Software as a service (SaaS) could make a profound difference to small- and medium-sized companies, allowing them to replace desktop and server software with lower-cost IT services on the internet.
But a report published this week by the Broadband Stakeholders Group, a coalition of broadband users, providers and government, warns UK firms might have to wait before they see the benefits.
"A large-scale transition to computing and software as a service for SMEs is only likely to come about when broadband is fast and dependable - when next generation access is available," it said.
The Broadband Stakeholders Group (BBSG) said next-generation broadband will allow more IT departments to move to a hosted service by improving the reliability and speed of connections. The report singled out SMEs making the greatest savings through SaaS.
But unlike large enterprises - that can already afford fast private broadband to run SaaS - many SMEs would have to wait for public fibre connections to be rolled out before migrating to SaaS, said Carl Bate, UK CTO at Capgemini.
"When you rely on a network connection to access your business software, then absolutely delaying the roll-out of fast broadband will delay mass adoption of SaaS among SMEs," he said.
According to the Department for Business, Enterprise and Regulatory Reform, SMEs account for 99.6 per cent of all UK businesses and provide 51.9 per cent of total UK turnover.
The BBSG estimates SaaS would save companies £350 every year per person in support costs. If 30% of small-enterprise staff used SaaS, the savings across the UK would total £620 million a year.
Paul Turner, VP global operations at Arieso, has been using SaaS applications for a year. The company, which has fifty staff, has saved a quarter of the cost of using desktop software.
"Having a reliable internet connection is essential for delivering SaaS. In the future, as features become more sophisticated, I could see the need for faster connections," said Paul Turner.
Denying SMEs access to the latest computing technology could dent the UK's gross domestic product (GDP). Evidence points to a strong contribution of ICT to overall productivity and GDP growth, said the report (see graph).
"If UK firms don't have this fast connection to make use of the latest technology like SaaS, their ability to interact with the market and their competitiveness diminishes," said Bates.
Research firm Gartner said 25% of new business software will be delivered as SaaS by 2011 because testing, integrating and upgrading software can be more expensive than the software itself. These costs are reduced when delivered as a hosted service.
"Growing intolerance for misspent investments on shelf-ware motivates buyers to seek on-demand software," said Gartner research director Alexa Bona. "Painful reminders of lengthy, unsuccessful deployment cycles motivate buyers to investigate simpler alternatives."
Read more about software as a service:
EMC, Symantec to enter Software as a Service market>>
Read more about Broadband: