Slideshow: Top 10 SMB Technology Predictions for 2012

Each year, the SMB Group offers its Top 10 SMB Technology Predictions. In 2011, we created a slideshow version. Due to popular demand, we’ve created a slideshow version of our 2012 predictions, which are summarized below.

  1. Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets
  2. The SMB Progressive Class Gains Ground
  3. The SMB Social Media Divide Grows
  4. Cloud Becomes the New Normal
  5. Mobile Application Use Extends Beyond Email to Business Applications
  6. Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate
  7. Managed Services Meet Mobile
  8. The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions
  9. Increased Adoption of Collaboration and Communication Services in Integrated Suites
  10. The IT Channel Continues to Shape-Shift

For the more detailed text version, see our 2012 Top 10 SMB Technology Market Predictions.

For a look back on 2011 trends, see Report Card: 2011 Top 10 SMB Technology Market Predictions.

Top 10 SMB Technology Predictions for 2012 from the SMB Group

Last week  we published a report card on our last year’s top 10 market predictions for 2011.

Here are the SMB Group’s Top 10 SMB Technology Predictions for 2012! A more detailed description of each follows below.

  1. Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets
  2. The SMB Progressive Class Gains Ground
  3. The SMB Social Media Divide Grows
  4. Cloud Becomes the New Normal
  5. Mobile Application Use Extends Beyond Email to Business Applications
  6. Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate
  7. Managed Services Meet Mobile
  8. The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions
  9. Increased Adoption of Collaboration and Communication Services in Integrated Suites
  10. The IT Channel Continues to Shape-Shift

