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Ahead of the Pack

Small businesses are zipping past bigger companies on the tech-investment track.

This story appears in the December 2003 issue of Entrepreneur. Subscribe »

Yes, growing businesses do squeeze every dollar until the eagle grins, especially during uncertain times like these. But they're leading the way in boosting their purchases of computer products and services. U.S. companies with 20 to 99 employees have the highest expectations for improved IT budgets in 2004, with an average increase of 10 percent, says research firm Gartner Inc. That contrasts with projected spending growth of less than 1 percent among the largest corporations.

Smaller firms are responding more quickly to this year's increased cash flows and profits, says Lewis Clark, a principal analyst with Gartner in Lowell, Massachusetts. They're also exploiting a short-term tax break for first-year depreciation. (Covering up to $100,000 in equipment purchases, this break is scheduled to run out in September 2004.) "We're seeing a large amount of growth in the small- and midsize-business market," agrees Meredith Child, an associate analyst with research firm Forrester Research Inc. in Cambridge, Massachusetts. A recent Forrester study found 44 percent of firms with sales less than $100 million boosting their IT budgets during 2003. On average, these companies will increase their IT spending by a whopping 17 percent.

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