AMI-Partners: The $35B North America SMB Enterprise Software Market Will Return to Positive Growth in 2010

NEW YORK--The North America small (1-99 employees) and medium (100-999 employees) business (SMB) markets for application software and services is poised to become a $35 billion spending opportunity by 2013. AMI-Partners estimates that spending will expand at a 6% CAGR in the next five years. While the economic downturn will restrict expenditures (below 1% growth) through 2009, a return to stronger growth should resume in the latter half of 2010.

These are some of the findings from AMI’s new study, “2009 Overview of the Business & Enterprise Application Software and Services Market,” which provides a perspective on growth opportunities in the North America SMB market.

Small and mid-market firms are becoming an increasingly attractive growth segment for enterprise application software and hosted services vendors. While spending on operating systems and traditional productivity software is slowing, in part, due to declining PC shipments, SMBs continue to invest in solutions that promise to deliver stronger cost effectiveness, business efficiencies, and customer intimacy. AMI forecasts high single digit CAGRs for on-premise enterprise software during the 2008 - 2013 period, and double-digit growth for SaaS-based offerings.

“The value proposition for enterprise solutions, such as ERP, CRM, business intelligence, and financial management, are compelling to both small and medium businesses seeking more effective performance management tools,” says Helen Rosen, VP with AMI-Partners. “Offerings that provide more transparency into drivers of financial and operating performance have the potential to help these growing businesses better align core tasks and processes with key growth objectives.”

Market acceptance of enterprise software and services has accelerated in recent years and should continue to grow, particularly as on-demand service models become more robust and cost-effective entry points for SMBs. Some observations AMI notes in its most recent study are:

• Enterprise accounting and financial management tools are entrenched in the market.
• Nearly half of all MBs and close to a quarter of SBs have deployed ERP, CRM, and collaborative software across their organizations.
• SaaS has reached an inflexion point among MBs showing strong YoY adoption growth.
• Opportunities for bundles of on-demand service are greenfield – adoption rates below the top three application categories are light.

Vendors that succeed in this market will be those who deliver against three key get-rights: creating solutions that address key SMB pain points, packaging bundles that can be leveraged and extended within and/or across business functions, and integrating an industry overlay that ties a solution to an SMB’s specific markets.

Related Studies

AMI-Partners’ 2008-09: U.S. and Canada Small Business Market Overview – Impact of Economy: Changing Dynamics, Opportunities & Challenges and 2008-09: U.S. and Canada Medium Business Market Overview – Impact of Economy: Changing Dynamics, Opportunities & Challenges studies highlight 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-Partners’ annual surveys of SMBs in India, 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. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

In light of global recessionary fears and the impact of economic downshifts on business, AMI-Partners has expanded its tracking studies to include several questions pertaining to SMBs’ perceptions of their dependence on local, national and global economies as well as their expectations about economic growth. These questions gained added significance in light of the timing of this year’s studies, which overlapped with the global financial crisis starting in mid-September. AMI-Partners’ studies, thus, present an early picture of an SMB market undergoing a major transition. Given that many SMBs are at the leading edge of this transition, AMI-Partners has included an additional analysis in this year’s reports to assess demographics, attitudes, current IT adoption as well as planned IT purchases among “concerned SMBs” compared to the rest of the market. (AMI-Partners defines concerned SBs as those that expect the local/regional economy will get worse in the next one year and concerned MBs as those that expect the local/regional, national or global economy to get worse in the next one year.)

For more information about these studies, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail ask_ami@ami-partners.com or visit www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a strong focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and “go-to-market” solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies. 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 25 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.