Small firms choose hosted enterprise apps

Global small and medium-sized businesses are investing unprecedented amounts in enterprise-class IT systems by choosing hosted versions of applications that previously would have been available to only their larger competitors.

Firms with between one and 999 employees worldwide are on track to spend US$2.44bn on hosted software-as-a-service (SaaS) customer relationship management (CRM), enterprise resource planning (ERP) and supply chain management (SCM) next year.

The figure represents a rise of 17 percent over 2006 levels, according to a new study by Access Markets International Partners.

Fuelling these investments will be strong demand for CRM from Britain, France, the US and Germany, the analyst firm predicts.

These four countries alone are set to boost their hosted CRM spending to US$674m in 2007, up 23 percent year on year.

Investment trends in ERP and SCM technologies in key countries in the Asia-Pacific region, especially Japan and Singapore, will increase their investment by about 17 percent in 2007.

"Hosted/SaaS CRM and ERP/SCM are gaining market share over packaged software as more and more SMBs opt for hosted services for their mission-critical applications," said AMI analyst Spencer Richardson.

"Hosted software solutions already account for four percent of the total global software spend by SMBs. This is set to rise in the coming years."

Canada, France and Sweden may become the next largest adopters of hosted/SaaS CRM and ERP/SCM, with a compound annual growth rate (CAGR) of 15 percent over the next five years.

Meanwhile, some level of market saturation will stabilise CAGR at 12 to 13 percent for Britain, the US and Germany. In terms of value, the US is likely to maintain its dominant market share of global hosted/SaaS CRM and ERP/SCM investment.

High demand outside the US comes from the insurance, real estate and financial services sectors, according to AMI.

Britain, France, Singapore and Canada are set to grow their hosted software spend by about 17 percent.

As for penetration rates for hosted/SaaS CRM and ERP/SCM within the SMB sector, Australia ranks first with 22 percent, followed by the US at 20 percent and Singapore at 16 percent.

"SMBs in the US spent more than US$1bn on their hosted/SaaS CRM and ERP/SCM in 2006, accounting for 52 percent of the overall $2bn global investment in hosted software," said Richardson.

"Germany was second with US$179m, or about nine per cent of the global hosted spend. Japan, Britain and France round out the top five with a combined investment of US$318m in 2006."

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