Software as a service (SaaS) has strong growth potential among U.S. small and mid-sized businesses (SMBs), despite continued barriers to sales, according to IDC. An IDC study finds 5.1 percent of PC-owning small firms and 15.2 percent of PC-owning medium-sized firms planning to move forward with a SaaS solution within the next 12 months. But interest in specific solutions, rather than the appeal of SaaS in general, will be driving SMB adoption in this market.

"SaaS is intuitively appealing as a method of software delivery to small and medium-sized businesses (SMBs), but they have not been adopting SaaS as quickly as originally anticipated, even though the reality of their move to SaaS is greater than their perception," said Merle Sandler, senior research analyst for IDC's SMB Markets program. "Providers of on-demand software face a number of challenges when targeting SMBs, including establishing appropriate sales channels and deciding how best to market to these firms."

Other key findings from the IDC survey include:

• The ability to pay for capabilities as needed is the main factor encouraging small businesses (SBs) to use SaaS. Adding new users without difficulty and easing the workload of IT staff are factors nearly as important for medium-sized businesses (MBs).
• Concern about data security is the factor most frequently cited as discouraging the use of SaaS among firms of most sizes.
• SBs are most interested in adding CRM and software to handle remote access from other locations, while MBs are most likely to move to the online delivery of payroll and HR applications.

About the market research study

IDC's 17-page study, "The Adoption of Software as a Service in Small and Medium-Sized Businesses: Perception Versus Reality" (IDC #205798; March 2007) analyses results from IDC's 2007 U.S. Small and Medium-Sized Business Survey conducted with 614 small businesses and 418 medium-sized businesses. This study is designed to help vendors understand the current and planned usage of SaaS in SMBs as well as factors that would encourage or discourage SMBs from moving to SaaS. The study also takes a look at applications that are being delivered via software as a service or being considered for future provisioning.

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