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Small firms failing to catch on to SaaS

Small firms failing to catch on to SaaS

Smaller companies in New Zealand have the slowest software as a service (SaaS) adoption rate, new IDC research shows.

This year’s Forecast for Management study found 32 percent of the organisations interviewed (157 were canvassed locally in April) had deployed some form of SaaS by the end of 2009.

However, the quickest adopters were found to be enterprises including public sector organisations (health, government and education), financial institutions, utilities, telcos and construction firms. In fact, 59 percent of companies with more than 500 seats had adopted SaaS in some form, even if it was just for one application, and 95 percent of large organisations said they would adopt some form of SaaS by the end of 2011.

By contrast, IDC says smaller companies have been the slowest to get on board.

“[The low adoption rate] seems surprising, but the smaller companies tend to be quite risk averse,” says senior IDC market analyst Louise Francis. “[Smaller companies] like to see what the bigger or medium companies do, because they can’t afford to implement something and find six months from now that it is not going to work. That has a much bigger impact for them in terms of resources.”

IDC predicts small business’ adoption rates will grow as SaaS becomes more mainstream and as issues such as privacy concerns are addressed.

The Forecast for Management study found 32 percent of local companies surveyed had implemented SaaS to some degree, but this is expected to rise sharply to 72 percent by the end of 2011.

Jon Kalaugher, CEO of business-to-business managed service provider Naverisk, says the threat of disintermediation means resellers may not be pushing cloud services to potential users.

“There are still cloud opportunities, but resellers need to get their heads around what that is. They need to know what is in it for them. There is some margin, but it can be tiny.”

In contrast to IDC’s perspective, OneNet managing director Michael Snowden believes smaller companies can be more inclined to take a risk on implementing the cloud than larger firms.

“Because a CIO is reporting to someone else they tend to be more protective of the status quo. With a business owner, the buck stops with them.”

Snowden says a cultural change is required to drive adoption rates and this will be led by larger vendors such as Microsoft and Google, which are heavily promoting their cloud services.


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