SMBs Are Shopping For ERP and CRM Solutions
The market remains fragmented, so leading vendors must drive home the value of offerings to command market share.
Posted May 11, 2005
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While the vast majority of small and medium-size businesses (SMBs) are using some type of entry-level business accounting solution, small businesses in particular have showed a sharp increase in their plans to deploy new enterprise resource planning (ERP) and CRM solutions in 2005, a new study shows. AMI Partners' "2004-2005 U.S. SMB Business and Applications Software Market Overview and Assessment," is a survey of 1,000 SMBs in the United States. The consulting firm found that 19 percent of small businesses (those with fewer than 100 employees) plan to deploy an ERP application in 2005, compared to only 3 percent in 2004. Additionally, 23 percent plan to deploy a CRM solution, compared to 4 percent in 2004. Sixty-three percent of U.S. small businesses, and 93 percent of medium businesses (those with 100 to 999 employees) are using purpose-built accounting solutions. The report also concluded that CRM spending growth within the SMB space will outpace that of companies' spending to adopt ERP solutions, but annual spending will be higher in the ERP area, indicating that companies are spending less money when purchasing a CRM solution as opposed to an ERP application. Laurie McCabe, vice president of SMB insights and solutions at AMI Partners and author of the report, says this distinction can be attributed to SMB companies "looking at ERP solutions more comprehensively, whereas with CRM solutions it may be more of a point product." The increase in tech-based business solutions among SMBs can be attributed to growing Internet use and familiarity, coupled with increasing access to high-speed Internet connections by SMBs, according to McCabe. Increased penetration rates of broadband Internet service and more companies doing business online with Web sites have also added to the number of SMBs adopting business solutions. These factors are paving the way for the adoption of hosted and on-demand applications by SMBs, McCabe says: "SMBs are becoming more comfortable with using technology-based business solutions and are becoming better educated about how these solution can benefit their businesses. More and more SMBs are transacting, collaborating, and communicating via the Internet. Years ago, people said they would never purchase certain things off the Internet, and now they are. It's the same thing." Vendors like FrontRange Solutions, Intuit, Microsoft, Oracle, SAP, and other leading players enjoy a healthy share of the SMB market, but AMI found the market is still fragmented. Forty-five percent of medium businesses indicated they use other ERP solutions from a list of additional vendors, which includes Constant Contact, eGain Communications, and Pivotal. "The U.S. SMB market is comprised of a diverse group of companies with lots of different needs, such as customer base, budgets, and priorities, and that makes it a difficult market for just a few vendors to dominate in terms of the market share," McCabe says. "In order to compete and rise above the noise in this crowded area, vendors are going to have to identify and align their offerings, channels, delivery options, and price points, and really drive home the value their offerings can deliver to these companies." Related articles: U.S. Service Vendors Target--and Profit From--the Midmarket Midmarket Champions The Key to Successful Client Relationships Integrate project management and CRM.
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