A recent research shows that Indian SMBs have increased their investment in implementing cloud based enterprise solutions by 43% in 2011. The increase in spend on enterprise applications was to be expected with the upturn in economy. However with lessons learnt the hard way over the past few years, they are careful to not go for just any solution. There are reasons beyond the cool sounding terminology for SMBs to prefer cloud over on-premises model.

Amongst major challenges those SMBs face are managing IT services and scaling at a rapid rate. While not being a core competency, IT services requires considerable investment of resources and bandwidth to run it smoothly. The role of IT services becomes even more important if the applications are deployed on-premises, leading to constant headaches associated with maintenance, upgrades, downtime etc. Limitations on technology could also prove to be a bottleneck when it comes to scaling. What if there are not enough licenses? What would be the training cost to familiarize a new joiner with the custom legacy systems? How should the fluctuations in headcount be accounted for?

Cloud based applications not only remove all the above hassles – the system is hosted and managed by the vendor or its affiliates – but also provide a simple solution to the “scaling problem”. Says Shashank Dixit, CEO and Co-Founder at Krawler Information Systems – “ The Indian market is maturing and the business owners are looking at implementing solutions that not only solve their problems now but also would be able to handle the changing demands in the future…. this is where SaaS steps in.”

The SaaS (software as a service) model solves both problems with one shot by the virtue of its architecture. The hosted nature with on demand capabilities is exactly what SMBs had wanted. It provides them with the option to

? Focus completely on their core competencies rather than worry about IT issues.
? Easy to scale up as it is On-Demand. They could go up to 200 employees from 50 without any additional investments on server upgrades, maintenance, data backup etc.

Effectively no overhead costs in the SaaS model makes it ideal for an SMB

With the supply and demand ratio skewed in the favor of the customer, this is the best time for them to pick and choose, and they are doing exactly that .Most providers of cloud based SaaS applications, like Salesforce( www.salesforce.com) and Deskera( www.deskera.com), know that the supply- demand curve is skewed and this is leading to providers dishing out attractive offers and promotional campaigns to attract customers.

The future is Cloud. Its ease of implementation, zero maintenance, on demand pricing model and the abundance of choice means we won’t be seeing a drop in the spending from SMBs on SaaS enterprise applications in the near future.