NEW YORK, US: Small and medium businesses (SMBs or companies with less than 1,000 employees) in Australia are poised to invest $66 million on software-as-a-service (SaaS) applications in 2009, up from 2008 by 11 per cnet, according to a study by New York-based Access Markets International (AMI) Partners, Inc.

Where overall IT investment among Australia SMBs is expected to decrease by -0.3 per cent due to the economic downturn, the use of SaaS applications will be a major growth area in the downward pressure of IT spending in 2009.

In the global recession, Australia SMBs have started focusing on improving internal efficiency to gain a competitive advantage. “Deploying ERP applications is essential to meeting this goal; 79 percent of small businesses (SBs) and 82 percent of medium businesses (MBs) see the importance of using the application, up by 8 per cent and 25 per cent respectively from 2007,” says Yuki Uehara, New York-based analyst at AMI-Partners.

“Australia SMBs are significantly expanding their international business focus. The flexibility, scalability and accessibility that ERP via SaaS offers best match the needs of businesses in an expansion mode,”  he added.

Australia SMBs are also focusing on customer retention to maintain their bottom-line revenues during the recession. To improve customer satisfaction and maximize sales from existing customers, interest in deploying seamless CRM applications has also significantly increased since 2007.

“Where the overhead cost of CRM adoption is too burdensome given the current cost-cutting pressure, SaaS offers flexible subscription-based pricing, no overhead, and a shorter installation timeline than in-house installation,” Uehara said.

"Other business applications account for the vast majority of the SaaS pie. Roughly a third of Australia SMBs are using applications via SaaS. Popular applications include email, accounting, online data backup, document management, and web conferencing. These applications collectively generate 82 per cent of total SaaS spending and are expected to grow by 10 per cent in 2009."

“The opportunity for SaaS model is not limited to applications alone. Actual incidences of security breaches have increased among SMBs; hence their need for adequate security has risen. A subscription-based managed security service offering may be the best match for Australia SMBs’ growing needs in coming years. Usage of basic content security solutions, such as anti-virus, anti-spam and anti-spyware, is almost at saturation. These SMBs are now ready to adopt more advanced solutions such as intrusion detection/prevention, patch management, web filtering and security management,” he said.

However, he added that, deploying multiple security solutions and products makes security environments too complex to manage by themselves. This is particularly true for Australia SBs that have very limited internal capability and resources to manage an increasingly complex security environment. As a result, roughly a third of these SBs and a fourth of MBs are planning to outsource IT security. “The subscription-based pricing model is able to make managed security service affordable and easier to deploy for Australia SMBs.