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SMB predictions -- SaaS, ASPs and MSPs

First in a series of expert predictions for IT at SMBs.
A year ago, I predicted "services, services, services" would be the focus of SMBs in 2005. I'm pleased and proud to boast that my predictions have become a reality.

SMBs are quickly adopting a variety of managed application, network, security, storage, hosting and other 'utility computing' services as they seek more ways to offload, or "out-task", various aspects of their IT/telecom requirements.

In 2006, a relatively new acronym of SaaS -- Software-as-a-Service -- will be added to the alphabet soup of ASPs (application service providers) and MSPs (managed

The expanding array of SaaS, ASP and MSP players will create a buyer's market for SMBs.
service providers), and become a mainstream practice dramatically changing the way SMBs acquire and utilize software.

Rather than continuing to purchase costly and cumbersome packaged applications, SMBs will expand the array of SaaS alternatives they utilize. These software service alternatives will be further validated by Microsoft's promised entry into the SaaS business.

The expanding array of SaaS, ASP and MSP players will create a buyer's market for SMBs. They will be able to select application and IT infrastructure management services from a variety of vendors, carriers, resellers, integrators, outsourcers and specialized service providers (xSPs).

The rapidly increasing, yet relatively undifferentiated choices will also create buyer confusion and commodity pricing pressures for the service providers. This will mean serious financial challenges and the demise of some secondary players.

The shift of the IT industry to a services model will only be slowed if a significant number of SMBs are harmed by providers that can't deliver reliable and cost-effective service solutions. If quality, reliability and cost problems emerge, the service movement will be slowed and could be reversed, much like the backlash against offshoring in 2005.

View Jeff's predictions for outsourcing from last year.

Jeff Kaplan founded THINKstrategies in 2001 to help IT solutions companies, IT executives and IT venture capital firms re-THINK their IT strategies and redeploy their limited resources to meet their corporate objectives.

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