The firm’s “2008-09: U.S. Home Based Business Market Overview – Impact of Economy: Changing Dynamics, Opportunities & Challenges” report shows that the number of home-based businesses in the U.S. using SaaS nearly doubled during 2008, growing 92 percent to 2.3 million. On a gross spending basis, these businesses contributed 16 percent of the total SaaS expenditures by U.S. small and mid-market enterprises for the year.

Home business owners are discovering the convenience of buying accounting/finance, contact management, data storage/back-up, and other applications via the SaaS delivery model. One reason is lower up-front cost: Home business owners save initially because they avoid having to pay for the licensing of new software—rather they simply “lease” the software on a “pay-as-you-go” basis. What’s more, they don’t need to shell out capital for new servers and installation services: With SaaS, all they need are broadband-connected PCs.

Another advantage of SaaS is that pricing is simple to predict and manage: Home business owners now have the ability to include the cost of their SaaS service in monthly expense reports as a recurring line item.

Today’s SaaS services also let small business owners quickly (and often automatically) get software updates (meaning they get the most-up-to-date versions as they become available); add or change software applications with ease; and tailor/adjust software and systems to meet specific business needs – with little to no IT support. Scalability, flexibility and security are also advantages that are winning over home-based business owners.
  

“Today’s SaaS offerings fit the bill as home-based businesses look for solutions that are both appropriate to their needs and do not require significant upfront financial investment,” said Sau Lam, senior analyst with AMI-Partners, in a release.

He added that “cost reduction is cited by home-based businesses in the U.S. as the number one driver for using SaaS followed by ease of installation and management.”

AMI’s rsearch shows momentum building around three key application segments:

--Business productivity tools: SaaS applications for foundational productivity tools, such as accounting/finance and contact management, are garnering an ever-increasing fan base.
--Collaborative applications: The need to reduce travel time and expenses is driving demand for hosted Web conferencing, document sharing, and project management applications.
--Data management solutions: The need to better organize and make effective use of data is stimulating interest in online data storage/backup and data analytic/mining services.

According to the study, home businesses that have been in existence less than five years are the most receptive to the concept of using hosted applications. The research shows that 30 percent of home-based businesses between 2-5 years old and 13 percent of home-based businesses less than 2 years old are more likely to adopt SaaS than their more mature peers.

Lam says this reflects a generational shift.

“Today’s home-based business entrepreneurs are tech-savvy, having been reared in the Internet age,” she said. “They are willing to invest in new technologies, which will help drive the home-based business SaaS market opportunity.”