China Small Biz Big IT Spenders

Medium-sized businesses on the mainland will spend over $20 billion on IT infrastructure and applications in 2007, up 18% from last year

Medium-sized businesses in China will spend approximately US$20.9 billion to beef up their IT infrastructure and applications in 2007, directing the majority of their investments toward IT services, computing and Internet services, says AMI-Partners.

In its survey released Monday, the research house said IT spending will increase by 18 percent over last year, where China's medium-sized companies--with between 100 and 999 employees--focus on three key areas. These top priorities are: deploying high-speed broadband Internet access, networking all hardware equipment in the main office, and enhancing IT security and privacy.

"Medium-sized businesses in China are expanding fast and are adding more employees to their rolls," Balaji Sreedhar, a Singapore-based research analyst at AMI-Partners, said in a statement. "This trend is forcing most medium-sized businesses [in the country] to invest in higher speed broadband [connection], networking office equipment and increasing their IT security."

The survey noted that IT decision makers in China typically prefer to purchase product brands they have previously bought, and after careful consideration of the total cost of ownership (TCO). They also purchase primarily products that are scalable, according to the report. In addition, "very few medium-sized businesses use internal funds to buy IT products, [and] they typically opt for either financing or leasing options", the study said.

Sreedhar said: "A sizeable number of medium-sized businesses in China have crossed the first two waves of IT adoption and are now in the third wave, which focuses on the extension of the enterprise."

According to the research house, the first wave of IT adoption involves the establishment of basic IT infrastructure such as personal computers, as well as basic accounting and HR tools. The second wave consists of building connections with external parties beyond the enterprise, including suppliers, resellers, channel partners and customers.

AMI-Partners noted that midsize companies in China are increasingly adopting enterprise software such as ERP (enterprise resource planning) and CRM (customer relationship management), where close to 25 percent of these organizations have adopted ERP while nearly 20 percent have implemented CRM.

Referring to the survey, Sreedhar said further adoption of these two software tools are "extremely likely" in the next 12 months. "We will see companies like Oracle and SAP locking horns to increase their market share across China's medium business segment this year," he said.

The study indicated that other technologies adopted by Chinese medium-sized businesses include SAN (storage area network) and NAS (network-attached storage). "The surge in business growth is leading to an avalanche of data for these companies," AMI-Partners said, noting that this has resulted in a significant number of medium-sized businesses adopting these storage technologies. SAN and NAS currently account for 25 percent of spending on storage hardware in China's medium-sized business segment.

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