SMBs in China to spend $42B on ICT in 2008

SINGAPORE: Small and medium businesses (SMBs, or companies with up to 999 employees) in China are set to spend $42 billion on ICT this year. This is up 12 percent over 2007, due to a boom in the overall economy and a rise in the number of SBs (small businesses, or companies with up to 99 staff).

This comes from the latest study by New York-based Access Markets International (AMI) Partners, Inc.

“The bulk of the spending in 2008 will come from telecom services, computing and Internet technologies,” says Samuel Chen, Singapore-based Research Data Analyst at AMI-Partners. “Also experiencing double-digit growth will be areas like data security, storage and networking spend. About 46 percent of security spending (or about $289 million) would come from security software solutions.”

Beyond just an increase in spending, the study also shows that the growing Chinese economy has resulted in the ICT space being strewn with a plethora of both foreign and local brands. Many of the top brands in various technology arenas are local brands; this attests to the competitive strength of the local IT vendors.

SMBs tend to be more prudent when it comes to their IT budgets. Naturally many tend to be look for cost-effective ICT solutions. It is thus unsurprising to see that many SMBs in China have turned to using relatively well equipped yet lower priced local brands. To a much lesser degree, some early adopters have also in fact turned to using software-as-a-services (SaaS) business applications as a more cost-effective alternative for their operation needs. Although SaaS adoption amongst SMBs is still very much in its infancy, there is an emerging demand for cost-effective and scalable software which this ‘on-demand’ software pricing model addresses.

Overall, the current growth in ICT investments rides on the strong showing by SMBs in 2007 and the booming domestic market in China. “About 55 percent of SBs (small businesses, or companies with up to 99 employees) and 53% of MBs (medium-sized businesses with 100-999 employees) in China experienced growth in revenues last year,” Mr. Chen says. “Riding on these gains, 69 percent of SBs and 71 percent of MBs said they expect to see revenues grow in 2008.”

China has experienced double-digit GDP growth in the past few years, and the domestic demand for ICT continues to grow at a phenomenal rate. “Now, largely because of the US recessionary fears, businesses would increasingly target their efforts towards China’s rising domestic market to fuel their businesses,” Chen says. “Although there appears to be some worrying threats like rising inflation rates and high oil prices, their impact on China’s domestic demand so far appears to be relatively marginal.”