Following a strong 2018, I expect 2019 will be another year of growth for the U.S. B2B technology industry, and the SMB market will be part of what fuels that trend. According to NPD’s most recent SMB Quarterly Technology Monitor, 54 percent of small businesses with 500 or fewer employees plan to spend on technology purchases in 2019.
Firms with 201 to 500 employees reported the largest purchase intention, followed by those with 50 to 200 employees. Vertically, markets with the highest purchase intention were in the information technology, insurance, manufacturing, and education markets. The insurance and accounting segments had the fastest year-over-year percent change, as they are key adopters of analytics for risk mitigation and financial planning.
Software led purchase intentions with 66 percent of small businesses planning to spend on the category, up 7 percent from last year and 8 percent from Q4 2018. Software sales represented 27 percent of the U.S. B2B tech channel in 2018, growing at a 10 percent compound annual growth rate from 2015 to 2018 versus non-software categories, which grew just 3 percent during the same period. Thus, I expect software to continue to grow at a faster clip than non-software categories as more firms are gaining access to cloud-based applications via two-tier distributor focused programs coupled with existing applications making it easier to operate within a hybrid compute construct.
A key catalyst for software growth is the information security segment that represented 22 percent of software sales. While large enterprises have fallen victim to security attacks, small businesses are often easier targets, so many are now seeking managed security service providers (MSSPs) to help thwart external and insider threats that can have a catastrophic effect on their business. In fact, according to Inc. Magazine, 60 percent of small businesses fold within six months after a cyber-attack.
The PC market saw the second highest purchase intention among small businesses with 63 percent planning to purchase a PC. I expect PCs will continue to be the center of gravity for general business productivity for small businesses, whether they are desk-bound or on-the-road. In addition, we will see areas of growth in vertical markets such as education, retail, and hospitality. For example, in the K12 market, Chromebooks continue to be a large part of notebook shipments in the U.S. B2B channel and are a frequently requested item in the classroom to help boost learning, as well as parent and teacher communications. In the retail environment, point-of-sale PC terminals remain a key technology for customer checkout regardless of pushes for mobile and self-checkout to reduce costs or QSRs for pre-ordering. In fact, POS PC terminals grew 21 percent in unit shipments from 2017 to 2018.
A final area of surprise was the server market with 46 percent of firms planning to purchase in the category this year, up 8 percent from last year and 13 percent from Q4 2018. This implies that SMBs are not completely sold on a “cloud only” environment, but are more interested in a hybrid world where they can control what is ported to the cloud and flex demand when they need to with public cloud providers.
Knowing the intentions of the SMB market is critical to the partner community since the small business market is vast and each business size, vertical market, and department has their own needs when it comes to digital transformation. Identifying these trends can help vendors and partners understand the overall health of the SMB market, as well as help predict which solutions will be important in the future.