UK SMBs set to spend £500m on SaaS by 2014

Research from Pierre Audoin Consultants highlights SaaS as a huge growth area

Suppliers are struggling to keep up with SMBs' hunger for SaaS, an analyst has claimed.

Pierre Audoin Consultants (PAC) said SMBs spent almost £1.6bn on business application software and SaaS in 2011, and this is set to grow to more than £2.1bn by 2015 – faster than the enterprise segment.

Saas spend will hit a whopping £500m by 2015 in the UK, PAC said.

Key areas of investment include CRM, analytics, mobility and industry-specific software, the analyst revealed.

The strongest opportunities for SaaS suppliers will be start-ups, enterprises expanding overseas and subsidiaries of international companies expanding into the UK.

George Mironescu, senior consultant at PAC, said: "There are significant differences in the positioning of vendors by company size. Although Sage is the undisputed giant of the UK SME market, it is not as strong in the upper mid-market and faces tough competition from the likes of IRIS Software in the SOHO segment.

"The SME market is entering into a major phase of transformation as buyers are increasingly attracted to cloud-based services which enable them to access enterprise-class functionality on affordable and flexible commercial terms.

"PAC expects the SaaS market in the UK will more than double its size by 2015 to well over £500m. However, SaaS is a work in progress for many ISVs, with established players wary of cannibalising existing revenue streams."

Of the top 20 applications vendors servicing the UK SMB sector, PAC rates only Salesforce.com and Fidessa as currently having a "mature" SaaS proposition.