMBs behave, their purchase cycle and who influences their purchase decision, channel preferences, and their top investment priorities would be key to nailing this market. The study reveals that there is a huge opportunity that vendors can tap on the Philippine SMB market.