Web 2.0 Apps Finding Favor with U.S. SMBs

Like pornography, Web 2.0 can be hard to define. But, in general, interactivity is the key that unlocks it’s potential and small and medium businesses (SMBs) have taken notice.

More than 40 percent, or 2.8 million, SMBs in the U.S. are already using Web 2.0 applications despite the lack of a distinctive definition for the new platform, according to a market study by AMI-Partners.

From software-as-a-service (SaaS) to Skype to Amazon and eBay, SMBs are adopting Web 2.0 to cut costs, improve profits and reach customers.

“The biggest impact we see is how SMBs can leverage the Web to get the solutions they need at a price they can afford, said Jackie Chan, director of Global SMB Primary Research at AMI-Partners in New York.

“It really wasn’t until Web 2.0 came into play, that people can leverage these types of platforms to make more useful solutions more collaborative solutions that can help small and medium businesses.”

While debates abound on the actual definition of Web 2.0, AMI-Partners views Web 2.0 as the second generation of Internet-based services, distinguished by the transition of static websites to a platform for applications development, creating opportunities for developers and ISVs to monetize new applications in new ways.

This results in new opportunities for the users of these applications to consume them and express themselves in ways not possible before.

“We see Web 2.0 as a revolution in the sense that now you’re … using information that’s supplied by more than just the person that posted the website,” said Chan. “It comes from the masses; the power of the masses. The more people that use it, it’s more useful.”

The AMI studies on U.S. SMBs concludes the following factors will drive growing SMB usage of Web 2.0 applications:

SMBs gain affordable access to otherwise expensive technology solutions. Approximately 14% of U.S. SMBs are already using software-as-a-service (SaaS) and this is expected to grow 24% by the end of 2007.

SMB’s desire to cost-effectively market, sell and support their customers. Over 400,000 U.S. SMBs currently use webcasts or blogs for advertising and promotion while 260,000 SMBs are leveraging podcasts.

They can open additional channels of communications while decreasing cost. Another 400,000 U.S. SMBs are currently using Skype while mobile instant messaging (IM) is deployed by over a million U.S.-based SMBs.

They participate in online communities and portals. One-in-five SMBs are currently participating in some form of electronic marketplace that specifically caters to buyers and sellers within their industry.

AMI believes the ingredients for successfully courting SMBs with Web 2.0 applications will include service offerings that encourage collaboration and allow for customization, while addressing user security concerns.

Some emerging areas of robust growth will include online storage and backup solutions, hosted CRM and SFA solutions, Web-based productivity tools, and other online collaboration solutions.

The Web 2.0 wave is not only changing user consumption behavior, but also the channel landscape for independent software vendors (ISVs) and their business models. Large vendors such as Microsoft, Google and IBM should also consider the impact of their Web 2.0 developments on ISVs and how to leverage these channel partners in the SMB space.

About the Study

The results come from AMI Partners International reports,2006-2007 United States Small and Medium Sized Business (SMB) Market Overview and Comprehensive Market Opportunity Assessments.