SMB IT spending trends and challenges

     

Small and medium-sized businesses typically have to be more judicious with their technologylaptop business investments, as they lack the deep financial resources of their larger counterparts. That certainly does not mean SMBs cannot access robust technological solutions and IT services, particularly with the growth of solutions that can be customized for a wide range of price points.

The good news for SMB IT leaders is that they may have significantly more resources to work with than in the past, according to Spiceworks' "State of SMB 2013" report. Analysts noted a particularly large uptick among companies with 250 or fewer employees, with average annual IT budgets increasing from $30,000 in the second half of 2012 to $192,000 in the first quarter of 2013.

Researchers found that much of the increase in IT spending is going toward the cloud and new hardware purchases. For instance, 12 percent of total technology budgets are now going toward hosted or cloud-based services. Decision makers showed a similar interest in new technology with a preference for making new hardware purchases rather than upgrading existing solutions - 46 percent planned to invest in new servers while just 24 percent intended to upgrade.

A push for virtualization
While the cloud may not be fueling everything that runs in corporate IT ecosystems, the technology underpinning it is shaping the way IT services are delivered. SMBs showed a clear movement toward virtualization, particularly for storage, security and productivity applications such as collaboration and email.

One of the main drivers of this trend is the increasing diversity in IT workloads that companies must manage. The adoption of more robust collaboration and communication tools, a proliferation of mobile devices and expanding IT service needs are all necessitating more efficient strategies for managing technological infrastructure.

Virtualization also allows for higher server utilization, enabling businesses to make the most of their hardware investments. However, many IT leaders may find they need to do more to optimize their budgets. The influx of collaboration tools has significant potential for small businesses looking to expand their reach, for example. By equipping employees with videoconferencing and similar technology, small businesses can meet with clients regularly whether they are local are on the other side of the country while limiting travel expenses. However, these types of applications also create a large amount of data and place new demands on network resources.

The problem of server sprawl
Although the issue is not isolated to small businesses, server sprawl is a prevailing concern among IT leaders. The Uptime Institute 2012 Data Center Industry Survey shed some light on the problem, highlighting the fact that 30 percent of businesses were expected to run out of space at one of their facilities by the end of 2012. This reality comes despite the fact that many respondents' IT infrastructure budgets had increased from 2011.

This trend could present a significant problem for SMBs, particularly as they look toward hardware procurement as a way of accommodating burgeoning IT needs. It is important to leverage the best technology available, but uncontrolled infrastructure expansion would result in unnecessary spending, leaving less room for business growth and innovation. Data Center Knowledge contributor Florin Dejeu recently outlined several reasons that system sprawl contributes to excessive total cost of ownership:

  • Overbuying: Many companies purchase entirely new hardware when they need either performance or capacity, but not both
  • Non-scalable systems: Infrastructure that does not scale well leads to wasted capacity
  • Additional management costs: Each new server or other appliance adds to the time and resources spent managing the data center

All of these factors contribute to unnecessary spending on IT infrastructure and management, which could stifle the benefits of budget increases. This makes it important for SMB leaders to consider a comprehensive IT strategy that focuses on optimizing existing assets while making strategic new purchases. A more thorough evaluation process will limit the number of new systems that must be purchased and increase the return on investment of existing solutions.

"Data growth is fueled by the proliferation of new business applications, the introduction of big data analytics, the increased use of mobile devices and tablets in the work place, and the increased use of large databases to run core company functions (ERP, payroll, HR, production management)" Dejeu wrote. "Companies are not only creating massive volumes of data, they are also under pressure to meet increasingly stringent and complex requirements for protecting and managing that data."

Creating a plan to optimize
The problem that Dejeu highlighted is one that could have far-reaching consequences if companies are not proactive in addressing it. Making new hardware purchases without improving IT practices and optimizing existing hardware translates to a large amount of wasted potential.

There are a few paths to optimization, though the most effective IT strategy is often one that combines several to maximize potential. One concept to consider is to look at what is being stored and how it can be stored better. This can involve a large-scale shift in data management practices. For instance, some companies invest in tiered storage systems, in which data is prioritized by how much performance is required to access it and still meet business requirements. This approach can be time consuming, as it requires complete visibility over the company's IT environment, but it can achieve cost savings without sacrificing performance.

Other strategies may tackle the issue from a technological perspective. Deduplication tools and compression software optimize storage by looking at the information itself. However, these strategies may also create risks - for instance, deduplication works by eliminating redundant files stored on a system, which could make it more difficult to recover from data loss.

As the Spiceworks survey indicated, cloud technology is also becoming a more prevalent part of IT strategy for SMBs. However, decision makers should avoid the temptation to shift every application or workload into cloud environments. Particularly for high performance needs, this option may be more expensive than obtaining the same features in house. Similarly, highly sensitive data such as financial records or insurance statements may make IT security a little more hesitant to move assets into a third-party infrastructure.

The main challenge SMBs will likely face moving forward may stem primarily from a complexity issue rather than budgetary restrictions. The availability of more financial resources to invest means that SMB decision makers will have a larger selection of solutions to choose from, while still having the same number of employees to manage those new technology assets. This may make it valuable to leverage IT consulting services to ensure that technology strategies are cohesive and to avoid making investments that would be underutilized.

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