A new study from Access Markets International Partners Inc. shows that small and medium businesses worldwide spent $10.5 billion in information technology storage in 2004, up from $9.6 billion in 2003.
Spending is projected to double over the next five years, according to AMI, which surveys several hundred small and medium-sized businesses annually on a variety of issues for its vendor clients.
Anil Miglani, senior vice president at New York-based AMI Partners, said several factors are driving the increases. "The data volumes for SMBs are increasing," Miglani said. "The 24/7 availability of their network infrastructure is causing a lot of concerns. And the third thing is the network storage is becoming more affordable for the SMBs."
Bob Craig, CIO at the Cleveland law firm, Baker and Hostetler LLP, is among those mid-market technology executives watching his storage needs rise, as attorneys rely more on electronic files and e-mail to build cases. One case the firm is currently working on could require attorneys to examine a full terabyte of data, said Craig, interviewed at this week's Gartner Midsized Enterprise Summit in New Orleans.
CIO Robert Reeder was losing sleep last year knowing that W.A. Wilde, a direct mail marketing company, needed to get away from its tape-based storage system. Six months ago, Reeder found the right disk storage system for the Holliston, Mass.-based company.
"For CIOs, security is a big issue today," Reeder said. "There are security issues with tape, including being able to drop a tape in someone's pocket. Disk is much easier for auditors because it much easier to access disk than it is tape," said Reeder, who chose an automated disk storage system, Advanstor, from ExaGrid Systems, Inc.
The loss of a storage disk at a large company grabbed headlines this week. Online discount broker Ameritrade Holding Corp. informed about 200,000 customers that a backup computer tape containing their personal information was missing.
While direct-attached storage and tape are the most prevalent storage choices in the midmarket, a growing number of SMBs are adopting more sophisticated storage solutions, such as Storage Area Networks, (SANs,) and Network Attached Storage (NAS), said Miglani. Entry-level SANs are now available for under $10,000.
"What we find is that SMBs have already acquired the basic technologies, like PCs and servers, and they are moving on to the next level, which really entails more network and Internet-based applications," said Miglani.
But the number of vendors selling to SMBs remains small, despite the size of the sector—6.2 billion in the U.S., Miglani said. Mid-sized companies are also comfortable buying from local channel partners, whom they rely on to select new technology.
Miglani expects that to change as the new products aimed at the SMB are rolled out in the next few years. "The growth of the market will definitely be determined by the participation of the channels in this area," he said.
The short-term outlook for storage spending was not as optimistic among a group of "decision makers" from 1,197 US SMBs surveyed by Forrester Research in Cambridge, Mass.
Part of a comprehensive look at IT spending, the study found the percentage of the SMBs planning to buy storage in 2005 dropped to 56%, down from 65% in early 2004.
But overall spending on IT by the US SMB market, which accounts for 44% of all US IT spending, is looking robust and growing at a faster pace than spending by enterprise-class companies. Spending by SMBs is pegged to rise 8% in 2005, according to the latest data from Forrester, compared to a 6% increase in spending by enterprise.
CIO Decisions staff member Stefanie McCann contributed to this article.