April 14, 2003

In-Stat: Small Business IT Expenditures 2002-2006

In-Stat/MDR estimates that the small business market (firms with 5 to 99 employees), in aggregate, spent more than $154 billion on information technology in 2002, up almost 4% from 2001 estimates. By 2006, In-Stat/MDR estimates that small businesses will spend roughly $192 billion on information technology products, services, and personnel. This market is the second largest purchaser of technology in the US, second to only the enterprise market. Given this, these customers are definitely key targets for IT providers of all types. However, In-Stat/MDR research suggests that telecom and LAN equipment providers will most likely experience the biggest bang for their marketing bucks in this segment, as these will be two key areas of technology spending in this market for years to come.

Increasing spending per firm in this market, combined with growth in the number of small businesses, is expected to lead to fairly strong growth in total small business IT spending over the next several years. Annual growth in IT spending is expected to continue to increase through 2005, where it is expected to peak at more than 6%.

In comparison to other business segments, the overall small business market is the second largest in terms of IT spending, behind the enterprise market, accounting for roughly 31% of all US business IT expenditures this year. This market's share of IT expenditures is expected grow over the next several years as these firms continue to become more sophisticated in their use of technology.

For further information on small business IT spending trends see: "Spend-Thrift?: IT Spending Across Technology and Vertical
Market, Part Three: US Small Businesses (5 to 99 Employees)," report #IN030754SB.

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