2012 Top 10 SMB Technology Market Predictions in Detail

  1. Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets. After the Great Recession officially ended in 2009, the U.S. economy resumed moderate economic growth in 2010—and the SMB outlook for 2011 became fairly bullish. But new economic worries and uncertainties are dampening some SMB outlook. Our 2011 SMB Routes to Market Studyindicated that SMBs are less confident about their revenue prospects for 2012: 56% of small and 63% of medium businesses are forecasting revenue growth for 2012, compared to the 77% of both small and medium businesses that forecasted growth for 2011. And many SMBs are tightening their tech wallets: More are forecasting flat or decreased IT spending for 2012 compared to 2011. To loosen the purse strings, tech vendors must deliver a rock-solid case for how their solutions help address top SMB challenges—which are to attract new customers, grow revenues and maintain profitability. In addition to broadening subscription-based cloud solution options (which offload big upfront investments), more vendors will offer flexible, alternative financing to help ease the financial burden—and gain a leg up on competitors.
  2. The SMB Progressive Class Gains Ground.That said, we also see a distinct category of SMBs that we are terming “Progressive SMBs.” Despite economic uncertainties, Progressive SMBs plan to increase IT spending. These SMBs see technology as a vital tool for business transformation, a mechanism to create market advantage and a way to level the playing field against bigger companies. Although price is still a key factor for Progressive SMBs, they are more likely to rate other factors—such as easier to customize for my business, strong reputation and brand, and ability to provide local service and support—higher than other SMBs when making technology decisions, according to our 2011 SMB Routes to Market Study. Progressive SMBs invest more in technology and see the results in terms of higher revenue expectations. For instance, 73% of medium businesses that are investing more in technology anticipate revenue increases in 2012, compared to just 17% among those decreasing IT spending. Technology vendors need to develop different marketing campaigns and more sophisticated solutions for Progressive SMBs than for their counterparts to win in this very important segment.
  3. The SMB Social Media Divide Grows. SMB use of social media is rising. According to our 2011 Impact of Social Business in Small and Medium Business Study, about 50% of SMBs already use social media, and another 25% plan to do so within the next 12 months. The study revealed that about half of SMBs take a strategic and structured approach with social media. These “strategically social” companies use social media for more activities, use more channels and are more satisfied with the business results than the other half of SMBs that are still throwing spaghetti on the Facebook wall. These more informal, ad hoc users say that they don’t have enough time to use social media effectively; they can’t decide what social media strategies and tools will work best; it’s too difficult to integrate social media with sales, marketing, service and other business processes; and they are unable to measure value from social media. As new social media tools—from crowd-sourced pricing to video commerce—take shape, SMB social media “haves” will gain business ground on the “have-nots” in an exponential manner. As the have-nots lose ground, they will clamor for better social media guidance and easier-to-use, better integrated and more affordable social media management solutions.
  4. Cloud Becomes the New Normal. Is the cloud perfect? No. Is it right for every solution and every business? No. But that said, the rate and pace of technological change are in overdrive, and the need for businesses to harness new technology-based solutions—social, mobile, analytics, etc.—to maintain a business edge is rising. Our 2011 SMB Routes to Market Studyresults reveal that demand for cloud-based solutions is accelerating in almost all solution areas. For instance, in the past 24 months, only 7% of small businesses purchased or upgraded cloud accounting/ERP solutions, compared with 13% that plan to purchase them in the next 12 months. Areas that show the biggest potential for cloud gains in 2012 are marketing automation, business intelligence/analytics, and desktop virtualization solutions and services. Most SMBs simply don’t have the staff, expertise or capital budgets needed for do-it-yourself IT—and they can’t afford the time it takes to get business payback from a solution that they need to vet, buy, install and deploy in-house. This makes the arguments for cloud computing—reduced capital costs, speed to deploy, and real-time collaboration and visibility—compelling. Demand for anytime, anywhere, any-device mobile access to applications will also accelerate cloud adoption, as many SMBs will want to offload management of mobile applications to a cloud solutions provider too. Enterprise players such as Oracle (with RightNow) and SAP (with SuccessFactors) have already begun their cloud shopping sprees. Look for traditional SMB vendors (Intuit, Microsoft, Sage, etc.) to join in the fun.
  5. Mobile Application Use Extends Beyond Email to Business Applications. In a custom study we completed this summer, SMBs indicated that they plan to significantly increase spending on mobile devices and services in the next 12 months, with the highest jump in the 5-to-49–employee size band. The study revealed that with mobile use of collaboration apps (email, calendar, etc.) now mainstream, SMBs are mobilizing business applications. Some of the strongest categories for SMB current and planned mobile app use are mobile payments (52%), time management (59%), field service (59%), and customer information management (69%). This rapid uptake will also include more vertical apps that are a perfect fit for industry-specific needs, especially given the choice of both smart phone and tablet (read: iPad) form factors. Unfortunately, our crystal ball is cloudy when it comes to predicting if another vendor will be able to give Apple a run for its money in the business-use tablet market.
  6. Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate.According to our 2011 SMB Routes to Market Study, 16% of small and 29% of medium businesses purchased/upgraded a BI solution within the past 24 months, and 16% and 28%, respectively, plan to do so in the next 12 months. The social-mobile-cloud triumvirate will fuel new and increased SMB investments in this area as businesses try to plow through the growing data avalanche to get to the insights they need to grow their businesses. As SMBs try to get a better handle on customers’ and prospects’ opinions and influence networks, interest in sentiment analysis and social graphing solutions will grow. New mobile access capabilities and applications from BI vendors designed to provide SMBs with just the information they need, when and where they need it, will spur interest as well. Finally, our study indicated that roughly a third of SMBs use or plan to use cloud-based BI and analytics solutions. An expanding array of cloud options in this area will make it easier and more affordable for more SMBs to deploy these solutions.
  7. Managed Services Meet Mobile.Despite momentum toward the cloud, it will continue to be a hybrid world for a very long time. Many SMBs will continue to use existing on-premises apps and choose on-premises deployment as security, regulatory or other needs dictate. So most SMBs will continue to grapple with IT infrastructure management—even as new mobile device management and governance challenges grow. SMB adoption of mobile phones and tablets is now on par with that of traditional landline phones, according to our 2011 SMB Collaboration and Communication Study. With employees more likely to lose a smart phone than a laptop, security issues abound and will only increase. The “bring your own device” (BYOD) phenomenon creates additional concerns, not least of which is to create a firewall between personal and business data. These SMB challenges provide ample opportunity for wireless carriers, networking vendors, MSPs and others that can provide integrated and automated managed services. These are likely to include services that encompass management of cloud-based infrastructure and all end-point devices, from desktop PCs, tablets and smart phones to purpose-built mobile devices; network services to reduce downtime and help optimize the network that mobile access relies on; and support for cloud-based dual-persona solutions on personal mobile devices.
  8. The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions.As unemployment has increased, so has the number of freelancers, contractors, independent consultants and others choosing to go it alone. According to the U.S. Census Bureau, small businesses without a payroll make up more than 70% of America’s 27 million companies, with annual sales of $887 billion. Many entrepreneurs never intended to take this path, but stay solo because they prefer it to going back to the corporate payroll. Others stick it out due to limited employment options. Either way, more accidental entrepreneurs view what they’re doing as a long-term business venture instead of a short-term stopgap. As a result, they see themselves more as business owners than as freelancers or contractors. But many have no intention or desire to hire employees. This will spike demand for—and growth of—applications and services that help them to achieve their business goals without adding employees. Traditional small business powerhouses (Intuit, Sage, etc.), pioneers in the SOHO space (FreshBooks, Shoebox, Zoho, etc.), new start-ups and others will increasingly cater to their needs with solutions that make it easier for them to fly solo—whether from a home office or on the go.
  9. Increased Adoption of Collaboration and Communication Services in Integrated Suites. As evidenced in our 2011 SMB Collaboration and Communication Study, the SMB pendulum is swinging from point solutions for voice, communications, social media and collaboration solutions to integrated suites. Medium businesses are leading the charge, with 28% currently using an integrated collaboration suite, and 35% planning to do so in the next 12 months. Small businesses are slower to make this leap, but a transition is under way here too. By moving from disparate point solutions to an integrated offering, SMBs can avoid the hassles of learning to use multiple user interfaces, going to different sites to login and remembering different passwords—in short, things that waste time and frustrate users. They also can lower costs and improve their ability to collaborate effectively. A growing roster of low-cost (or free), easy-to-use integrated collaboration suites (Google Apps, Microsoft Office 365, IBM LotusLive and HyperOffice, to name a few) are adding fuel to the convergence fire—although vendors will still need to address the obstacle of user resistance to learning something new.
  10. The IT Channel Continues to Shape-Shift. The trend triumvirate—cloud, social and mobile—is also reshaping the IT channel. These trends are moving the goal posts and changing the ways in which channel partners add value. Cloud computing reduces the need for hardware, software and infrastructure deployment skills, and ups the ante for educational guidance, business process transformation and integration skills. Re-imagined channel partner programs from vendors such as Intacct and IBM’s Software Group have blossomed as they shift partner rewards to focus more on value-add and renewals. Meanwhile, non-traditional IT partners, such as creative and marketing agencies, have stepped in to fill a gap by providing social media and digital marketing services for solutions such as Radian6 and HubSpot. In the mobile domain, partners will need to bring more value to help SMBs develop and implement mobile strategies, and offer solutions to manage mobile devices and applications and provide better network performance, reliability and redundancy. As with any significant inflection point, the cloud-social-mobile trend necessitates that older partner models continue to move aside as new, more relevant ones take shape.

