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Millennial-led midmarket firms report greater SaaS adoption

Midmarket firms are leading the way within the small and medium-sized business space when it comes to software as a service adoption, with 28% of these firms reporting that they have deployed SaaS apps, according to market researcher IDC’s latest SMB IT Decision Maker Survey, published February 2016. Furthermore, Microsoft Office 365 has been successful in the midmarket space, with 50% of these firms reporting adoption.

Midmarket businesses with Millennial-aged IT leadership were also 25% more likely to adopt SaaS than their peers, according to the survey’s findings. Millennial-led midmarket firms, or those whose leadership is composed of a majority of executives aged 35 years or younger, deploy an average of 10 SaaS apps, versus the average midmarket segment’s eight apps. This led IDC to conclude that the age of IT leadership is a good indicator of a midmarket firm’s inclination to purchase SaaS apps. Moreover, desktop as a service, travel booking and human capital management SaaS apps are more likely to be deployed among this subset.

The likely reason for Millennial-led midmarket firms’ greater propensity for SaaS adoption is that “Millennials have grown up with a higher level of trust in having a flexible mindset,” said Chris Chute, research vice president of the global SMB cloud and mobility practice at IDC.

In addition to Microsoft Office 365, the top-growing SaaS apps among midmarket firms (which IDC defines as those with 100 to 999 employees) include ERP, accounting/finance, business intelligence and platform as a service. This growth in apps indicates that midmarket firms are using SaaS to move toward a cloud-first IT environment, according to Chute.

He advises SMBs that don’t have a mostly Millennial-aged IT leadership but want to deploy more SaaS apps to test out a variety of cloud services.

“If one set from a particular vendor doesn’t work out, don’t be afraid to just move on and test-drive another one,” he said, citing no-hassle trials as a way to do so. “Customers don’t have to feel like they are committed to a given IT solution the way they used to,” Chute added.

Small-business SaaS adoption

In the meantime, SaaS adoption among small businesses is less mature, with only 10.8% deploying SaaS. These firms are mainly using SaaS to modernize their email and back-office functions, the top ones being storage, e-commerce capabilities, accounting and payroll.

However, the survey also found that IT-enabled small firms, or those with a formalized IT staff or function, are adopting SaaS in a similar manner as their midmarket counterparts. These businesses’ SaaS adoption rate is 25% — similar to the midmarket’s 28% — but Office 365 is also their second-most-adopted SaaS app.

For small businesses that are not yet IT-enabled but are looking to adopt more SaaS apps, Chute suggests identifying regular business processes that weigh down employee productivity, such as counting inventory monthly or visiting remote sites to audit projects. Then, these small firms can put a particular app to the test among a few employees to see if it fits.

“Oftentimes there’s an app, usually mobile, that has already been solving a regular pain point for other firms,” he said. “Internet searches, forums and word of mouth from other local businesses all can assist here.”