Asian SMBs open to hosted software

Small and midsize manufacturers in Asia are more keen to subscribe to software as a service, compared to rest of the world.

On-demand or hosted versions of business applications like ERP and CRM are going down well with small and midsize manufacturers in the Asia-Pacific region, reveals new research.

According to AMI-Partners' report released this week, spending on hosted applications--also known as software-as-a-service (SaaS)--by small and midsize manufacturers in the region is the fastest growing in the world. The Asia-Pacific market, excluding Japan, is projected to grow at a compound annual growth rate (CAGR) of 27 percent from 2005 to 2010, said Jackie Chan, a senior analyst at AMI-Partners, in an e-mail interview with ZDNet Asia.

The second fastest-growing market for SaaS is Latin America, which is forecast to grow at a CAGR of 26 percent between 2005 and 2010, Chan added.

With SaaS, companies do not need to buy expensive hardware to run business applications like CRM (customer relationship management), ERP (enterprise resource planning) or SCM (supply chain management). Instead, applications are hosted on the Internet with service providers such as Salesforce.com and NetSuite, and users can access them using a Web browser for a subscription fee.

AMI-Partner's study also forecast hosted CRM spending by Asia-Pacific small and midsize manufacturers to grow 30 percent over 2005--twice the growth rate of packaged CRM software spending. In terms of ERP and SCM, SaaS spending will grow 20 percent over last year, while packaged ERP and SCM software spending is forecast to increase by 13 percent.

According to the New-York based Chan, most of the demand for SaaS will come from China's SMBs in the manufacturing sector. China's spending on SaaS this year, she noted, will grow by 34 percent and account for 29 percent of all SMB manufacturing IT spending in this area. China's manufacturing SMBs will also register a CAGR of 30 percent between 2005 and 2010.

In India, small and midsize manufacturers will contribute 16 percent of the country's total sector spending on SaaS this year, with a CAGR of 28 percent between 2005 and 2010, Chan added.

IT spend of manufacturing SMBs in the Asia-Pacific region

Currency in USD
Source: AMI-Partners

The study also revealed that SMBs in Asia's manufacturing sector are set to spend about US$23.5 billion on IT this year, an increase of 16 percent over 2005.

Nearly half or 48 percent of the spending will be driven by China, up from 41 percent last year. India and Korea are expected to contribute 10 percent each. Within Southeast Asia, Indonesia and Thailand were singled out by Chan as "tiger economies".

The manufacturing sector is the fastest growing vertical that AMI-Partners tracks, accounting for over one-third of all IT spending by SMBs in the region, said Chan.

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