SMALL and medium-sized businesses (SMBs) in Singapore are on track to invest more than US$507 million on IT-related services this year, up some 8 per cent over the amount they spent last year.

A new study by New York-based Access Markets International (AMI) Partners shows that almost two-thirds of this investment will go towards professional services, including software development and integration, and consulting and IT management services.

AMI defines SMBs as commercial entities with up to 999 employees. The study defines IT services to include product support services such as computing and software; networking support services; professional services such as IT consulting, development and integration; and IT management and process management services.

According to AMI's Singapore-based Asia Pacific VP, Raju Chellam, Singapore has about 120,000 commercial entities that would fall under the SMB classification. Out of these, about 98 per cent are small businesses that employ less than 100 people.

Speaking to BizIT, Mr Chellam said: 'IT services issues in Singapore are more evident and pertinent among businesses that employ more than 50 staff.'

Singapore's growth rate of 8 per cent is lower than the overall Asia Pacific excluding Japan (APEJ) average of 11 per cent. 'Across the region, IT services spending by SMBs will cross US$18 billion this year, up a robust 11 per cent over 2006,' Mr Chellam noted. 'There are about 20 million SMBs across 13 key markets in the APEJ region.'

SMBs in Singapore exhibit an advanced stage of IT maturity compared to their counterparts in the rest of the region. 'That's why Singapore SMBs focus more on integrating their disparate IT systems and consolidating their existing infrastructure,' Nishant Dave, AMI's Singapore-based research director for the Asia Pacific region, told BizIT. 'Comparatively, across the rest of the region, IT services spend is more evenly split between product support and professional services. Singapore SMBs have already crossed the basic levels of IT sophistication compared to their regional counterparts.'

Across the Causeway, SMBs in Malaysia are likely to spend over US$600 million on IT services this year, up 12 per cent over 2006. Among other countries in the region, China and India will be the fastest growing IT services markets with the SMB spend rising 15 per cent this year over last.

Mature markets such as Australia and South Korea will continue to drive nearly a third of the total APEJ IT services spend among SMBs this year.

The single biggest issue for SMBs in Singapore and across Asia, particularly for small businesses (commercial companies with up to 99 staff) is how to manage their IT ecosystems vis-a-vis their business growth but with skeletal or sometimes no IT staff in-house. In this environment, the role of a trusted adviser is crucial for these SMBs, according to AMI.

'SMBs both in Singapore and across the region generally do not have the resources to negotiate complex services-level agreements with their IT vendors and partners, unlike larger enterprises,' Mr Dave said.

'Therefore, as these SMBs scale up in terms of the number of employees, more and more of these companies will tend to gravitate towards using vendor-branded services - mainly because they are perceived to be more reliable and transferable if the need arises,' the AMI analyst added. Vendor-branded services are ones which are sold by IT vendors either directly or through partners and are available as a standard featured packages.

In the mid-market (companies with 100-999 employees), SMBs across the region are set to invest US$10 billion on IT-related services in 2007 with more than 25 per cent going towards software development, integration and consulting services.

That's mainly because of their need to migrate older legacy systems, integrate hardware with middleware and applications, and design new IT architectures to ensure business continuity and scalability, Mr Dave said.

Computing and software-related services will continue to drive more than a third of total IT services spend among mid-market companies in the Asia-Pacific this year.

'We see mid-market companies moving from a pure fix-it approach to a more holistic partnering arrangement with their IT services partners,' Mr Dave said, adding: 'As a result, mid-market SMBs will seek more value out of their future hardware investments and tie these to a long-term support services roadmap with their service partners.'

This article first appeared in BT on June 14, 2007