SMBs Adopt Automation Apps
Updated · Aug 07, 2002
Small- and medium-sized U.S. businesses (SMB) are outgrowing simple applications, such as homemade lists and databases, and adopting more sophisticated automation software to manage sales, customers, inventory, and other business processes.
Research from Access Markets International (AMI) Partners, Inc. indicates that SMB spending on sales force automation (SFA), customer relationship management (CRM), enterprise resource planning (ERP) and supply chain management (SCM) software topped $1.3 billion during the last 12 months — a 21 percent increase year-over-year.
As of the second quarter of 2002, over 1 million U.S. SMBs were using one or more business process automation applications (SFA, CRM, ERP or SCM) — that figure represents a 114 percent increase over the 489,000 SMBs that were using the apps during the same period in 2001.
AMI estimates that U.S. SMB business process automation software license related spending is expected to grow to $4.2 billion by 2006, reflecting a compound annual growth rate (CAGR) of 33 percent during 2002-2006, as SMBs transition from relatively simple solutions, such as databases and spreadsheets, to sophisticated implementations, such as common customer data repositories, lead management, etc., including hosted versions.
“The U.S. SMB market has now entered a sustainable high-growth phase of business process automation applications deployment,” observed Deepinder Sahni, vice president at AMI. “Optimizing business processes to stay competitive, retaining and growing customers to generate sales, and controlling costs in this difficult economic climate are the key driving factors behind this surge in enterprise applications deployment in the SMB market.”
The number of SMBs using various ERP/SCM/enhanced accounting/manufacturing resources planning (MRP) solutions grew 24 percent to 262,000 during the 12 months ended 2Q 2002, according to AMI. Additionally, AMI estimates that total ERP- and SCM-related SMB spending on software licensing during the 12 months ended 2Q 2002 was $986 million — up 18 percent from $836 million in 2001 — and is expected to grow at a 23 percent CAGR to $2.3 billion by 2006.
“SMBs typically derive between 10-20 percent of their annual revenues from transactions with large (1,000+ employees) sized businesses. This is a compelling business reason for SMBs to plug into the electronic networks established by larger companies,” said Dorothy Gryglak, senior analyst at AMI. “Conversely, larger enterprises are exerting pressure on SMBs to deploy ERP/SCM as they seek greater visibility into their supply chains. At some point the network effect will become a self sustaining force and drive ERP/SCM adoption deeper into the SMB market,” noted Ms. Gryglak.
The AMI study also reveals that an estimated 784,000 U.S. SMBs are now using SFA and CRM solutions, with estimates of total related spending on software licensing during the 12 months ended 2Q 2002 reaching $354 million. This figure reflects a 29 percent increase from $275 million in 2001, and is expected to grow at a 53 percent CAGR to almost $2 billion by 2006.
While AMI analyzed SMB usage of CRM, Forrester Research offered predictions about the overall industry. Forrester reports that after a drop of 5.4 percent in 2002, the CRM market will experience a modest CAGR of 11.5 percent from 2002 to 2007, and growth at consulting firms will drive the CRM services segment to $41.9 billion in 2007.
Forrester theorizes that the CRM apps category will regain its footing from 2002’s loss as annual growth jumps from 6.8 percent in 2003 to 14.0 percent in 2004 — this expansion will taper to 12.5 percent by 2007.
The research firm attributes the slow growth rate (7.3 percent over the next five years) of customer-facing channel apps to the slowdown in Internet commerce software, but predicts that marketing automation apps will represent the fastest-growing CRM segment. While growth between 2002 and 2004 will hover around 14.5 percent, the segment will expand at a 17 percent rate thereafter — reaching $928 million in 2007.
Reprinted from CyberAtlas.
Robyn Greenspan, an independent researcher and speaker, is interested in innovation, market trends and information technology. She was a participant in the AI Summit and also took part in the IEEE International Conference on Edge Computing, International SOA Symposium series and the International Cloud Symposium series. She graduated from Temple University. She was previously the communications and research manager for the AMS, an internationally recognized professional association that advances knowledge in the IT and business management areas.