Small and midsize companies are slowly but surely turning their heads -- and business -- to software-as-a-service.
Posted Mar 3, 2008
For years now, software-as-a-service (SaaS) has been the little engine that could -- and it's been gaining significant traction as more and more companies are turning to hosted, on-demand solutions, according to a report released today by Access Markets International (AMI) Partners. The report particularly underscores the growing adoption of SaaS among small and midsize businesses (SMBs), revealing that 21 percent of small businesses and 31 percent of midsize ones are using a SaaS model -- double the penetration seen in 2004.
The consistent development of SaaS remains "steady" and "incremental," says Laurie McCabe, vice president of SMB insights and solutions at AMI-Partners. According to the report, SMBs are drawn to SaaS because the technology:
"There are, truly, many great SaaS solutions out there for SMBs, in almost every application area," McCabe says. Yet while SaaS technology may be readily available, adoption is hampered by the fact that many businesses still need to be educated about its benefits.
The report states that SaaS adoption among midsize businesses is "significantly outpacing" penetration within the small-business sector -- in fact, midsize businesses are, on average, spending about six times more per year than their small-business counterparts are, and they're twice as likely to report a planned increase in spending in the next 12 months. "Small businesses are typically slower than [midsize] businesses to adopt any new type of technology solution," McCabe says. "As a group, small businesses tend to be less knowledgeable about what's available, and more reluctant to try things than [midsize] businesses [are]."
Aside from educating themselves, McCabe argues that there are no legitimate obstacles for smaller businesses looking to acquire a SaaS solution -- SaaS is an equal-opportunity model. The initial steps are remarkably simple, McCabe says -- and may be just what a small or midsize company needs to get the ball rolling: "Identify the business functions you need a solution for, and 'google' that function -- such as 'CRM and SaaS' -- to get an idea of the range of offerings out there," she advises. "Then try a few and compare."
- is easy to use;
- is easy to implement and maintain;
- requires limited infrastructure and technology resources; and
- is increasingly available.
In fact, she adds, the most fundamental reason to turn to SaaS in the first place is that it's "easier to try and use than traditional packaged software." Furthermore, most SaaS solution providers will give a potential client the option to see its data in a live demo -- and some industry wags have noted that any vendor that won't let you test-drive its software should be immediately removed from consideration.
Growth may be steady but McCabe predicts SaaS will take another three years to become truly accepted by the mainstream. It helps that big-name companies are also taking a dive into the SaaS pool, further extending awareness of the market. And the fact that SaaS solutions are now being peddled by established vendors such as Microsoft and IBM should also help boost confidence.
As of now, the market has yet to ripen. "Our survey indicated that 34 percent of small businesses were not aware of SaaS, and 33 percent didn't think SaaS was relevant to their business[es]," McCabe laments. As a result, she adds, it remains the vendors' burden to convey the advantages and practicality of SaaS.
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