Commentary
8/29/2008
11:22 AM

Smaller Businesses Drive SaaS Growth In China

Worldwide, the market for SaaS is projected to grow 25% annually and reach $19.3 billion by 2011. Much of the fuel for the growth comes from China, where the annual growth rate is pegged 33% and almost 20% of the total market ($3.8 billion). And in China, the SMBs are the growth engine -- 42 million of them contributed 60 % of GDP and by 2012 there will be 50 million.



Worldwide, the market for SaaS is projected to grow 25% annually and reach $19.3 billion by 2011. Much of the fuel for the growth comes from China, where the annual growth rate is pegged 33% and almost 20% of the total market ($3.8 billion). And in China, the SMBs are the growth engine -- 42 million of them contributed 60 % of GDP and by 2012 there will be 50 million.This data arrives in a recent report on the growth of the SaaS market comes from Celent, a financial research and advisory firm. The report focuses specifically on adoption of SaaS for financial functions, but underscores the appeal of outsourcing application management, particularly for smaller organizations with limited and stretched IT resources that can ill afford to divert resources from running the core business. However, despite its undeniable appeal, small and growing businesses should look before leaping into SaaS.

As analyst Hua Zhang of Celent's Central Asia Research Group, and author of the report, says:

"For end users, SaaS boasts four major advantages over traditional software models: lower construction costs, lower maintenance costs, lower application thresholds, and lower application risks. However, some factors hinder users from buying SaaS services: security considerations, a lack of evidence regarding its advantages over commercial software, reliability, and service availability."

Recent high profile outages have raised legitimate concerns about the reliability of hosted applications for business use. Yet despite these stumbles the value proposition of SaaS and cloud computing remains seductive, particularly to smaller organizations with limited IT resources, but unlimited ambition to compete locally, regionally, nationally, and globally.

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