Growth Predicted for SMB App Market

According to a new study from AMI-Partners, the North American small (1-99 employees) and medium (100-999 employees) business (SMB) markets for application software and services is poised to become a $35 billion spending opportunity by 2013. AMI-Partners estimates that spending will expand at a 6 percent CAGR in the next five years. While the economic downturn will restrict expenditures (below 1 percent growth) through 2009, a return to stronger growth should resume in the latter half of 2010.

AMI said SMBs 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, SMBs continue to invest in solutions that promise to deliver stronger cost-effectiveness, business efficiencies and customer intimacy. AMI forecasts high single-digit CAGRs for on-premise enterprise software during the 2008-2013 period, and double-digit growth for SaaS-based offerings.

“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,” said Helen Rosen, vice president with AMI-Partners. “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.”

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. AMI said vendors that succeed in this market will be those who deliver against three key points: creating solutions that address key SMB pain points, packaging bundles that can be leveraged and extended within and/or across business functions, and integrating an industry overlay that ties a solution to an SMB’s specific markets.

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