For more information, please visit the SMB Groupweb site at http://www.smb-gr.com, contact us at (508)410-3562 or send an e-mail to information@smb-gr.com

2010 Top 10 SMB Technology Market Predictions

Fellow SMB analyst Sanjeev Aggarwal and I have teamed up to bring you our top ten technology related predictions-plus three bonus predictions–for the SMB (companies with 1-1000 employees) market for 2010. Details for each prediction follow the list below.

Remember to vote for your top prediction here!

2010 Top 10 SMB Technology Market Predictions

1. Pent Up SMB Demand Will Be There—But Won’t Be Easy to Capture

2. SMBs Accelerate Their Shift to Digital Marketing Media

3. The Collaboration Battle Heats Up

4. The New Face of Small Business

5. Savvy SMB Vendors Get Strategic About Social Media Analysis

6. SMBs Drive the Mobile Internet Tsunami

7. Virtualization Boosts Cloud Computing Adoption

8. SMBs’ Appetite for Managed Services Grows

9. Beyond Excel—Targeted Workflow and Analytic Tools Takes Flight

10. 2009 Acquisitions Drive New Value for SMB customers in 2010

Bonus Predictions

1. Time to Get Paid for Selling a Free Lunch

2. Vendors Scramble for SMB Developer Loyalty—and New Integration Needs Arise

3. SaaS Computing Lifts Off in New Areas

Top Ten Predictions

1. Pent Up Demand Will Be There—But Won’t Be Easy to Capture. In 2010, as the economy comes out of recession, SMBs will be more willing to spend again, but only for solutions that will provide demonstrable bottom and/or top line business benefits. SMBs will spend only if they believe that the investment will help them operate more profitably, grow revenues, increase productivity, save money or gain time-to-market advantages. SMBs are also evaluating and making trade-offs in areas that offer strategic, long-term advantages vs. those that meet more urgent, short-term needs. In many cases, IT investments must also be weighed against requirements for other core goods and services essential to the business.

