Software Spending Soars Among IT-Savvy SMBs

A recent study by AMI Partners maintains that spending by small and midsize companies on applications for CRM, SFA (sales force automation), ERP and SCM (supply chain management) soared to $1.3 billion in the past 12 months, a 21 percent increase over the previous 12-month period.

AMI classifies small businesses as those with one to 99 employees, and midsize businesses as those with 100 to 999 workers, said analyst Dorothy Gryglak.

The study also showed that 85 percent of all expenditures for enterprise software across the board in the past 12 months were made by the top two SMB tiers, or those that are the most IT-savvy as defined by AMI.

Solution providers say they've seen increased interest in CRM, ERP and SCM from the mid-market and even a slight rise in actual spending, although some question if the 85 percent figure is accurate.

"From a revenue perspective, that number sounds high. Citigroup can go out and spend

$20 million or $50 million on a CRM exercise and not think a lot about it. It would take a lot of SMBs to equal that number," said Mark Salois, senior vice president of sales and marketing at Akibia, a Westborough, Mass.-based CRM integrator.

On the other hand, CRM as a concept has been proven in large accounts, and technologies and best practices that worked in the enterprise can be adapted and applied to midmarket companies, integrators said.

Peter Grambs, a CRM practice leader for Cognizant, a Teaneck, N.J., integrator, said he's seen a "definite uptick" in SMB business and revived interest among pharmaceutical and health-care companies. "Like insurance companies, they're late to the game and realize they have to do this," he said.

Integrators are split, however, on whether CRM offerings that made hay in the enterprise will repeat that success in smaller corporations.

"SalesLogix does very well in the midmarket. Siebel Mid-Market is not as strong," said Yacov Wrocherinsky, CEO of Infinity Info Systems, a New York CRM specialist.

There will be a flurry of vendor activity later this year, including the release of SalesLogix 6 and the long-awaited Microsoft entry, MS-CRM.

"The beauty of what Microsoft is doing is creating a lot of awareness and demand for CRM. Everyone needs it; now maybe they'll know they need it," Wrocherinsky said.

In what is anticipated to be a showdown among the giants, SAP is coming down to the SMB market with its CRM offerings even as Microsoft is expected to move up. Integrators say these vendors are poised for a battle. "All the big players are trying to come down [to SMB, but this is a very different niche with different requirements," Wrocherinsky said.

On the demand side, many smaller companies have not overspent on technology like their larger competitors and may now look at the present as a time to catch up, said Scott Sleeper, CTO of Tanning Technology, a Denver integrator. "The smaller guys didn't trim as deep or as hard as the enterprises when the economy softened, and now may be able to make up for lost time," he said.

But in virtually all accounts, technology purchases are being scrutinized as never before. "We see activity picking up," Sleeper said. "Companies are recognizing that they have to do something . . . but on the other hand, we see $100,000 decisions being bounced up to CFOs. In the past, even $1 million decisions didn't get kicked up that high."