Analyst View

SMBs in India spent over $45m on hosted applications in 2009: AMI

Small and medium businesses (SMBs, or companies with up to 999 employees) in India are set to spend more than $45 million on hosted applications in 2009, according to a new study by Access Markets International (AMI) Partners. Medium businesses (MBs, or companies with 100-999 employees) are anticipated to account for over two thirds of the country's total SMB expenditure, while small businesses are also increasing adoption of basic hosted applications.

During these economic times India SMBs, which are traditionally a price-conscious market, are even more cost conscious than normal. Hosted Applications require no upfront investment in technology. They also require little or no allocation of time or resources for software deployment and maintenance. For these reasons hosted applications appear well placed to compete against licensed software. Vendors who provide specific modules such as CRM, payroll, HR, collaborative applications, etc., will have an advantage over other vendors.

“The current economic situation has forced many India companies to spend less on technology and their IT infrastructure,” says Sumeeta Misra, AMI's Bangalore-based Research Associate. “Today more SMBs are investing in a hosting model rather than on a customized or package-based software. During the current scenario, it makes more sense for companies to host IT applications with a third-party than managing all of them in-house. The total cost of ownership is decreased further reducing hardware and support costs.”

It is in this context that hosted applications among SMBs have displayed a healthy growth in the last 12 months-this trend is expected to continue as SMBs look to invest strategically while tightly managing cash flow. In India, the number of businesses adopting hosted application has shown 8% growth in 2009.

India SMB spending on hosted CRM solutions is expected to grow over 10% in 2009; hosted ERP/SCM expenses are likely to rise at a marginally lower rate. But applications that enable business process transformation (BI, CRM, ERP, SCM, HR suites, email, office productivity suites) are experiencing double-digit growth. Other applications that can be hosted include project management, billing, accounting/ financial, merchant services, inventory management, messaging and payroll, etc.

The India SMB market is attracted more to on-demand collaboration applications. SMB spending on hosted VoIP is expected to grow at over 5% in 2009. Cloud computing has become another buzzword as it brings utility computing that helps customers pay only for the computing resources they use. India is being seen as one of the potential markets for cloud computing where several applications can be hosted. Many new products are being launched on the cloud that will help an organization use a wide range of services including development and hosting of managed applications off-premises.