KOLKATA, INDIA: India SMBs (Small and medium business or companies with up to 999 employees) are on track to spend US$30 million on accounting software in 2009, showing a 5 per cent growth over 2008.

Small businesses (SBs or companies with 1-99 employees) are generating a major portion of accounting software spending, contributing nearly 85 per cent of the total. Advanced features and web support, combined with easing prices, have helped accounting software make significant strides, according to the latest study by New York-based Access Markets International (AMI) Partners, Inc.

“On demand software or software-as-a-service is a growing trend in the accounting software market and India SMBs are choosing this option to weather the economic storm,” notes Priti Verma, research associate for Research and Consultancy at AMI-Partners, Bangalore. “More India medium businesses (MB, companies with 100-999 employees) are adopting SaaS than their SB counterparts.”

“Manufacturing leads in accounting software spending among India MB verticals whereas professional service firms lead the India SBs in this spending category,” says Verma. “Most India SMBs are still using standalone accounting software, as opposed to using accounting software that is not part of a larger suite.”

Accounting software is becoming more scalable and has been redesigned to suit larger businesses as well as the small and medium-business model. Organizations are implementing web-based accounting software, which helps them in integrating the workflow and consolidation of work tasks.

“Businesses are no longer looking for a plain vanilla financial accounting package; instead they want an overall solution for financial management,” Verma says. “We see companies which have been using standalone financial accounting systems are now migrating to the integrated solutions as they are realizing the limitations of standalone products.” Accounting software is now addressing more sophisticated issues such as supply chain, logistics, RFID, inventory and distribution.

Another interesting trend is the continuing evolution of system functionality and tools in accounting software to assist organizations with regulatory compliance. Though some organizations are now adopting new technologies, a large portion of India SMBs have not yet upgraded their accounting software thereby leaving a large market opportunity for software vendors to target.