SMEs Expected to Spend US$12b in 2002 - Analyst

China's small and medium enterprises (SMEs) are expected to spend a record 100 billion yuan (US$12 billion) on IT products and services this year and the growth will last until 2006, said a senior Chinese IT analyst.

"IT applications demand that SMEs will become a sector that IT makers can not afford to avoid in the coming years with their increasing desires to improve efficiency and management," said Huang Yong, vice-president of CCID Consulting Co Ltd, a market research subsidiary of the China Centre for Information Industry Development (CCID).

Huang predicted this year's SME IT application market will reach 100.8 billion yuan (US$12.2 billion), growing 23 per cent than the previous year.

That will amount to an unprecedented 223 billion yuan (US$27 billion) in 2006.

"Many businesses are very keen to use IT technologies in their management and operations to sharpen their competitive edge, as they will face more pressure from foreign rivals after the nation's entry into the World Trade Organization (WTO)," Huang said.

He added that IT makers are also actively promoting IT applications among SMEs, which will in turn enhance the awareness of SMEs.

Major IT suppliers in the Chinese market launched their SME-targeted solutions, including Legend's IT 141 and HP's "Golden Finger" programmes last year.

US giants IBM and Cisco Systems have joined hands in the development of the market and started a network solution package for SMEs with the former's Netfinity 5000 server and the latter's Cisco 803 routers.

However, the growth of IT expenditure from SMEs will slow down from 2005 and the rate for 2006 is forecast at 17.9 per cent.

"According to the 10th Five-Year Plan for 2001-05, Chinese enterprises will have established a modern production organization system and will shift their investment focus to some areas in the supply chain, so the enthusiasm in IT applications will diminish," Huang said.

Another cause of the slowdown will be due to fierce competition after China's accession into WTO leading to the disappearance of many SMEs and a drop in total IT demand.

According to CCID Consulting's statistics, the IT application market of SMEs last year was 82 billion yuan (US$9.9 billion), about one third of the total IT market.

Most of spending went to hardware products with 68.4 billion yuan (US$8.3 billion), accounting for 83.4 per cent of total IT spending, while the rest was spent on software and IT services.

Desktops continued to have the biggest orders from SMEs with a market of 12.7 billion yuan (US$1.7 billion), while laptops were the fastest growing with a 38 per cent growth over 2000.



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