IT Services Led China Medium Business IT Spending of US$6 Billion in 2004

China

AMI-Partners: China medium businesses increased IT and telecom spending in 2004, registering more than US$6.1 billion. The SMB IT industry analysts found that more than half of the IT-related investments were dedicated to IT services, such as customized software, consulting and support . Computing products -- including clients, servers and imaging products -- made up more than 20 percent. China medium-sized businesses (MBs) are continuing their infrastructure build-out and migrating to more complex systems. As a result, AMI-Partners expects that demand for IT services in this market will continue to surge.

Growing PC Density and Other Hardware Upgrades

PC investment by China MBs in 2004 resulted in shipments exceeding 300,000 units. The PC-to-employee ratio shows significant room for market expansion. The industry is consolidating, with local giant Lenovo acquiring IBM’s PC operations. Leading server brands installed include HP, IBM and Lenovo. Among medium businesses planning to purchase new servers in the next 12 months, brands being considered are HP, IBM, Dell, Lenovo and Great Wall.

Additional highlights from the AMI study, which included face-to-face in-depth interviews with MBs across Tier 1, Tier 2 and Tier 3 cities in China, include the following:

• More than a third of China MBs plan to purchase a PC in the next 12 months.

• Current IT penetration findings point to approximately every three to four employees sharing a PC, every three PCs sharing a printer, and every 20 PCs and seven printers sharing one server.

Labor-intensive industries like manufacturing, construction, agriculture and mining tend to have a lower PC-to-employee ratio. Such sectors account for 50% of the MB universe and are expected to invest in IT automation.

Going Mobile -- Approaching the Wireless Era China MBs are well penetrated with Internet access, and rely heavily on the Internet to increase sales efficiency and to streamline their accounting and finance processes. The rapid globalization of the economy has resulted in a growing mobile workforce among China MBs:

• Currently, more than two thirds of China MBs have mobile employees who travel for business at least four to five days monthly.

• China MBs have more than one business location and a typical MB has approximately four branch offices.

2004-2005 China Medium Business Market Overview and Topline Assessment Publ 20050525