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SMEs still love the PC

The PC, along with consumables like ink cartridges, paper and disks, remains the most important item in budgeting for IT purchases among SMEs in South Africa, according to SME Survey 2004, a project that researched the role played by government, information technology and financial services in small and medium business in South Africa. Conducted with the backing of Hewlett-Packard and Standard Bank, the research involved interviews with 2919 SME business decision makers.After PCs and consumables, which were ranked as the most important item in the IT budget by 51% of respondents, software runs a close third, followed by servers and peripherals, such as printers and scanners. Laptops remain a distant priority, in eighth place, ahead of only PDAs (personal digital assistants) and wireless technologies.

“The findings confirm international research on the South African market, which shows PCs outselling laptop computers by a ratio of almost 4 to 1,” says George du Plessis, SMB Segment Manager at Hewlett-Packard South Africa. “Laptop sales may be growing faster than any other format, at 73% for the first quarter of this year, but desktop PCs still grew at 51%.”

The low ranking of new mobile technologies is an indication of the fact that SMEs operate in the here-and-now, with budgets oriented almost entirely to practical demands, rather than the nice-to-haves, the unknowns, and the cutting edge technologies.

“The picture is very different in the enterprise environment, where corporates understand that these technologies have the potential to transform businesses,” says Du Plessis. “But SMEs tend to stick to what they know best.”

If SMEs know what works for them, they also tend to know what’s good for them. The number of SMEs connecting to the Internet via ADSL has increased tenfold over the 2003 findings, which is understandable given that the technology had just rolled-out at that stage. Despite this, ISDN has also increased its proportion of connectivity. The big change has come in SMEs moving away from dial-up to these more high-speed options – falling from almost two thirds to a third of respondents.

SME Survey 2004 confirms the finding in the 2003 survey that the proportion of companies spending 1% or more of turnover on IT would increase by 1% in 2003. However, this year’s survey shows SMEs budgeting to spend exactly the same proportion of turnover on IT in 2004 as last year.

The news is not necessarily bad for the IT industry, however.

“SME turnover on the whole tends to rise in line with national growth figures,” says Spiro Georgopoulos, Director: Business Banking at Standard bank. “So while the proportion of the pie going to IT may not grow in 2004, as the pie gets larger, the IT industry will benefit proportionately.”

Du Plessis agrees, and points out that competitive advantage within the IT industry is the key to growing market share of SMEs’ spending: “One of the reasons for HP’s leadership position in the overall IT market is our end-to-end offering to SMEs, from PCs to consumables to peripherals.”

In financial services, the 2004 survey confirmed last year’s finding that Standard Bank remains by far the most popular bank for business purposes among SMEs.

About half of all respondents were willing or able to reveal the proportion of procurement that is made from BEE companies. And more than half of these respondents, in turn, reported zero or less than 10% of procurement going to
BEE companies.

This is a clear indication that SMEs in general have not incorporated BEE procurement into their policies and procedures – even where they are BEE companies themselves.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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