NEW YORK--June 19, 2006--Software-as-a-service (SaaS) is gaining ground among small businesses (SB:1-99 employees) and medium businesses (MB:100-999 employees) in Japan. Total spending on the hosted applications among Japan SMBs will increase from $112 million in 2005 to $138 million in 2006, up by 23%. On the adoption base, Japan SMBs using at least one type of application via SaaS model will grow by 20%, from 13% of PC SMBs to 15%.

These findings were released today by New York-based Access Markets International (AMI) Partners, Inc. The growth of SaaS spending is roughly twice as high as that of overall software investment of 11%. The rapid deployment of CRM as a service is the major driver for the overall growth of SaaS spending. Where ERP and all other application services spending will grow by 18% and 21%, respectively, CRM service spending is expected to increase by 29% in 2006.

The expected growth rate of SaaS spending among Japan SMBs (23%) is higher than their counterparts in the North America (19%). "Better broadband infrastructure, lower software application penetration and greater legal requirements for security management are contributing factors behind the higher SaaS spending growth among Japan SMBs," says Yuki Uehara, New York-based research analyst at AMI-Partners.

First, in 2006, broadband usage will reach 85% of all SMBs in Japan, while that figure is 78% for their US counterparts. Where DSL, T1 and cable modems are the leading data lines among the US SMBs, fiber optics which offer 20 times or higher data-transmit speed than those leading lines, is rapidly gaining popularity among Japan SMBs. The proliferation of fiber optics better enables application usage over the Internet in Japan than in the U.S.

Second, overall enterprise software applications adoption among Japan SMBs are lower than their US counterparts. For example, the adoption of CRM among Japan SMBs is 0.6%, roughly a fourth of the rate of their US counterparts. ERP penetration among U.S. SMBs is 1.3 times higher than their Japanese counterparts. High cost and risk are barriers for SMBs to deploy such applications. However, SaaS encourages SMBs to deploy new applications at lower cost than in-house deployment and lessens risk of developing inappropriate systems which end up unused.

Lastly, The Personal Information Protection Act places a heavier burden of security solutions on Japan SMBs than their US counterparts. The legal requirement is likely to drive higher demand among Japan SMBs particularly for CRM systems, which archive and transmit customer data and therefore are most vulnerable to attack and penalties. Professionally managed CRM services that offer greater security solutions than those that SMBs themselves can afford are more attractive in Japan than in the U.S. "Japan has a better environment for SaaS players to develop business than the U.S., and clear focus on the SMB market creates a greater growth opportunity."

About the Study

AMI's 2005-2006 Japan Small Business Market Overview and Comprehensive Market Opportunity Assessment and 2005-2006 Japan Medium Business Market Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI's annual surveys of SMBs across Japan, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. These data point to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, visit the AMI Web site at www.ami-partners.com.

About AMI-Partners

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence -- focusing on global small and medium business (SMB) enterprises. The AMI-Partners mission is to empower clients for success with the highest quality data, business planning and "go-to-market" solutions. AMI was founded in 1996 under the name of Access Media International (USA), Inc. by Andy Bose, formerly group vice president at IDC. Since its inception, the firm has built a world-class management team, each with ten to fifteen years' experience in IT, telecom, online communications or multimedia.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 20 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.