SMB: Battleground of China's enterprise application market

The relatively untapped small and medium-sized business market will be the focus of vendors over the next five years, new research shows.

Stronger competition for China's enterprise application market is expected to emerge in the small and midsize business segment, says the analysts at IDC.

According to IDC's latest report, enterprise application (EA) vendors will focus on smaller organizations as 62 percent of SMBs have yet to adopt or fully implement IT. SMBs form 63 percent of China's 5.5 million enterprises.

Competition in the mid- to low-end market is expected to increase among the international software vendors as the Chinese players typically focus on the higher-end segment, said Grace Han, IDC China software and service research manager, in a statement.

The study revealed that SMBs look for features such as flexibility and user-friendliness of applications, and the speed at which they can implement the technology. SMBs also prefer industry-specific applications to simplified or scaled down high-end products.

According to IDC, as the SMB market matures, application software will focus on industry applications, and demand for business performance management (BPM), human resource management (HRM), and enterprise assets management (EAM) will also increase.

In the report released last week, IDC projected that China's EA market, which was worth US$1.75 billion in 2005, will grow at a compound annual growth rate (CAGR) of 17.4 percent to reach US$4 billion by 2010.

The report also predicted that the manufacturing sector will fuel the growth of China's EA market. Manufacturing was the largest market for EA last year, accounting for more than half of the market's revenue, followed by retail and telecommunications.

Overall, enterprise resource management (ERM) and supply chain management (SCM) were the main contributors to the EA market; both markets also grew by approximately 100 percent over 2004 in the SMB EA segment, according to IDC.