To have any chance at making the final cut, vendors will need to redouble efforts to illuminate their value proposition in a clear and compelling manner, and provide more quantifiable evidence that their solutions will help slash costs, increase productivity and provide payback value. Time-strapped SMBs will also increasingly demand that vendors be easy to do business with—heavily favoring vendors that offer an accessible, transparent and positive sales experience from discovery through purchase.

2. SMBs Accelerate Their Shift to Digital Marketing Media. In 2010, SMB adoption of digital marketing media will accelerate, as more SMBs turn away from traditional media (yellow pages, print, direct mail, etc.) and towards social networking (e.g. Facebook and Twitter), email marketing, search engine marketing, blogs, forums, etc. As SMBs become more familiar with the basics, they will seek out solutions that help them streamline and integrate customer interactions across multiple digital venues. Prime opportunities include more specific, tailored search optimization and management services.

Examples include Lotusjump, designed to help retailers and etailers optimize organic search for hundreds or thousands of products; Yodle, aimed at helping services businesses create an integrated Web site and SEO campaign to drive foot traffic and make the phone ring; and WebVisible, which helps local businesses create more effective online marketing and advertising campaigns. Another sweet spot will be services that help SMBs manage and integrate inbound and outbound social media streams, along with more structured digital marketing tools, such as SEO, SEM and email marketing. Vendors such as Cloudprofile and Hubspot offer such capabilities now, with Salesforce.com’s Chatter slated for the second half of 2010. With the market getting more crowded and noisy by the minute, however, vendors will need to avoid overloading SMBs with techno-babble, and focus instead on providing SMBs with an exceptional user experience and measurable business benefits.

3. The Collaboration Battle Heats Up. In an age of information overload, SMBs need better collaboration tools, integrated with daily workflow, to bring order to the chaos. SMB decision-makers and employees are reaping the benefits of social networking and collaboration tools like Facebook and Evite in their personal lives—and asking how they can derive the same kinds of benefits in their businesses. They want to make information easier to find, share and use; extend and enhance the body of shared knowledge; and connect with people they need when they need them. In 2010, the collaboration battle will swing into full gear, as vendors introduce more integrated solutions that pull together people, tools, services and content. After all, collaboration is the only business activity that every employee engages in every day—offering vendors an irresistible opportunity to expand their market footprints and installed base presence.

For instance, IBM LotusLive and Lotus Foundations make powerful Lotus collaboration capabilities affordable and digestible for SMBs; Microsoft continues to extend SharePoint and hosted messaging capabilities; and smaller players, such as HyperOffice and Zoho, feature services built for small business from the ground up. At the same time, business solutions vendors from SAP to Salesforce.com are embedding richer collaboration capabilities into their offerings. Even networking vendors, such as Cisco are getting into the game under the unified communications umbrella.

4. The New Face of Small Business. In 2010, vendors need re-examine the evolving small business market with a new segmentation lens to better identify the composition of the small business market, and how they can create the most compelling offerings as the sands shift. Triggered by the recession, generational changes, and globalization, a tectonic shift is changing the face of small businesses. The generational shift has been underway for a while, of course: the U.S. Bureau of Labor Statistics forecasts that the number of workers between ages 33 and 44 will decline rapidly through 2020, and that more people in the labor pool are likely to be either under 30 years old or over 50. Meanwhile, more people are opting to start their own businesses: the U.S. Department of Labor notes that 650,000 new businesses started up in 2006, compared to roughly 570,000 in 2002.

Different types of entrepreneurs, small business owners and their employees have diverse requirements and expectations for technology solutions. While older workers may tend to stick with the familiar, younger new business owners and workers are unlikely to have much allegiance to existing market leaders. As baby boomers in the U.S. retire, younger Gen X and Gen Y workers—and soon Millenials—will replace them. But, many retiring or laid off older workers will move on to start new businesses, out of economic necessity and/or for lifestyle preferences. In addition, persistently high unemployment will accelerate the entrepreneurial trend across all age groups. Meanwhile, globalization is fueling the need for small businesses to expand interactions beyond their traditional geographies.

5. Savvy SMB Vendors Get Strategic About Social Media Analysis. Social media is becoming a mainstream way for vendors and service providers to engage with small and medium businesses. Most vendors already have a social media presence and publish content regularly through social media channels, while many have integrated social media into their customer service approaches and/or using tools to measure brand performance. However, only a handful have developed an effective approach to extract meaningful strategic insights from social media conversations, engagements and information.

