Software As A Serivce – Hosted Applications

Research firm AMI Partners writes in a report Software-as-Services: Moving On Demand To In Demand with SMBs that “Although interest in and acceptance of SaS solutions is on the rise in the SMB market, adoption has yet to accelerate as quickly as vendors would like,” says Laurie McCabe, Vice President SMB Insights and Business Solutions at AMI-Partners. “SaS vendors have run into many of the same obstacles that other technology vendors have faced in selling to the sprawling and highly fragmented SMB market.”
On the demand side, the report analyzes key market drivers of and inhibitors to U.S. SMB adoption of SaS to date, and examines SMB penetration, plans and forecasted spending for SaS solutions.
For instance:
– Internal SMB IT resources remain scarce: the typical small business averages a 0.60 full-time IT headcount, while the average medium business has five full-time IT staff. At the same time, SMB requirements for and reliance on technology-based
business solutions are rising.
– Growing Internet use and familiarity and increasingly pervasive high-speed access among SMBs are paving the way for SMB adoption of SaS applications.
– SMB demand for SaS and hosted applications is projected to grow at a 40% CAGR over the next four years. But the majority of SMBs currently have no plans to adopt SaS solutions, often because of lack of awareness and education about SaS vendors and
On the supply side, AMI interviewed 13 leading SaS vendors, including ADP, Concur, Employease, Intacct,, Intuit, Marqui, NetSuite, OpenAir,, Siebel CRM OnDemand, Smart Online and Vettro. The report assesses the solution, marketing and channels approaches that leading SaS vendors are taking to accelerate SaS demand and adoption. The study delves into the following areas and more:
– How SaS vendors – most of whom are smaller players with little brand equity and small marketing budgets – are competing for mindshare and business;
– The progress SaS vendors have made to quell past concerns about the SaS model
– such as increasing functionality, enhancing customization and integration capabilities, and locking down security;
– Steps they are taking in solution, marketing and channels areas to accelerate broad-based SMB adoption.
The study discusses several factors that will be pivotal in spurring broad-scale SMB adoption of SaS solutions, including that vendors must:
– Continue to improve integration and configuration capabilities, making it easier to tailor their solutions for individual requirements;
– Balance greater functionality with ease-of-use requirements;
– Integrate disparate applications and business process into more complete but flexible solutions;
– Develop a multi-dimensional channels strategy to align with the different ways that SMB customers want to procure solutions;
– Extend into adjacent market areas by integrating internally developed, acquired or partner solutions with their existing portfolios.
The report also assesses the next phase of SaS industry development – that of increased consolidation – and examines the different ways that consolidation is likely to occur. Further, the study considers the impact that major players, such as IBM, Microsoft or a wild card, will have as they form and shape active SaS ecosystems. Background charts for each vendor interviewed for the study are provided in the report appendix.