Firms to invest $640 mn in packaged software

Small cos posted a 23% rise in software spend last yr.

The country's small and medium businesses or SMBs (with the workforce of up to 999 employees) are on their way to invest around $640 million in buying packaged software this year, up more than 25 per cent as compared to last year.

According to a report by New York-based Access Markets International (AMI) Partners, spending on databases, accounting, networking, productivity and system software will account for more than 90 per cent of the total software spend by SMBs this year.

"We expect the Indian IT market to maintain this bullish trend because of increased IT awareness among SMBs," said Nirupam Chaudhuri, research manager with AMI Partners.

According to the report, SMBs have become more alert and they know what they need to accelerate their businesses.

A small percentage of IT-savvy SMBs have progressed to the third wave of IT adoption and are now demanding tailor-made solutions with superior support services. AMI defines the third wave of IT adoption as a stage of "extending the enterprise", where due to adoption of advanced infrastructure solutions there is improved collaboration and closeness within business partners.

Small businesses (SBs or companies with up to 99 employees) posted a 23 per cent rise in software spend while medium businesses (MBs or companies with 100 to 999 employees) showed 30 per cent growth in software spend last year.

Generally, investment in packaged software is driven by business needs. "Specific requirements decide the modules or packages for implementation," the study said.

According to the report, SMBs are also concerned about rationalisation of investments. "Facilities like state-of-the-art technology with the latest security features are seen as major factors in overcoming competition," it said.

AMI said, "Software firms can no longer push everything as a package to users. So, they have launched solutions and packages in which pay-as-you-use features are incorporated, thereby allowing SMBs to access only the modules they have paid for."

The top management in SMBs want a snapshot of all processes in the company in real time. Thus, such applications are gaining steam.

There is also an increased focus on employee productivity, enhancing customer interaction systems, automating and streamlining operations, round the clock connectivity, and information protection. These factors are driving the adoption of packaged software and solutions.

Middle management and product heads have important roles in deciding the solutions that the company invests in, according to the report.

AMI said a growing level of awareness of the benefits of hosted applications had gone a long way to reduce inhibitions about information security. The prevailing low-bandwidth costs had added impetus to the adoption of such solutions.