Small and medium-sized businesses (SMBs) plan to increase their IT spending for 2004 by 6.6 percent over 2003, compared with a 1.7 percent increase among larger companies, according to new research from Cambridge, Mass.-based Forrester Research.

Forrester surveyed more than 1,000 IT decision-makers at North American SMBs, which are defined as firms with fewer than 1,000 employees. Overall, SMBs are more optimistic about the future than their enterprise counterparts are, with 81 percent describing their current business climate as being at least moderately strong and 78 percent expecting more improvement by the end of the year.

Manufacturing was the most optimistic sector, with 86 percent of SMBs expecting their industry to perform at least slightly better three quarters from now. IT decision-makers at financial services SMBs were also confident, with more than half describing their business climate as strong or very strong, and 72 percent saying it is still improving.

All this optimism will translate into increased IT spending, primarily on hardware, security and information management software. New security investments are likely for 75 percent of SMBs, with highly regulated industries like the finance sector showing the strongest demand.

More than half of surveyed SMBs have begun deploying personal/client firewalls; 74 percent are planning to buy new servers; and 65 percent planning to purchase new storage.

About 51 percent said they have at least a pilot for wireless networking underway, and 70 percent are looking to buy added Internet connectivity and bandwidth.

The survey found that challenges with structured and unstructured data are causing 33 percent of SMBs to buy business intelligence software this year and another 30 percent to purchase content management software.

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