SaaS Business Apps Drive SMB Cloud Computing Adoption

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SaaS Business Apps

Much of cloud computing’s infancy was fueled by software development firms, enterprise tech companies, and large financial institutions. IBM sparked the trend in 2003 with its on-demand computing initiative. By late 2005, Amazon recognized the potential market for IaaS and PaaS solutions and launched its EC2 service less than a year later.

Fast forward five years, and almost every tech startup relies in some way on EC2, Windows Azure, Google Apps Engine, or similar IaaS and PaaS services. But it’s SaaS solutions—and their popularity with SMBs—that have driven cloud computing adoption and innovation.

SaaS App Report

A recent Gartner report estimated that the IaaS market hit $3.7 billion in 2011 and will grow to $10.5 billion by 2014. In a separate report, Forrester Research predicted the SaaS market will explode from $21 billion in 2011 to $63 billion by 2014. In short, SaaS is already trouncing IaaS in market share—a trend that will continue in the coming years. As much as half of that grow will be in the SMB sector.

For anyone looking to capitalize on SMBs’ growing interest in cloud computing, Techaisle’s recent cloud computing survey offers a trove of helpful information:

  • 46% of SMBs who’ve adopted cloud computing services use only SaaS business apps; 26% use only IaaS; and 26% use both SaaS business apps and IaaS.
  • 69% of SMBs prefer to procure SaaS apps from a single trusted integration specialist or vendor.
  • 40% of SMBs desire more training opportunities
  • 36% of SMBs cite lack of app customization as the primary SaaS drawback
  • 41% of SMBs have experienced cloud service integration challenges
  • 49% of SMBs want faster deployments

As for why SMBs are so eager to embrace SaaS solutions, businesses cite simple installation, minimal configuration, on-demand everywhere availability, and integrated web-based data backup as some of the most desirable features of SaaS products.

By far, the most popular SaaS apps are core business productivity tools. Google Apps and Microsoft Office 365 are two of the best-selling SaaS products in the SMB community. Google claims that a majority of their 4 million Google Apps customers (and 70 million users) are SMBs. Similarly, Microsoft says that it has 100 million Office 365 users worldwide (a majority of which also come from SMBs).

The demand for SaaS products isn’t limited to office, collaboration, and email software. As of 2011, QuickBooks Online had 25 million users, and AMI reports that 570,000 SMBs have adopted cloud-based CRM solutions—a number they expect to triple over the next three years. Salesforce.com is the leader among CRM vendors, but the SaaS CRM field also includes Applicor, NetSuite, and SugarCRM. Other SaaS products popular with SMBs are email list management and marketing, project management, and database development and administration tools.

Moving forward, the next set of winners in the SMB SaaS market will likely be companies that provide apps and services that enhance interoperability and integrate cloud solutions into a single unified framework or control panel. Given the demand for seamless service and app integration, expect initiatives like OpenStack, HP’s converged cloud, and IBM’s SmartCloud to grow in popularity. Also look for Microsoft and Google to increase their presence in the broader SaaS market through Microsoft’s growing portfolio of SMB cloud services and Google’s Google Apps Marketplace.

By Joseph Walker

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