SMB Information Technology ROI: At some point, a growing small or medium-sized business (SMB) needs to acquire new IT solutions to survive—or thrive—by improving its products, services, and bottom line. More about information technology ROI (return on investment) and information technology spending in this Cisco whitepaper.

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by Fred Sandsmark, illustration by Wesley Bedrosian. iQ Magazine

Growing a company often requires you to invest in new technology.

At some point, a growing small or medium-sized business (SMB) needs to acquire new IT solutions to survive—or thrive—by improving its products, services, and bottom line. "Small and midsize enterprises are aggressively increasing their IT spending this year," says Frank Koelsch, executive vice president of the Info-Tech Research Group. In a March 2005 survey of Canadian, U.K., and U.S. businesses with revenues under $1 billion, Info-Tech found that:

• 51% of the companies surveyed planned to increase IT spending (hardware, software, and services) in 2005
• 33% planned to increase their spending by more than 15%

From Cisco: Cisco Assists SMBs with IT Funding David Rogan, president of Cisco Systems Capital Corporation, a wholly owned financing subsidiary of Cisco Systems, outlines ways that this captive leasing program can help SMBs fund IT investments. iQ: How is Cisco Capital different from other lease sources? Rogan: We're set up very differently. A third-party leasing company tries to extend a lease as long as possible, essentially forcing customers to stay with outdated technology. Because Cisco Capital focuses on placing Cisco networking equipment in the SMB marketplace, it provides significant technology-refresh options as time goes on. iQ: What do you mean by "technology refresh"? Rogan: What a company buys today may not be appropriate in two or three years. With our fair-market–value leases at some point you have the right to return that equipment and acquire new equipment. Growth also means adding new technologies to a network, such as IP Communications, security, and wireless. We offer very aggressive lease rates for these technologies. iQ: What specific programs do you have for SMBs? Rogan: We just launched Cisco Easy Lease Program, which extends Cisco's financing into the SMB market segment. We believe it is best in class, both in service and cost. We provide very fast online credit approval for leases between $5,000 and $250,000, using a one- or two-page lease document. Rapidly growing SMBs can use this program to fund their networks, applications, and maintenance, while they use their capital to grow their businesses.—F.S.

IT spending is also on the upswing in Asia and Europe: compared to 2004 levels, research firm IDC expects SMB IT growth in Asia to rise 9.4%, and analyst firm AMI-Partners has predicted that SMB IT spending in Western Europe will increase 4.8%.

Estimating the Cost, Maximize the Benefit
When developing the budget for an IT investment, you should count not only hardware and software but all costs that will be incurred, including:

• Installation
• Training
• Upgrades
• Service
• Ongoing management
• Network security

To get the most from your IT investment, choose solutions that can support business growth and advanced technologies such as wireless networking or IP Communications. A local reseller or consultant can be helpful in identifying the technical requirements and choices. Furthermore, "seek smart money," advises Alice Magos, an accountant and SMB analyst with CCH Tax and Accounting, Inc., a Wolters Kluwer company. In other words, look for financing "where the financier provides not only capital but also support and expertise to your business." The value-adds could include:

• Business or technical knowledge
• Contacts
• Loans that protect your ownership interests
• Leases that come with "technology refresh"