By Aaron Tan, ZDNet Asia

20/12/2006

URL: http://www.zdnetasia.com/news/software/0,39044164,61976571,00.htm

Small and midsize businesses (SMB) are on track to spend more on hosted software in 2007, a new study reveals.

According to a new study by research company AMI-Partners, SMBs worldwide are expected to spend US$2.44 billion in on-demand CRM (customer relationship management) and ERP (enterprise resource planning) next year, up some 17 percent over 2006.

The strongest demand for CRM software will come from Britain,
France, the U.S. and Germany. Together, these countries are set to
increase their hosted CRM spending to US$674 million in 2007, up 23
percent year-on-year.

AMI analyst Spencer Richardson said in a statement that hosted
software already accounts for 4 percent of the total global software
spending by SMBs, and is expected to increase in the coming years.

“Hosted/SaaS (software-as-a-service) CRM and ERP are gaining
market share over packaged software, as more SMBs opt for these hosted
services for mission-critical applications,” Richardson noted.

Globally, AMI noted that Canada, France and Sweden may become
the next largest buyers of hosted software, with a compound annual
growth rate of 15 percent over the next five years. The U.S. is also
likely to maintain its dominant market share of global on-demand
software market.

“SMBs in the U.S. spent more than US$1 billion on their hosted
CRM and ERP software in 2006, accounting for 52 percent of the overall
US$2 billion global investment in hosted software,” Richardson said.

“Germany was second with US$179 million, or about 9 percent of
the global hosted spend. Japan, Britain and France round up the top
five with a combined investment of US$318 million in 2006,” he added.

CRM has also seen the highest growth in the past year among
hosted software products. Outside the U.S, spending in on-demand CRM
rose 22 percent, from US$182 million in 2005, to US$235 million this
year.

Blueprint Global Services,
a Singapore-based IT services company, signed up with SaaS provider
NetSuite after having difficulties locating customer data in its
previous patchwork system of Excel spreadsheets and Peachtree
accounting software.

According to Bhavesh Shah, NetSuite’s on-demand software,
which melds financials and CRM into a single hosted package, has
allowed Blueprint to have real-time overview of his business. “We’re
able to get information in one place, rather than from disparate
systems,” he told ZDNet Asia in a phone interview.

“The overall experience has been good,” Shah noted. “As an
SMB, buying software as a service also allows your cash flow to be
better managed.”

Shah, however, lamented about the high support costs for his
on-demand software. He noted that many markets in the Asia tend to be
price-sensitive, and SaaS vendors need to take that into consideration if they want to be successful in Asia.

He also pointed out other challenges for the on-demand software market in Asia, such as the low broadband penetration in some developing markets, and data security concerns among larger Asian companies.