SMBs fail to factor in TCO into their budget

While small-to-medium business (SMB) customers will boost IT spending for the Middle East, they are somewhat careless shoppers, a survey released by HP last week seems to suggest.

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By  Peter Branton Published  October 2, 2005

While small-to-medium business (SMB) customers will boost IT spending for the Middle East, they are somewhat careless shoppers, a survey released by HP last week seems to suggest. According to HP, 70% of SMBs in the Middle East plan to increase their spending on IT within the next year. However, while 76% of them claim to consider return on investment (ROI) when making their purchases, only 22% work out the total cost of investment (TCO) in the long term. Suprisingly, HP claimed, it was the larger firms within the SMB sector which made TCO less of a consideration when purchasing IT, rather than their smaller counterparts. “This was a very unexpected result,” admitted Hamid Hassan, SMB manager HP Middle East. “We really expected bigger companies to consider TCO more than the smaller SMBs,” he claimed. Luc Behar, SMB segment manager for HP Middle East, said the differentation between the two types of firms is due to lack of flexibilty on the part of larger companies. “I think it all comes down to how easy it is for companies to change their purchasing behaviour. Smaller companies are a lot more flexible so are faster at implementing change,” he said. The survey was conducted by an independent research company on behalf of HP and canvassed 265 SMBs — firms with between ten and 500 employees — in Saudi Arabia, Kuwait and the UAE. The UAE beat Kuwait and Saudi Arabia in terms of having the most SMBs which have the means to measure TCO of IT purchases – 52%. In Kuwait 22% of customers said they have TCO measuring methods, while in Saudi Arabia, no SMBs responded positively to the question. Hassan said: “Unless you have worked out the total cost of ownership of a specific product or solution, you will not be able to identify clearly and comprehensively the return on that particular investment.” Respondents were also questioned on their attitude to promotions. Of those who responded 27% said that promotional offers would sway them towards purchasing a particular product. “It is clear that most SMBs are brand consumers. They will not go for a company’s product just because there is a promotional offer attached,” said Hassan.

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