Small and mid-sized businesses now have an arsenal of hosted services at their disposal, which they can access through a web browser and a secure internet link.
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As well as reducing the IT burden, they can use software as a service (SaaS) to lower the cost of providing back and front office business functions.
According to IDC, the SaaS industry is set to grow at 40% over the next year alone, driven largely by the economic downturn as companies look for quick returns on their investments.
Today, SaaS offerings have grown to cover human resources, accounting, procurement, billing, customer relationship management (CRM), sales and marketing, enterprise resource planning (ERP), and business intelligence (BI).
- Business management
- Affordable business tools
- Unified communications
- Managed EDI
- Document management
- One-stop shops
Gooroo offers a whole online business management suite which can be accessed via a web browser or web-enabled phone, and is priced at £25 per user per month.
This includes accounts, CRM, sales, stock control, and task and people management and shows the user a dashboard of their business operations.
Dean Miles, general manager of Gooroo Software said: "We recently surveyed small businesses' plans to adopt SaaS and cloud solutions, and there is real demand out there. SMEs want the same software tools that are available to enterprises."
One of Gooroo's first customers is Allgas, a specialist supplier and maintainer of gas and electrical appliances and accessories. It deployed Gooroo's suite to help manage stock and sales, and to support an e-commerce site.
Managing director Elaine Whylde said: "We were looking for a cost-effective solution to provide a single, real-time view of our central stock position, both internally and externally through our planned e-commerce website. My old PCs, database and accounts software cost £9,000 to buy and £1,000 a year to support, but the Gooroo solution will cost me £25 a month per user."
Business IT Online is another suite of small business tools, and this one is priced from £7.95 per month for 5 user accounts, making it one of the more affordable offerings in the market.
Business IT Online Finance has CRM and sales management, invoicing, scheduling, file-sharing, marketing and local business search and even an office supplies store.
David Cruickshank, chief executive officer of Business IT Online, explained: "The idea is that we are 'SAP for the micro business'. We offer a range of core services so that the small business owner doesn't need to install a costly networked computer infrastructure and VPN for remote working; buy multiple software licenses; or go anywhere else for their needs."
Aqillais an example of an accounting package for SMEs that has been designed specifically to be delivered over the internet, on demand.
The software was launched in 2006, and received investment from finance industry veteran Bob Morton: "On-demand is a high growth area, with companies of all sizes looking at this type of delivery because it offers access to the latest applications, without the need for high levels of capital outlay or the ongoing expense of maintenance and management," he said.
SaaS has left few software markets untouched, and with the arrival of sophisticated web 2.0 technology, unified communications is one of the more recent applications to arrive in the browser.
CommuniGate UK's Pronto! is a product which gives the user a web-based dashboard that brings together their e-mail, collaboration tools, voicemails, instant messaging, RSS feeds, videos and images.
The application uses a secure and fast Flash client to support dragging and dropping of files from the desktop, as well as multiple windows and sessions.
With tools like these, firms such as CommuniGate are clearly aiming to challenge Microsoft's dominance in desktop productivity tools.
Simon Paton, managing director of CommuniGate Systems UK, said SMEs implementing a SaaS model for unified communications stand to reduce their fixed costs and create a "highly flexible operation that can respond rapidly to the forthcoming business highs and lows".
Paton said that, in some areas such as CRM, there is little differential in cost between the traditional and SaaS model. "However, when it comes to the adoption of unified communications the differentials are significant."
"Not only can an organisation completely remove all capital expenditure but operational costs are typically reduced by one third and are based on actual user numbers, enabling the business to ensure fixed costs are aligned with resources," he argued.
SaaS has found its way into many new markets, such as recruitment. Taleo is a SaaS-based talent-management product for SMEs, which can simplify recruiting, hiring and performance management, according to the firm.
Taleo marketing director Chris Phillips said: "Organisations of all sizes need to understand the costs incurred through poorly managed recruitment and ensure that they have an automated system in place that can provide valuable cost savings to the bottom line."
Many organisations use the EDI data format to send business-critical documents, such as purchase orders, delivery notes and shipping notes, between suppliers and retailers.
One SME that has benefited from a Saas-based EDI service is drinks maker Innocent.
Innocent said it has relatively limited IT staffing, but needs to communicate with retailers around the clock. It uses a managed EDI service from Inovis, which has helped to remove the complexity of sending documents back and forth.
Managed EDI also has a flat-rate pricing structure, so costs are predictable and low, said the firm.
John Redfern, managing director EMEA at Inovis, said, "Exchanging data with retailers is a complex business. Inovis addresses this by managing the whole process, from hosted software on a user-friendly platform, to translating data into required formats and integration into back-office EDI systems. This leaves the business free to focus on strategic IT activities."
Like EDI, SaaS has enabled smaller organisations to have the sorts of document automation used by larger enterprises. One example of a SaaS document automation provider is Esker, which specifically helps SMEs to automate paper-based processes, to help save time and cut costs.
Esker's SaaS services include sales order processing, accounts payable, accounts receivable and purchasing automation.
James Elkington, managing director of Esker, said, "Our on-demand model ensures that SMEs have access to the same benefits that have traditionally only been available to large organisations with big budgets and dedicated IT teams.
"For example, with accounts payable automation, it is estimated that organisations can save between 40 to 60 per cent of accounts payable operational and administration costs."
This April saw the launch of one of the industry's first cloud-based file archiving services, Virtual File Store from Iron Mountain Digital.
The firm provides storage-as-a-service (STaaS) for backing up and archiving enterprise data, and its new service aims to provide secure, long-term storage of inactive data off-site.
Richard Ellis, manager of Channel and Direct at Iron Mountain Digital, said the benefit for SMEs of using cloud-based storage are that no large capital investment is required, and it fits into a monthly operating budget.
He added that the storage service can scale up as the business requires, and this can cover short-term storage spikes, as well as long-term structural changes such as acquisitions.
One trend that is rapidly emerging is for SaaS service providers to offer whole suites of applications, from the back to the front end, arguing that businesses prefer to go to a single vendor for their IT.
One such firm is ThinkGrid, which provides business IT on demand for SMEs, with applications that include Sage, Microsoft Sharepoint and Visio.
ThinkGrid also actively encourages its customers to tell them if there are other line of business or specialist applications they would like made available.
"It's much less hassle and cheaper for businesses to use just one provider for all their applications," said Rob Lovell, chief executive officer of ThinkGrid.
"The SaaS model means that SMEs can get the latest software and required infrastructure at a low, monthly cost, rather than having to go through the headaches of upfront investments, installation and upgrades themselves. SMEs don't want to be dealing with multiple service providers and that's where we come in."
But ThinkGrid is by no means alone in the market. The likes of SAP, Oracle, Microsoft and Google are building up their SaaS portfolios. Meanwhile, established SaaS firms such as Salesforce and Netsuite continue to build their presence, making it rich pickings for SMEs looking to embrace on-demand software.