Small and medium-sized businesses account for nearly two-thirds of IT spending in Central and Eastern Europe.
According to a new IDC study of eight CEE countries (not including Russia), although SMBs employ about two-thirds of the total workforce in CEE and account for a vast majority of businesses, many still suffer from commercial backwardness, little horizontal organization through associations and partnerships, and a lack of modern business tools. Nevertheless, a small but growing group of SMBs are plunging into entrepreneurialism and embracing the digital age, especially in the manufacturing and financial services sectors.
"Education is vital to helping small and medium-sized businesses step fully into the information age," says Roman Maceska, Research Director, Systems and Vertical Markets, IDC CEMA. "As a result, vendors are going to be essential in leading the spread of IT rather than letting businesses adopt it at their own pace. Vendors will need to do more than sell hardware and ready-made solutions; they must also act as impromptu teachers and even counselors, helping SMBs understand the importance of IT in doing business in both the newly expanded EU and in Europe in general."
The importance of SMBs to national economies varies across the region. Of the eight countries under study, Poland has both the largest absolute number of SMBs and the highest number per capita, and SMBs play a significant role in its economy. The same is true for Hungary, Slovakia, and Slovenia in particular, where SMBs form the backbone of the economy. By contrast, the Croatian and Romanian economies are driven by large enterprises. "As might be expected, different industries also invest to varying degrees in IT," says Maceska. "The half-million SMBs in manufacturing spend almost twice as much on IT as the 1.5 million SMBs in the retail/wholesale segment."
In terms of company size, small businesses (less than 100 people) accounted for more than 38% of IT investments in 2004, ranking first in key IT categories like PCs, software, networking equipment, and IT services. Despite leading in non-hardware categories, most of these small businesses allocated more than half of their IT budgets to hardware. "IT competence at small companies is generally low," says Maceska. "By contrast, medium-sized organizations [between 100 and 500 employees] generally have dedicated IT staff, with those in the communications, media, business services, and financial services verticals tending to already be advanced users of IT." Medium-sized businesses represented a little more than a quarter of spending and led in the midrange-server category.
In the eight countries under study, IDC expects IT spending growth among SMBs to rise faster than the average for all enterprises over the next few years. Small manufacturers and financial services organizations will lead the field, averaging 12.6% and 12.4%, respectively, in annual IT spending growth. Healthcare and government institutions will also be hot markets as various EU and national funding sources will be available for upgrading antiquated systems.
"EU membership should help drive membership in international trade associations that in turn will create greater understanding of what it means to be integrated vertically within an industry," says Maceska. "Therefore, in addition to educating the channel and users, vendors wanting to tap this growth will also need to provide vertical-specific solutions at prices that will satisfy the usually cost-sensitive SMBs across the region."
IDC's Central and Eastern European Opportunities in the SMB Market analyzes IT spending trends among small and medium-sized companies in Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia for the 2004-2009 period. To provide a point of comparison, it breaks down spending by both small (1-99 employees) and medium-sized businesses (100-499 employees) and large (500-999 employees) and very large businesses (1,000+ employees). Quantitative analysis of IT spending focuses on vertical market and company size while qualitative analysis focuses on key factors shaping SMB IT demand during the forecast period.
For more information, please contact Tatiana Hinova at +420 221 423 140 or at thinova@idc.com.
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