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Software-as-a-service (SaaS) is gaining ground among small businesses (SB:1-99 employees) and medium businesses (MB:100-999 employees) in Japan. Total spending on the hosted applications among Japan SMBs will increase from $112 million in 2005 to $138 million in 2006, up by 23%. On the adoption base, Japan SMBs using at least one type of application via SaaS model will grow by 20%, from 13% of PC SMBs to 15%.

These findings were released today by New York-based Access Markets International (AMI) Partners, Inc. The growth of SaaS spending is roughly twice as high as that of overall software investment of 11%. The rapid deployment of CRM as a service is the major driver for the overall growth of SaaS spending. Where ERP and all other application services spending will grow by 18% and 21%, respectively, CRM service spending is expected to increase by 29% in 2006.

The expected growth rate of SaaS spending among Japan SMBs (23%) is higher than their counterparts in the North America (19%). "Better broadband infrastructure, lower software application penetration and greater legal requirements for security management are contributing factors behind the higher SaaS spending growth among Japan SMBs," says Yuki Uehara, New York-based research analyst at AMI-Partners.

First, in 2006, broadband usage will reach 85% of all SMBs in Japan, while that figure is 78% for their US counterparts. Where DSL, T1 and cable modems are the leading data lines among the US SMBs, fiber optics which offer 20 times or higher data-transmit speed than those leading lines, is rapidly gaining popularity among Japan SMBs. The proliferation of fiber optics better enables application usage over the Internet in Japan than in the U.S.

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