China SMBs set to spend US$42B on ICT

By Vivian Yeo, ZDNet Asia

Friday, March 07, 2008 06:12 PM

ICT spending by small and midsize businesses in China will grow 12 percent year-on-year to reach US$42 billion in 2008, says AMI-Partners.

Boosted by strong results in 2007, small and midsize businesses (SMBs) in China are set to continue their uptrend in ICT spending over the next 12 months.

According a new report from AMI-Partners, SMBs will spend US$42 billion on infocomm technologies this year, a 12-percent increase over 2007. The New York-based research house specializes in SMB research.

The study also found that about 70 percent each of small businesses with fewer than 100 employees and medium-sized businesses with between 100 and 999 employees expect revenue growth this year. Some 55 percent of small businesses, and 53 percent of midsize ones, reported a jump in revenues in 2007.

"The bulk of the spending in 2008 will come from telecom services, computing and Internet technologies," said Samuel Chen, 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 like security spending (US$289 million) would come from security software solutions."

Additionally, the need for SMBs to stay cost-effective is driving two trends in the country's ICT market, said AMI-Partners. Firstly, there is an emerging demand for on-demand and scalable software models, although the software-as-a-service phenomenon is very much in its infancy.

Domestic demand has also been growing at a phenomenal rate. SMBs in China have turned to "relatively well-equipped" local brands that are priced lower than big global names, and this has led to local players featuring among the top brands in various technology areas.

Singapore-based Chen, however, pointed out that with U.S. recessionary fears, businesses would increasingly target their efforts toward China's domestic market to "fuel" their revenues.

"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," he added.