SMB PC Spending Up 33% In 2010SMB PC Spending Up 33% In 2010

Top 10 SMB Predictions For 2011

IT spending by small and midsize businesses reached above pre-recession levels last year, an encouraging sign for the overall U.S. economy, according to The NPD Group, a market research.

An increase in sales of infrastructure products through U.S. distributors and commercial technology resellers, such as Ingram Micro, CDW, and Insight, drove an 18% increase year over year in hardware spending to more than $38 billion last year, The NPD Group reported Monday. PC sales jumped the highest, rising 33% to $6 billion, while unit sales rose 27%.

Overall, the numbers indicated that SMBs, the primary customers of distributors and resellers, were making up for 2009, when many companies held back spending during the height of the economic recession that followed the financial collapse in the fourth quarter of 2008.

"To be competitive and be ready for whatever is going to happen over the next couple of years, it's imperative for these small and medium-sized businesses to be ready with the right infrastructure to protect their assets and drive increase volumes going forward," NPD analyst Stephen Baker said in an interview. "It's a lot cheaper to buy and upgrade storage networks, routers, etc., than it is to hire a lot of new employees."

PC sales held strong even in the fourth quarter of 2010, when sales were much higher year over year, even though Microsoft had released Windows 7 in the last quarter of 2009, which convinced a lot of businesses to start upgrading from Windows XP. Revenue and unit sales in Q4 2010 rose 22% and 14%, respectively, NPD said.

Network storage products, primarily storage area network (SAN) and network attached storage (NAS) hardware were one of the few major IT categories that NPD recorded growth in 2009 and 2010. The category accounted for more than $1 billion in revenue last year. Sales of networking routers and switches rose 25% last year to nearly $7 billion.

PC business software sales also got a nice bump last year. Sales grew 12% to $4.2 billion, marking a strong recovery after the 6% drop in 2009, NPD said. Momentum was strongest in the fourth quarter of 2010, when revenue jumped 17% year over year, driven by Windows 7, Office 2010, and database software.

The strongest growth in overall spending was seen in the first three quarters of last year, tapering off to 9% growth year over year in the fourth quarter, NPD said. Spending this year got off to a good start in January and February, and "we continue to see decent sales numbers," Baker said.

The fact that spending, particularly on PCs, continued to rise in the fourth quarter of last year and the first two months of this year, "bodes pretty well for spending for the rest of the year," Baker said.

Spending last year returned to levels last seen around 2007, which places sales at just about pre-recession levels, Baker said. "Longer term, looking out to next year and beyond, it will be a real test to see if we can see growth over and above the maximum volumes of the mid-2000 period."