Site icon IT World Canada

Software market to get boost from small buyers

Small and mid-size business customers will form the next big software and services market, with sales in North America more than tripling to top US$3 billion by 2006, according to a recent report.

The study, conducted by New York-based analyst firm Jupiter Media Metrix, concluded that executives at midsize companies – those with 100 to 500 employees – are most interested in accounting and financial management applications, customer relationship management technology, and e-commerce storefronts. As these companies expand over the next 24 months they will be actively seeking software packages that solve business issues and have some inter-connectivity without requiring a great deal of costly customization

With larger vendors trying to address this market by “dumbing-down” their enterprise software, and a proliferation of smaller, regional players, no vendor has yet to dominate the small to mid-size business (SMB) space, said Marcia Loewenstein, a San Francisco-based senior analyst for Jupiter.

“[SMBs] have very similar needs [to enterprises] in that they have customer sales to deal with, they have finances to deal with and they want to serve their customers better, but they don’t have the resources – neither technical nor time – that a large enterprise might. If they do have an IT department, the staff are probably wearing many hats so there isn’t a whole team devoted to integrating or customizing a CRM or finance application,” Loewenstein said.

According to Jupiter analysts, increasing availability of full-featured functionality – without the high-ticket pricing scheme that defines the large enterprise market – will drive growth, along with demand among SMBs for solutions that can scale as companies grow. Specifically, Jupiter estimates that the North American market for enterprise software applications and related services sold into SMBs will grow from US$971 million in 2001 to US$3.4 billion by 2006.

“Five or 10 years ago – or whenever a mid-size company was going through its last evaluation/upgrade cycle – these kinds of easily implemented, Web-based CRM and sales force automation tools weren’t readily available. So part of [the anticipated growth] is the availability of easily implemented plug-and-play solutions,” Loewenstein said.

Although they have been slow out of the gate, some vendors are now starting to address the needs of the SMB market, she added.

“Intuit has historically served very small companies, and a lot of companies in that range are still using Quicken because there’s really nothing that attractive to move them over. But now Intuit is releasing some solutions (targeted) to the 25 to 100 employee market, so they see a huge opportunity for their install base of companies who are growing out of existing solutions.”

“There are also some fully-integrated solutions that are becoming available from big players, like Oracle Small Business, and Microsoft’s Great Plains integrating with bCentral,” she added.

SMBs will invest the most dollars in tools for Web sites devoted to corporate marketing and product information and CRM, according to the study. According to an October 2001 survey of executives, nearly half of SMBs will have built a Web presence in the next year. Jupiter analysts forecast that e-commerce/Web presence applications will grow to US$1.1 billion by 2006 and account for more than one-third of the market – up from 14 per cent in 2001. Additionally, spending on CRM software by SMBs is expected to reach US$651 million and make up 19 percent of the market by 2006 – up from 10 per cent in 2001.

Since SMB executives are often interested in IT, but not technological experts, Loewenstein said that they may face not only lack of appropriate products, but also a hard-to-fill knowledge gap.

“A lot of times [SMB decision-makers] look to colleagues or word-of-mouth for information. As opposed to the large enterprise market where the vendors deal with them directly, this market is a channel market in most cases – they are still looking to their regional provider of technology who have they worked with in the past,” she said.

(With files from IDG News Service)

Jupiter Media Metrix is at http://www.jmm.com/.

Exit mobile version