SMBs to spend US$3M on SaaS

SINGAPORE--Bolstered by the popularity of Web applications, small and medium-sized businesses (SMBs) in Singapore are set to spend US$3 million on hosted applications and software as a service (SaaS) this year, according to a new study by AMI-Partners.

In a statement released Tuesday, Daniel Sim, a senior AMI-Partners analyst, said the forecast is a 27 percent increase on last year.

"Even though spending on hosted applications and SaaS represents only 3 percent of all software spending among SMBs in Singapore, its 27 percent growth rate is the fastest in Southeast Asia," Sim added.

The analyst firm attributed the rise in adoption of hosted applications to the growing popularity of online applications such as Web-based e-mail and instant messaging.

The release noted that users are "more comfortable than ever before" communicating over the Internet, which it said has achieved a knock-on effect on user acceptance of business applications, such as sales ordering and contract management, residing online.

According to Sim, SaaS, a delivery model where companies do not buy but pay to use the software, is an option for businesses with resource constraints.

"SMBs, unlike large businesses, lack the resources when it comes to information system support," Sim said. "For SMBs to adopt SaaS, vendors would have to play a value-added role in educating SMBs on critical issues such as data security, downtime management, costs versus benefits, data ownership and data migration issues."

The top three vertical markets for hosted applications are wholesale, retail and professional services such as accounting and legal firms, said the release.

The study also highlighted the healthcare and financial services sectors as possible growth hot spots, adding that the latter will see related software spending grow 29 percent this year over 2006.

According to AMI-Partners, smaller banks and financial houses would be drawn to hosted applications to "keep up" with regulatory pressures. Hosted applications, it added, are a quicker way to get the latest versions of software.

Said Sim: "Regulatory bodies defining security standards and conformity requirements have helped greatly in ensuring data security and, at the same time, pushing banking and financial houses to adapt to the required protocols."

Overall software spending by SMBs in Singapore is on track to cross US$127 million this year, up 9 percent over last year, said AMI-Partners.