Packaged software sales to hit $770M among Indian SMBs

BANGALORE, INDIA: Small and medium businesses (SMBs, or companies with up to 999 employees) in India are on track to invest about $770 million on packaged software this year, up 21 percent over 2007 levels. Spending on databases, accounting, networking, productivity and system software will account for more than 90 percent of the total software spend this year, according to the latest report by New York-based Access Markets International (AMI) Partners, Inc.

“There has been strong growth in financial indicators for all the major verticals in the SMB space, which is likely to continue this year as well,” says Nirupam Chaudhuri, Senior Research Manager with AMI Partners. “SMBs in India are likely to continue to invest to support business expansion plans, globalization needs, compliance and risk mitigation needs, and leverage technological advancements.”

Small businesses (SBs, or companies with up to 99 employees) posted a 23 percent rise in software spend, while medium businesses (MBs, or companies with 100 to 999 employees) showed 28 percent growth in software spend last year. “Investments in applications and solutions for productivity enhancements, accounts and financial applications will continue to be made this year,” Chaudhuri says. “Other areas include investments on back-end and front-end operations, marketing tools, sales tools, analytics tools, proper services and support structures.”

Among verticals, the manufacturing and professional services sectors together will drive more than 40 percent of SB software spending—and 70 percent of MB software spend. “The growth of industries like manufacturing and retail is less dependent on IT adoption. So it is encouraging to see these verticals procuring their software for business enablement and long-term realization of benefits from investments,” Chaudhuri says. “Traditional mega-spend verticals are investing as usual in all types of advanced infrastructure and applications.”

Specific business needs dictate procurement of different classes of applications and solutions. Last year was a good year for basic applications like productivity suites, collaborative tools and high-end applications like business intelligence (BI) tools, middleware, storage applications, and network and system management tools.

“Affordability and awareness have fueled a decent rise in enterprise applications adoption,” Chaudhuri says. “The emergence of vendors offering hosted modules has fuelled the market among SMBs in India. Expertise in niche vertical segments is proving to be a big plus for focused ERP players, each targeting user acquisition, to dominate in their own sectors.”

Utilities and middleware applications have surged as well. Other factors fueling growth in software are the emergence of web services, SOA (service-oriented architecture), consolidation of IT infrastructure, increased connectivity needs, on-demand computing, need for interoperability of different applications and virtualization tools.

The market has witnessed major acquisitions and consolidation among software vendors, making the portfolio of major players stronger with a full stack of solutions. There is more focus on enhancing value for customers. Product innovations are also taking place that help facilitate more availability, affordability and performance of solutions.

“The emergence of SaaS (Software as a Service) as a delivery model will benefit SMBs,” Chaudhuri says. “There is increased adoption of applications with open standards. Vendors failing to adapt solutions in that model may suffer. Subscription services and composite applications will boost further growth in adoption.”

Packaged software is also adapting to the services model to cater to modular business processes. Some benefits of adopting SOA (service-oriented architecture) are better integration, cost reduction, reusability of applications and web services, lowering of risk, better interoperability, improved productivity and efficiency, higher RoI, lower operating costs, rapid system deployment and increased business agility.