SMEs cautious as budgets trend up

Small and medium-sized enterprises (SMEs) are careful about making purchases and tend to mistrust outsiders while their IT budgets hold steady.

Over the last three years only 12 per cent of SME executives saw a decrease in their IT budgets, while 62 per cent saw an increase, according to a recent survey conducted by silicon.com and consultancy The Bathwick Group.

These results are in line with the conventional wisdom that budgets bottomed out in 2001 and since have been trending gradually upwards.

Looking ahead to 2005, this trend looks to be continuing. Just over a third of respondents said their coffers will stay the same next year while one in four predicted an increase of between one and nine per cent.

According to a separate silicon.com poll of 12 CIOs, half expected their IT budget (measured as a percentage of revenue) to fall or stay the same and the other half expect a rise.

An attitude of prudence still pervades, though, with three-quarters of respondents to the SME survey saying their company is cautious about technology expenditures and two-thirds agreeing return on investment is considered before buying new IT systems.

When putting this money toward purchases, SME executives said the most important factor in buying decisions is that the solution is right for the specific task at hand, followed by cost. Loyalty to providers and vendors understanding customers' business rated lowest.

Half of respondents said they make purchases from resellers while a third buy direct from manufacturers online - with only 11 per cent buying direct from salespeople and six per cent from a shop.

So who do SMEs turn to for buying advice?

Their in-house staff are by far the most trusted source, followed by IT publications and then by local consultants. Executives surveyed hold the highest degrees of mistrust for big-name consultancies and software and hardware vendors.

Of the individual vendors, Hewlett-Packard and IBM were trusted most while telecoms Vodafone, BT and Cable & Wireless the least.

The survey consisted of interviews with 567 executives from companies with under 1,000 employees.