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SaaS: More and More, Small and Medium Companies Take the Plunge
SaaS is gaining popularity with small and medium sized companies. Just how fast is shown by some recent surveys made available by AMI Partners. AMI has forecast 25 percent compound annual growth for hosted business applications used by small and medium sized companies in the US from now until 2014, compared to an expected growth of just five percent for traditional on-premise software.
A follow-up report issued by AMI in January, 2011 found that the rise of SaaS is even happening faster in places like India. There, spending on SaaS by SMBs is expected to increase a staggering 43 percent in 2011. More than 10 percent of India’s SMBs have expressed an interest in adopting SaaS or cloud-based applications in the up-coming year.
Arnab Bhar, Research Analyst at AMI-Partners-India, said “as software and services have become more integral to the SMB IT environment, SaaS is progressively gaining traction and mindshare as it reduces the initial capex for setting up the IT infrastructure. In addition, cloud-based services also reduce the need for on-premise IT staff, which most SMBs lack anyway. Moreover, the cloud vendors are beginning to push the market demand while also providing local channel partners the cloud infrastructure, skills and resources required to deliver these cloud-based services.”
A complete change-over to SaaS isn’t going to happen soon though.
Helen Rosen, a vice president with AMI-Partners, said that “there is an entire marketplace trained on and running PC-based applications that will not disappear overnight. Much of these investments are in applications that are highly embedded, and would not be cost-effective to replace wholesale. In our opinion, there is immediate potential for vendors to capture incremental revenues from installed products through partial upgrades and add-ons delivered via SaaS. As an interim strategy, this could help vendors—particularly those with large footprints of legacy applications—protect their base, allow for an organic migration, and create a platform for an ecosystem of application enhancements to emerge.”
