AMI-Partners study shows U.S. SMBS spent $1 billion on enterprise software in 2003.

A new AMI-Partners study, "2003 U.S. Enterprise Software Market Overview and Assessment," reveals that total U.S. business expenditures for CRM, SFA, ERP and SCM solutions reached $2.7 billion in 2003, accounting for over a third of worldwide spending in this market. U.S. small and medium business (SMB) spending on CRM, SFA, ERP and SCM amounted to $0.99 million during 2003, while large businesses invested a total of $13.6 billion on enterprise software. AMI forecasts that large businesses will increase spending on enterprise software by 4.9% annually in the coming years, while SMBs will raise spending in this area at a staggering 14.3% compounded annual growth rate.

SMBs have historically been underserved in the enterprise software market, with only about one-in-ten SBs and one in 4 MBs deploying CRM/SFA solutions, and less than 5% of SBs and roughly 20% of MBs using ERP/SCM solutions. However, increased SMB demand will be fueled by renewed vendor attention and the increasing availability of "pay-as-you-go" on demand hosted solutions tailored to SMB customer needs. AMI's latest surveys indicate that over 380,000 SBs and 27,000 MBs in the U.S. view implementing CRM/SFA/ERP/SCM solutions as an important strategic focus area for the next 12 months.

"To capitalize on SMBs' growing interest in these solutions, vendors need to fully grasp the differences in how SMBs and large businesses view enterprise software," said Laurie McCabe, Vice President, SMB Insights and Business Solutions of AMI Partners. "Vendors targeting the SMB market must understand the different levels of IT awareness, adoption, sophistication for these solutions within different SMB market segments and sub-segments, and tailor products, marketing and channels initiatives accordingly," added McCabe. "Most SMBs still need a lot of education as to how enterprise software solutions can help their businesses", said Jackie Chan, Senior Analyst at AMI. "While large enterprises are witnessing and understand IT's contribution to their bottom-line, many SMBs remain skeptical that investing in enterprise software solutions will drive business growth and productivity."

Key findings presented in this report include:

--U.S. enterprise software spending reached $14.6 billion in 2003 with CRM/SFA forecast to have the highest growth rates in the next 5 years.

--SBs rely heavily on homegrown solutions for both accounting and sales force automation needs today.

--MBs increasingly use third-party application hosting services to alleviate deployment, maintenance and management responsibilities.

--Among large businesses, CRM/SFA penetration leapt from 37% in 2002 to 54% in 2003, with call center, forecasting and account knowledge cited as the top 3 feature sets deployed.

--The SMB ERP/SCM market is extremely fragmented, indicative of many SMBs needs for industry-specific solutions.

--Channel partners play an important role in their customers' brand selection, and tend to be more influential to MBs in software brand selection.

This AMI study, 2003 U.S. Enterprise Software Market Overview and Assessment, examines the enterprise software market based on input from more than 1,450 small, medium and large business IT decision makers in the U.S. The study analyzes current usage, plans and channels for aggregate software, accounting software, CRM/SFA software, ERP/SCM software, middleware software, collaboration software, and provides insights to other applications usage trends, market size and background demographics. By furthering vendors' understanding of the enterprise software market landscape, this report will help them sharpen their marketing, positioning and channels programs.