Midsize firms leading way in tech spending

By Jim Hopkins
USA Today

SAN FRANCISCO — Main Street is coming to the rescue of the tech industry.

As the industry claws out of one of its worst downturns, small and midsize companies are leading the rebound in tech spending.

Midsize companies — those with 100 to 1,000 workers — are spending eight times faster on tech than are big corporations, says a September study by researcher Precursor. Moreover, 61 percent of 555 small companies surveyed last month said they recently bought computers and other big-ticket items. That was the third monthly rise, the National Federation of Independent Business trade group says.

Trends in tech spending are crucial to the U.S. economy because companies, historically, invest in tech and other equipment before they add workers. Tech investments spur productivity, which boosts revenue and profits.

Companies spent an annualized $427 billion on tech in the second quarter, according to the most recent federal data available. That's up 7.5 percent from a year ago but less than the record $453 billion at the tech boom's height in 2000.

The nation's almost 6 million small and midsize companies will account for about 45 percent of tech spending this year, Precursor says.

That's drawing big guns such as IBM, Microsoft, Hewlett-Packard, Cisco Systems and Intuit, which all recently launched products for the sector.

Spending by small and midsize companies is driven by:

• Lean operations. Compared with big companies, small ones didn't gorge as much during the tech boom. Now they're buying technology that's cheaper and better — such as wireless networks.

• Tax sweeteners. A tax break passed by Congress in spring to spur small-firm spending may be working, Precursor says.