In 2010, vendors will augment tactical use of social media with a more sophisticated, strategic plan to monitor and analyze broader SMB trends and directions. By listening, synthesizing and analyzing conversations at a higher level, vendors can strengthen market insights for use in marketing, product planning, channel development and merger and acquisition strategies. Coupled with more traditional research, domain expertise and analysis, this strategic perspective on social media conversations will provide actionable insights and a competitive edge.

6. SMBs Drive the Mobile Internet Tsunami. In 2010, SMB adoption of smart mobile devices and services will increase at an even faster pace, as the number of mobile applications and services grows exponentially. SMBs with services businesses are already serving up local ads in local searches delivered on iPhones and Blackberries—as evidenced by the fact that vendors providing local search solutions saw their revenues jump by 50% to 100% in 2009. Things will continue to heat up as new Google Android-based smart phones continue to swarm the market, Dell’s new division focused on mobile devices debuts, Apple’s iPhone AppStore expands, and vendors such as RIM and Nokia extend their own application stores in response to Apple’s success. Vendors that can go beyond devices and applications to help SMBs create more engaging content, and develop more effective e-commerce and permission-based strategies to reach their target customers on these devices can gain a significant advantage going forward.

7. Virtualization Boosts Cloud Computing Adoption. For the foreseeable future, SMBs’ will continue to take a hybrid approach to technology, combining on-premise and public cloud-based solutions to satisfy business requirements. In 2010, vendors will offer a greater range of targeted solutions for hybrid environment requirements to spur SMB interest and traction. Virtual desktops, business continuity/disaster recovery, on-demand computing and storage will feature prominently in vendors’ lineups.

As SMBs contemplate Windows 7 migration strategies, they will more closely evaluate the total cost of ownership (TCO) of cloud delivered virtual desktop solutions vs. deploying new Windows 7 desktops/laptops—as well as the added benefits around security, backups, updates, etc. that virtual desktops provide. Growing adoption of virtualization will also open the door for SMBs to consider high availability and disaster recovery solutions, which until now, have been highly desirable, but largely unfeasible for smaller companies. Look for VMware to lead the way, with others, such as Citrix and Microsoft playing catch up.

8. SMBs’ Appetite for Managed Services Grows. SMB business requirements continue to become more complex, and their reliance on technology is increasing. But most lack the resources to keep IT infrastructure up and running at peak performance. Increasing business reliance on IT infrastructure will fuel rising demand for managed services providers (MSPs) to increase performance, reliability, availability and service levels—but at reduced or at least neutral costs.

Although demand for point services (for things like backup and recovery, security and virus protection) will remain healthy, more SMBs will seek out comprehensive managed services offerings in order to free up resources to focus on core business requirements and get the benefits of “one throat to choke.” By coupling cost-effective, round the clock remote management services with onsite support, vendors will make managed services more affordable and accessible for SMBs. Examples include Dell’s ProManage Managed Services, which combines the advantages of remote management services with a scalable network operating center along with a team of local Dell and partner support professionals around the globe that provide onsite support; Mindshift, which offers horizontal managed services, as well as vertical managed services solutions for industries such as legal, healthcare and professional services; and HP, which is approaching the SMB managed services segment through its HP Smart Management Services for SMBs and Total Care Business Solutions.

9. Beyond Excel—Targeted Workflow and Analytic Tools Takes Flight. SMBs often rely on disjointed, ad hoc methods to manage many tasks and workflows, such as spend management, expense management, sales compensation and corporate performance management—to name a few. For the most part, they tackle these and other jobs with Excel spreadsheets and a messy mix of emails, paper documents and manual processing. Besides being a headache for everyone involved, this cumbersome approach has many other drawbacks, such as limited reporting abilities, high error rates, a lack of real-time visibility and collaboration capabilities, and limited flexibility.Until recently, most solutions to help manage these processes were too expensive and cumbersome for the typical SMB customer.

However, the rise of cloud computing has given wings to many software-as-a-service (SaaS) solutions that give SMBs purpose-built tools that help streamline workflow and provide critical intelligence to help improve top and bottom line performance. In 2010, vendors’ mid-market offerings in areas such as corporate performance management (CPM), with vendors such Adaptive Planning and Clarity Systems; sales compensation management, with players such as Xactly; and spend management, with entrants such as Rosslyn Analytics, which recently launched RA.Pid, a free self-service solution for SMBs. Meanwhile, traditional enterprise BI players, such as IBM Cognos and SAP Business Objects will continue to carve out more digestible BI offerings for the mid-market, offering up solutions and/or end-to-end on demand business process services to customers.

