SINGAPORE: With the right infrastructure in place and a high Internet penetration rate, China small and medium businesses (SMBs or companies with less than 1,000 employees) will continue to deploy software-as-a-service (SaaS) at an estimated compound annual growth rate of 17.8 per cent over the next five years, having already seen over $90 million invested on SaaS applications in 2008, according to a new survey by AMI-Partners.

“Channel partners in China will strive to evolve into all-in-one providers and will look at building healthy working relationships with key vendors to further drive managed services and SaaS adoption among China SMBs,” Augusto Roman P. Carlos, Asia-Pacific IT Services Senior Analyst at AMI-Partners said.

About 30 per cent of channel partners in China offer remote managed services and account for almost a third of the total SMB channel partner revenue of $17.5 billion. “These MSPs are relatively larger in size than the average China channel partner and are slightly older. Having been in business longer, they realize the need to diversify and expand their offerings to stay competitive in the environment and expand their revenue streams,” he added. 

China SMBs are getting more comfortable with using the Internet for conducting business transactions, which will pave the way for SaaS growth. With SaaS, SMBs get cost efficiency and simplicity of management and also minimize the likelihood of system breakdown and repairs. While basic IT applications such as e-mail and payroll are currently the key SaaS solutions used, high-value SaaS solutions such as financials, ERP and CRM adoption will gain momentum as SMBs become more mature and sophisticated in their usage of technology.

Despite fast growth, managed services are still in their early stages of adoption with a few hurdles that need to be overcome such as competition from retailers, maintaining customer satisfaction, perception that it requires considerable investment, low margins, lack of technical knowledge and training and the lack of capital resources.

“MSPs in China need to maintain a high degree of service and support especially when transitioning customers from a hardware-centric model into a more services and solutions-oriented model. In addition, they need to think like a local and attain the right knowledge and expertise to succeed in this space and be able to educate SMBs on the long-term benefits of deploying managed services,” Carlos said. “Furthermore, China SMBs usually prefer a ‘touch and feel’ experience when looking at purchasing products.”

Moving forward, managed services awareness among China SMBs, especially in this economic environment, will be driven by the message of customer retention, increasing revenues, simplifying operations, focusing on core business and staying competitive.

“MSPs must be able to drive home managed services’ impact on areas such as TCO, scalability and efficiency of staff and IT environment,” he said. “Vendors, on the other hand, must be able to support MSPs in building up their managed services expertise especially in web hosting and e-commerce, networking, printers, security and storage and backup. By working together, MSPs and vendors can approach SMBs and convince them that this model aligns with the strategic imperatives of the firm. This synergy will then allow them to increase SMB awareness and gain a foothold in the growing China managed services market even in the face of a challenging business environment.”