IDC Sees Largest Web Spending from Small Biz

According to a new report issued by IDC (International Data Corp.), small businesses will soon take the lead in U.S. Web spending (IS expenditures devoted to hardware, software, consultants and staff to develop Web sites and field Web-based applications).

Consider these numbers. Web spending in the U.S. amounted to $87.5 billion in 1999. Of that, $19.6 billion was spent by small businesses (firms having less than 100 employees) to build a Web presence. The amount represents 26 percent of all business Web spending for the year.

IDC predicts that by the end of 2003 total Web spending in the U.S. will skyrocket to 285.6 billion, a 34.4 percent compound annual growth rate (CAGR). By that time, spending by small businesses is expected to grow to $95.5 billion—a 35 share and a 44.5 percent CAGR. That means, IDC concludes, "Overall, small businesses will provide the largest absolute and relative share of new revenues to vendors…."

While IDC believes that Web activity will account for increasing portions of IT budgets across the board, the research firm also says that expenditures will "vary markedly across economic sectors and classes of enterprises." Although non-Web expenditures will still dominate the IT budgets of small businesses, non-Web spending will "essentially stagnate," and small businesses' Web expenses will surge from 9.1 percent to 28.6 percent of their total IT costs from 1999 to 2003.

IDC, reporting that a relatively low percentage of small businesses have fast Internet connections (84 percent access the Net via dial-up modems), sees "a significant opportunity" for telcos and Internet service providers. "Broadband access opens the door wide for IT suppliers such as vendors of servers, hubs, and routers," the research firm concludes.

The new report also forecasts that the number of small businesses engaged in e-commerce will more than triple, reaching 2.8 million by the end of 2003--a 47.1 CAGR. Most of these funds, at least in the near term, will be spent on B2C than B2B initiatives. Other enterprises, such as Web designers, consultants and ASPs need to supply "the appliances and furniture" needed before small businesses will "comfortably dwell" in the B2B space, IDC reports.