The Asia-Pacific ‘on-demand’ software market could witness an explosive growth over the next three years thanks to the rising demand from SMEs. On-demand software or software as a service (SaaS) is a software distribution model where applications are hosted by a vendor or a service provider, and made available to customers over the Internet.

According to new analysis from global growth consulting company, Frost & Sullivan Asia Pacific On-demand Software Market, revenues in this market - covering 12 major Asia-Pacific countries were US$70.3 million in 2006, and is forecasted to grow at a CAGR of 27.1% (2006-2009), reaching a market size of US$144.3 million by end-2009.

"The rising number of SMEs, and the increasing adoption of software solutions that provide them with a competitive edge is likely to give rise to greater deployments of on-demand software across the region," notes Subba Iyer, director, Frost & Sullivan. "The advantages of web-based accessibility, cost feasibility, faster implementation cycles, and manageability would appeal to businesses; more so for SMEs."

However, technological and infrastructural limitations, such as inadequate and costly bandwidth, and security concerns are a major hurdle to the adoption of on-demand software solutions.

"To address the data security concerns, vendors should invest in their own hosting service, or partner with reliable providers, thereby helping to gain confidence among customers," says Iyer.