SaaS on the Rise With Small-to-Medium Businesses

The use of software as a service (SaaS) among small-to-medium businesses is on the rise, according to a report by Access Market International Partners (AMI-Partners). The market intelligence firm surveyed various businesses, defining small businesses as having one to 99 employees and medium ones at 100 to 999 employees.

The study, covering the year 2007, found that 21 percent of small businesses (SBs) and 31 percent of medium businesses (MBs) use SaaS, which are double the rates found in 2004. Adoption of SaaS was spurred by cost factors and ease of use, according to the report. Moreover, businesses are requiring software solutions that are easy to implement and maintain. The lack of infrastructure costs enabled by a SaaS solution can be a benefit too.

MBs were the largest adopters of SaaS, spending six times as much as SBs, according to the study. MBs are expected to be twice as likely to increase SaaS spending over the next year, the study's authors say.

While SaaS remains popular among SMBs, it has not shown the same growth at large businesses. Many of the larger businesses have sufficient resources -- both in terms of infrastructure and sufficiently skilled personnel -- to deploy their own solutions without having to subcontract via SaaS.

While SaaS is enjoying increased usage, there is still room for growth. SaaS vendors need a plan to reach customers, according to Sau Lam, business applications and solutions analyst at AMI-Partners.

"SaaS vendors need to intensify campaigns to educate and spark interest among SMBs that are not yet considering SaaS, identify other needs that existing customers have and develop and partner to extend their offerings to increase share of wallet," Lam stated in an AMI-Partners press release. "In addition, they need to build channel programs with partners that can persuade SMBs that are not yet considering SaaS to give it a serious look."

The report also reveals the SaaS services that have seen the greatest increase in usage. The top three solutions preferred by SBs include banking/finance, instant messaging and payroll processing applications. MBs favor payroll processing, banking/finance and human resources management.

For further details, contact AMI-Partners on its 133-page report, "2008 U.S. Small and Medium Business Applications & Solutions Market Overview," as described here.

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Will Kraft is a Web designer, technical consultant and freelance writer. He can be reached at [email protected]. Also, check out his blog at