When first popularized over a decade ago, Software-as-a-Service (SaaS) was targeted as larger enterprises as a means to reduce the costs, complexity and implementation time for big, heavy-duty workhorse applications - the alphabet soup of acronyms like CRM, ERP, CMS, LMS etc. While it has unarguably lived up to those expectations, the more meaningful sea change is happening for small businesses, or more specifically Very Small Businesses (VSB) - generally defined as those with fewer than 10 employees. More and more of these contractors, florists, realtors and tax-preparers are chucking the install disks and simply logging on, for everything from managing customers to tracking expenses.

There are many reasons why these two acronyms, SaaS and VSB have made such a meaningful connection, but primarily:

• Small business owners are increasingly younger - there are more Gen Yers despite being a smaller proportion of the population than Gen X - and have grown up using consumer-oriented online services.
• They are increasingly mobile - more than 40% are virtual or work in multiple locations, and online services allow them to be unthethered.
• Services are getting better, cheaper, simpler - more service customers report that they picked it on the basis of it being the best solution, regardless of software/service.

For SaaS vendors, these small businesses are particularly attractive because they exhibit strong vendor preferences and loyalty. They are easy to market to, and responsive to low-cost marketing channels like social media. And most of all, there's lots of them - over 28M of them in the US alone. But you've got to have the goods to make the cut, specifically...

• Simplicity - Gone are the days of bloated feature-sets and training manuals, even online-help is more insurance than necessary feature. The iPhone rule reigns supreme - no more than three clicks to accomplish a task.
• Social - Despite concerns about intermingling business and personal tools, there is real value and convenience in well-thought-out features - for example, importing contact photos from facebook, or unifying your email inbox with your business twitter stream.
• Mobile - Given the mobile nature of small businesses, this is the price of entry. If you don't have an iPhone app, you're just a poseur.
• Cheap, Free, Trial, Monthly-pricing - These are the new economics of small business services. Deal with it!

Here are some great services that embody all these qualities:

• ContactMe - a new service for managing leads and customers that is so simple and intuitive that it just feels wrong to call it CRM.
• BookFresh - the perfect solution for small appointment-based services to allow customers to book services online.
• Zoho - a tour-de-force of apps, everything from scheduling to document mgmt - think of it as an easier Google Apps.
• FreeAgent - Finally a simpler option for basic accounting and invoicing.
• ShoeBoxed - Scans in your receipts, business cards and more - your expense reports just got easier.

Closer to home, for hosting-providers (like Network Solutions) that have traditionally focused on online identity and presence services, filling these adjacent needs is a great opportunity to provide value in the "backoffice" as well. With hosting and websites becoming increasingly commoditized, the SaaS market represents an opportunity to differentiate, diversify revenue streams and potentially enter an entirely new market. Incidentally, I will be on a panel covering this very topic titled "What's next for SaaS - more value for consumers, more revenue for providers" at the OpenXchange partner summit in Cologne on Nov 4. Other panelists include execs from 1&1 and OpenXchange and it should provide some interesting perspectives.