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SMB market has higher rate of IT spending

InformationWeek had a piece, Oracle Puts Pressure On Microsoft, which captures an interesting datapoint:

Oracle’s move toward small and midsize businesses is being driven by a saturated software market at larger companies. Also, IT budgets at small and midsize companies are on the rise, in part because of a need to remain competitive. Today, small and midsize companies spend an average 6.3% of revenue on IT, compared with larger enterprises whose budgets are typically at 2% for manufacturers and 5% for services companies, according to AMR Research.

Implications:
While this outwardly looks promising, this larger ratio means that IT is a larger net line-item in operating budgets for SMBs; it’s relatively more money, and so will receive relatively more scrutiny. And, the budgets of thes relatively cash-strapped SMBs are unlikely to grow much beyond their current rate (in my estimation), and then they will decline as the larger players woo customers by promising to take cost out of their IT budgets. The competition will erode prices, and eventually decrease this rate to something approaching parity with larger firms. This will likely take several years to play out.

Still, from the perspective of the larger players now entering this market, that 6.3% of revenue was flowing to others, and thus represents a revenue growth opportunity - even if the market itself shrinks.