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A report by New York-based consulting firm AMI-Partners predicts the North American small and midsize business market for application software and services is poised to become a $35 billion spending opportunity by 2013.
AMI estimates that spending will expand at a 6 percent CAGR (compound annual growth rate) in the next five years. Although the company admits the economic downturn will restrict expenditures (below one percent growth) through 2009, AMI predicts a return to stronger growth should resume in the latter half of 2010.
The findings came from the AMI study, “2009 Overview of the Business & Enterprise Application Software and Services Market,” which provides a perspective on growth opportunities in the North America SMB market. AMI’s report forecasts high single-digit CAGRs for on-premises enterprise software during the period from 2008 to 2013, and predicts double-digit growth for SAAS (software as a service)-based offerings.
The company says midmarket firms are becoming an increasingly attractive growth segment for enterprise application software and hosted services vendors. While spending on operating systems and traditional productivity software is slowing, in part, due to declining PC shipments, AMI finds SMBs continue to invest in solutions that promise to deliver stronger cost effectiveness, business efficiencies as well as customer intimacy.
“The value proposition for enterprise solutions, such as ERP, CRM, business intelligence, and financial management, are compelling to both small and medium businesses seeking more effective performance management tools,” Helen Rosen, vice president at AMI, said in a statement. “Offerings that provide more transparency into drivers of financial and operating performance have the potential to help these growing businesses better align core tasks and processes with key growth objectives.”
AMI’s report notes that market acceptance of enterprise software and services has accelerated in recent years and should continue to grow, particularly as on-demand service models become more robust and cost-effective entry points for SMBs.
The report broke the SMB category down to small businesses, or SBs, and midsize businesses, or MBs, finding nearly half of all MBs and close to a quarter of SBs have deployed ERP, CRM and collaborative software across their organizations. AMI determined SAAS has reached an inflection point among MBs and shows strong year-over-year adoption growth. Opportunities for bundles of on-demand service are “greenfield,” meaning adoption rates below the top three application categories are light.
AMI also suggested vendors that succeed in this market will be those who deliver in three areas: creating solutions that address key SMB pain points; packaging bundles that can be leveraged and extended within or across business functions; and integrating an industry overlay that ties a solution to an SMB’s specific markets. The full report is available for purchase for $10,000 via the company’s Website.