AMI-PARTNERS STUDY SHOWS U.S. SMALL AND MEDIUM BUSINESS SPENDING ON ENTERPRISE SOFTWARE EXCEEDED $1.3 BILLION – RECORD SURGE IN CRM/SFA AND ERP/SCM SOLUTIONS
780,000 SMBs Currently Use Various SFA/CRM Solutions and 250,000 Have Adopted Various ERP/SCM Applications
AMI Segmentation Model Shows Top 2 SMB Segments Driving 85% of Total Spending
NEW YORK – July 17, 2002 – Total U.S. Small and Medium Business (SMB) spending on SFA, CRM, ERP and SCM software topped $1.3 billion during the last 12 months, registering a 21% increase year-over-year. From 489,000 in 2Q 2001, the number of U.S. SMBs using one or more business process automation applications (SFA, CRM, ERP or SCM) increased by 114% to over 1.0
million in 2Q 2002.
The above findings were released today by New York-based Access Markets International (AMI) Partners, Inc., a leading consulting firm specializing in IT, Internet, telecom and business services market intelligence, trends and strategy with a strong focus on global small and medium business (SMB) enterprises.
“The U.S. SMB market has now entered a sustainable high-growth phase of business process automation applications deployment,” observed Deepinder Sahni, Vice President at AMI. “Optimizing business processes to stay competitive, retaining and growing customers to generate sales, and controlling costs in this difficult economic climate are the key driving factors behind this surge in enterprise applications deployment in the SMB market.”
Total SMB seats using one or more of these applications currently exceeds 3 million, representing a 25% year-over-year growth. AMI estimates that U.S. SMB business process automation software license related spending is expected to grow to $4.2 billion by 2006, reflecting a Compound Annual Growth Rate (CAGR) of 33% during 2002-2006, as SMBs transition from relatively simple home grown solutions to sophisticated implementations, including hosted versions.
Sales Force Automation (SFA) and Customer Relationship Management (CRM). The AMI study reveals that an estimated 784,000 U.S. SMBs are now using SFA and CRM solutions. According to AMI, majority of these solutions are home grown and relatively simple, such as databases and spreadsheets. However, the AMI study shows SMBs will transition to more impactful, yet cost
effective SFA/CRM solutions which include features such as common customer data repositories, lead management, etc. SalesForce.Com and Salesnet.Com are delivering such solutions via the web while current market leader Siebel along with FrontRange Solutions and Interact Commerce Corporation typify companies that deliver desktop and/or network based products within the SMB space.
The competitive environment is expected to further intensify as well established, larger players seek revenue growth in the burgeoning SMB market. Siebel, with its focused commitment to CRM and early entry into the MB market currently has a head start in offering enterprise class CRM applications to the SMB space. Microsoft with its MS CRM is well poised for a major push in the SMB arena, while Intuit is leveraging its impressive SB accounting installed base to introduce QuickBase, a SB focused CRM solution. Meanwhile, IBM, Oracle, Peoplesoft, Peachtree (division of Sage) along with others are sharpening their SMB focused enterprise software product-market strategies.
AMI estimates total CRM and SFA related U.S. SMB spending on software licensing during the 12 months ended 2Q 2002 reached $354 million, up 29% from $275 million in 2001, and is expected to grow at a 53% CAGR to almost $2 billion by 2006.
Enterprise Resource Planning (ERP) and Supply Chain Management (SCM). The number of SMBs using various ERP/SCM/Enhanced Accounting/MRP solutions grew 24% to 262,000 during the 12 months ended 2Q 2002, according to AMI study –
Manufacturing, Wholesale and Retail being the leading vertical markets. Enhanced Accounting/Financials and MRP are currently the dominant ERP modules deployed in the SMB space.
“SMBs typically derive between 10-20% of their annual revenues from transactions with large (1,000+ employees) sized businesses. This is a compelling business reason for SMBs to plug into the electronic networks established by larger companies,” said Dorothy Gryglak, Senior Analyst at AMI. “Conversely, larger enterprises are exerting pressure on SMBs to deploy ERP/SCM as they seek greater visibility into their supply chains. At some point the network effect will become a self sustaining force and drive
ERP/SCM adoption deeper into the SMB market,” noted Ms. Gryglak.
The SMB ERP/SCM space has thus far been served by players such as Exact (Macola), PeopleSoft and Great Plains (acquired by Microsoft), but has more recently attracted SAP (with its Business One solution) and J.D. Edwards, among others. According to AMI estimates, total ERP and SCM related US SMB spending on software licensing during the 12 months ended 2Q 2002 was $986
million, up 18% from $836 million in 2001, and is expected to grow at a 23% CAGR to $2.3 billion by 2006.
SMB Market Segmentation. With close to 8 million U.S. SMBs, IT solution providers will need to effectively hone in on appropriate target segments to lower their overall cost of sales to this market for acquiring customers. AMI has segmented the SMB market into 4 distinct and highly actionable “Tiers”. Each “Tier” or segment has a distinct profile in terms of firmographics, business process automation affinity and IT sophistication and adoption, which allows marketers to configure their solutions and messages in a manner most relevant to each segment. Further, the distinct demographic profiles of each segment allow for highly targeted marketing. This model has been well received by IT solution providers in targeting high value customers for specific IT solutions.
AMI’s SMB segmentation schema identifies businesses in Tier 1 and 2, comprising approximately 30% of all U.S. SMBs, or over 2 million companies, as early adopters of business process automation solutions. These segments typically spend 5-10 times more on IT solutions relative to other segments, and drive 85% of SMB expenditures incurred on business automation software
About Access Markets International (Partners) Inc. (AMI-Partners) AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital and actionable market intelligence, focusing on global small medium business (SMB) enterprises. The AMI-Partners mission is to empower the firm’s clients for success with the highest quality data, business planning and “go-to-market” solutions. AMI-Partners was founded in 1996 under the name of Access Media International (USA), Inc. (AMI-USA) by Andy Bose, formerly a group vice president at IDC. Since its inception, the firm has built a world-class management team spanning 10 to 25 years in IT, telecommunications, online communications, and multimedia. The team is comprised of individuals who
have formerly built careers at leading companies such as Cablevision, Compaq, IBM, IDC, JPMorgan, McKinsey and other industry-leading companies.
AMI-Partners has shaped the go-to-market SMB strategies of more than 130 leading IT, Internet, telecom and business services companies in the last five years. The firm is well known for its IT and Internet-adoption-based segmentation of the SMB Markets; for its annual retainership services based on global SMB tracking surveys; and for its proprietary database of several thousand SMBs in the U.S., Europe, Asia-Pacific and Latin America. The firm invests significantly in collecting survey-based information with several
thousand SMBs globally through the industry’s most comprehensive SMB survey instrument, and is considered to be the leading benchmark for tracking SMB trends.
For more information on AMI-Partners please visit www.ami-partners.com or call 212-944-5100.
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