Cloud-based business applications, especially those related to customer relationship management (CRM) are garnering considerable attention from U.S. small and mid-sized businesses (SMBs), according to new research from AMI-Partners.
In its latest "U.S. SMB Cloud Services Study," AMI determined that the software-as-a-service (SaaS) CRM market&mdashalready representing 570,000 U.S. SMB firms—is set to undergo double-digit year-over-year growth in the next five years. During this period, spending on SaaS CRM will outpace on-premises CRM nearly four to one, the firm predicts.
According to AMI's figures, last year, spending on on-premises CRM solutions was $1.3 billion, representing 70 percent of the total CRM market, while SaaS-based solutions accounted for 30 percent of the market, or $519 million.
Jacqueline Atkinson, research director at AMI, says that "specific to SMBs, many factors have shifted the market toward increased adoption of SaaS applications," including a greater availability of broadband Internet connectivity and the proliferation of wireless-enabled mobile devices.
A third factor that she identified is the economy. "Like with any size company, pressures from a down market have certainly moved more SMB owners and executives to drive-out costs while broadening efficiency," she says. "While certain applications, such as hosted email, have captured a larger share of the market, we're seeing an expansion for other business applications, such as CRM, business intelligence and accounting.
Also tied to the economy, Atkinson notes that "the advent of cloud services has allowed SMBs to acquire enterprise-class solutions, such as CRM, at significantly less total cost of ownership." Though she could not quantify this, Atkinson did point out that, "depending on the number of users, the savings over on-premises CRM software can be in the hundreds of thousands of dollars during an average five-year period."
This, she says, can happen because, "SaaS CRM reduces the overall investment by eliminating the added costs associated with on-premises solutions, such as software licenses, dedicated servers, maintenance fees and upgrades, not to mention, the savings on internal IT support personnel dedicated to managing the solution."
Also driving the push toward cloud-based software is a greater use of social media as a CRM tool, according to the report.
"More and more SMBs are attempting to attract and retain customers over social media channels," Atkinson explains. "Enterprise social CRM can translate what these companies readily perceive on their social communities into actionable insights for timely business planning."
The report notes that SaaS CRM vendors offering a social component, such as Salesforce.com or Sage, "will be influential in moving SMBs toward leveraging social CRM. These vendors consequently are poised to capture more of this growing SaaS CRM market."
Beyond the social media realm, trailblazers in the overall SaaS market include salesforce.com, Aplicor, and NetSuite, the report says.
"Nonetheless, today, SaaS solutions are near universal across all major software vendors," Atkinson adds. "Sage, SAP, Oracle, and Microsoft offer on-premises solutions, which are very relevant for a lot of enterprises, but have also captured a sizeable share of the SaaS market with their hosted solutions."