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Investing more in software as a service (SaaS) and enterprise resource planning (ERP) could help smaller businesses lower their operating costs and help them grow in spite of the recession.

So claims a report released today by RedShift Research, which makes the case for the mass implementation of SaaS for SMEs, stating the majority of advantages revolve around cost reduction.

According to the report, recession-hit SMEs put limitations on IT spending in an attempt to reduce costs, with 19 per cent making little or no investment in IT for two to three years.

However, the removal of many costs by solutions such as SaaS and ERP allow SMEs to now focus purely on business by removing the burden of IT, and less down time obviously equates to increased productivity.

“Many [SMEs] have already made a move towards leveraging external IT expertise for support, maintenance, and advice. Making the move to SaaS is the next logical step,” said Andrew Watkinson, managing director at Ardent Solutions, who commissioned the study.

Today, many SMEs face huge disadvantages by not having adequate IT resources in place to support the running of everyday tech operations. The report also suggests that many businesses simply cannot afford their hardware expenditure, with 43 per cent of them opting to postpone such investments.

“SaaS is gradually beginning to filter down into business as a concept,” said Redshift Research’s managing director.

However, the fact that 30 per cent of SMEs are unsure what SaaS actually is, and with 38 per cent spending less than £10,000 per annum on IT, suggests it still has a long way to go.

Additionally, constantly changing technologies have left smaller businesses at a disadvantage with 65 per cent having less money available to invest than this time last year.

Jonathan Dawkins, a senior consultant at Ardent, added: “It is vital that SMEs embrace alternative methods of not only keeping up with the changing face of technology, but staying ahead of it.”