China Small and Medium Businesses' IT Investment Plans in 2006; SMB IT Spending Exceeds $16.7 Billion In 2005, Half On Computing-Related Investments.

NEW YORK -- Primary Strategic IT Focus Areas for 2006 Include Broadband Access, PC and Network Operating Environment, Employee IT Skills, and Business Continuity

Small and medium businesses (SMBs) in China invested $16.7 billion on information technology (IT) in 2005. Half of this was spent on computing-related technologies including PCs, servers, printers and peripherals. While new PC adopting SMBs will continue to push computing-related spending, a shift in spending patterns is expected in 2006 among current PC-owning SMBs as their investment plans shy away from basic hardware to focus more on connectivity, software, services and business solutions.

A new study from AMI-Partners focuses on the IT adoption trends and attitudes of the China SB market segment as well as the MB market segment. The study reveals that in 2006, SMBs will focus their IT strategies primarily on deploying broadband access, upgrading and standardizing operating systems, employee skills training and education, and IT security enhancement alongside storage capacity increase. Secondarily, China SMBs will continue to purchase additional computing hardware and replace old hardware with newer ones.

In the last 12 months, almost half of China SMBs' IT spending was dedicated to computing-related areas. "As it stands now, about two-thirds of SMBs in China are still operating without a PC," said Jackie Chan, Senior Analyst at AMI. "But many of these businesses have realized that IT implementation starting with PC deployment can really help them stay competitive in the increasingly global marketplace." Survey results indicate that more than 1.7 million small businesses in China plan to purchase their first PCs in 2006.

Furthermore, nearly 1.2 million current SMB PC users expect to procure additional PCs in 2006, a quarter of which will be notebook PCs used as desktop replacements. The majority of SBs will aim to increase their PC installed base while mid-size firms set out to replace their older hardware. "Computing-related spending will grow 18% in 2006, sustaining a healthy momentum driven by new PC adopters, additional shipment and hardware replacement," commented Ms. Chan.

2006 IT Goals in China

Among the current IT adopters, however, the focus for 2006 will not be hardware-based. China SMBs will direct their attention towards faster connectivity, improving their operating environment, training their internal employees and enhancing security measures.

--First and foremost, SMBs seek to increase employee productivity with broadband deployment while setting the stage for networking data centers. This is a natural migration for SMBs as they ride the waves of IT adoption.

--Secondly, they want to upgrade and standardize their operating systems. Over a third of China SMBs are operating in a multi-OS environment. Staffing all the necessary skills in a multi-OS environment is a real challenge for SMBs and they're seeking to simplify the datacenter environment in order to ease management and updating tasks.

--SMBs typically lack internal IT staff to maintain their IT infrastructure. Particularly in China where there exist high deficiencies of trained employees who can operate PCs, staff with IT maintenance knowledge is even scarcer. As such, these SMBs often rely on third party service providers to help them manage their growing IT infrastructure as well as provide training for their internal staff. As their reliance on information technology grows, their need for services will continue to grow alongside.

--Business continuity is a relatively young discipline, and as such, its importance has yet to be fully recognized by most governments. However, in light of recent global events including terrorism acts, natural disasters, and widespread epidemics, China SMBs themselves are realizing the importance of ensuring that their business can be quickly recovered in order to minimize interruptions. Security is now seen as an important element of business continuity and security and storage investments are expected to grow hand-in-hand.

About the Studies

AMI's 2005-2006 China Small Business Market Overview and Comprehensive Market Opportunity Assessment and 2005-2006 China Medium Business Market Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI's annual surveys of SBs across China, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. These data point to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, please call AMI-Partners at 212-944-5100, e-mail [e-mail], or visit the AMI Web site at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence -- focusing on global small and medium business (SMB) enterprises. The AMI-Partners mission is to empower clients for success with the highest quality data, business planning and "go-to-market" solutions. AMI was founded in 1996 under the name of Access Media International (USA), Inc. by Andy Bose, formerly group vice president at IDC. Since its inception, the firm has built a world-class management team, each with ten to fifteen years' experience in IT, telecom, online communications or multimedia.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 20 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.