This morning in San Francisco at the SMB Cloud Summit, industry veteran and LSA Tech Adoption Index advisor Neal Polachek presented a forecast for the SMB software-as-a-service (SaaS) sector. One of the biggest takeaways was that SaaS adoption will be as potentially disruptive to the SMB market as smartphones were to local search.

He started his discussion simply describing the impact SMBs have on the US economy, estimating that small businesses drive roughly $7.4 trillion in spending. He added that 48% of all private sector employees (about 58 million) work for SMBs. Clearly, SMBs are critical to the health of the national economy.

Getting into the actual SaaS opportunity, Neal estimated that the addressable SMB marketing is about 10 million businesses. He said this is roughly the number of SMBs that have employees to pay, transactions to process, supplies to purchase, customers to engage, etc. All of which can be supported by SaaS solutions.

More specifically, the opportunity with SaaS fall into five primary categories: human capital, marketing and advertising, operations and finance, supply chain and CRM. Neal added that SMBs are already spending about $6 billion in these five categories.

Further accelerating this adoption of new tech, Neal went on to say that the SMB market is in the early stages of a generational shift, unlike any before it. According to Pew Research, beginning in 2011 and lasting about 19 years, nearly 10,000 Americans will turn 65 (traditional retirement age) everyday. This means that millions of SMBs will either be sold or turned over to a new generation of SMB operators.

From a marketing sizing perspective, recent research puts that current SMB SaaS market around $10B in top line revenue today, growing to about $14B in the next 3-5 years. Neal expects this migration to digital tech within the SMB market will continue to accelerate and providers will need to take advantage in order to remain competitive.