10. 2009 Acquisitions Drive New Value for SMB customers in 2010. In 2009, many deals were struck that portend great impact on the SMB market, channel and competitive landscape. Among the most notable were HP’s acquisition of 3Com, which gives HP the ability to provide a full complement of networking and connectivity solutions for SMB customers. In a market long dominated by Cisco, the HP-3Com combination gives SMBs a strong alternative, with attractively priced, competitive networking products and services with a compelling value proposition. Intuit’s acquisitions of PayCycle, Mint.com and BooRah continue to build and refresh the vendor’s portfolio of services for it’s core small business and consumer segments—which often overlap in the “prosumer” category. Intuit will likely continue on an aggressive acquisition trajectory in 2010. Avaya’s acquisition of Nortel Enterprise Solutions makes Avaya the runaway market share leader in voice and unified communications in the SMB market, with roughly twice the market share of Cisco. But at the same time, Cisco’s pending acquisition of Tandberg will enable it to bring cost effective, standards based video conferencing solutions to SMBs, creating new awareness and interest in the SMB video conferencing market. We also expect 2010 to spawn a new round of acquisition activity as vendors converge collaboration, social media and business solutions.

Bonus Predictions:

1. Time to Get Paid for Selling a Free Lunch. There may be no such thing as a free lunch in the physical world, but there is an abundance of free and very low-cost software-as-a-service (SaaS) tools for everything from personal productivity and collaboration applications (such as Google Apps, Zoho and Dimdim) to financial management (including Freshbooks, Sage BillingBoss and Workingpoint) for small businesses. With more people starting their own businesses—often on a very tight budget—use of these services will continue to rise. But in 2010, vendors with this model will start feeling the pressure to scale.

The business models for these services are predicated on the assumption that a small percentage (usually in the range of 5% to 10%) of customers will convert to a premium paid offering. Many vendors also get advertising revenues, and some see data aggregation services as another way to generate income. To profitably scale their businesses, these vendors need to stimulate rapid viral adoption (which enables both advertising and data aggregation sales) and achieve their conversion rate goals for premium services. But the combination of rapid, high volume viral growth and paid conversions is a to tough code to crack. While Google may not need to worry about cracking the code anytime soon, smaller, venture-backed vendors have a much shorter time horizon to make it work. Many will not be able to, and will need to either get acquired or shut their doors. However, some will get the formula right—with good odds on FreshBooks and Zoho.

2. Vendors Scramble for SMB Developer Loyalty—and New Integration Needs Arise. Cloud infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) are giving SMB application developers lower cost, lower risk options to develop and bring new solutions to market. In 2010, both traditional platform vendors, such as Microsoft and IBM, along with newer PaaS and IaaS types such as Salesforce, Intuit and Amazon, will need to fight tooth and nail to get both commercial SMB developers and end-user customers to create applications for their environments. Meanwhile, since its highly unlikely that most customers will only want solutions from one of these ecosystems, vendors that provide integration solutions, such as Pervasive, Boomi, and Cast Iron, have a whole new market opportunity ahead of them—integration between these different platforms and ecosystems.

3. SaaS Computing Lifts Off in New Areas. Cloud poster child Salesforce.com celebrated its 10th birthday and hit the $1 billion in annual revenues mark in 2009—and software-as-a-service (SaaS) CRM is now a mainstream—even preferred–choice for SMBs. SaaS is also gaining a solid foothold in HR, marketing and content management are other areas in which SaaS is gaining a solid foothold. In 2010, the rate and pace of cloud computing adoption among SMBs will continue its upswing.

Key areas to watch include the historically elusive SaaS financials market. Smaller companies are showing a good appetite for self-service online accounting solutions such as Intuit QuickBooks Online Edition and Workingpoint, and point solutions for things such as invoicing, from vendors such as Freshbooks and Sage Billingboss, and others. Moving upmarket, firms such as NetSuite, Intacct, FinancialForce—and after a hiatus, SAP Business By Design–should enjoy good growth spurts in midsize companies, especially in those that are faced with a costly upgrade of a legacy packaged financials solution. Both internal IT and business decision-makers move to cut upgrade, maintenance and application management costs, while also speeding time to solution value. This momentum will be further fueled as SaaS vendors make progress in bringing integrators, VARs and CPAs on board to amplify marketing and sales capabilities.

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