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(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)

In my first article about Astea International Inc. (ATEA) I mentioned that the company was positioning itself for significant growth due to a recent convergence of the following developments: 1) a significant uptick in cloud software as a service wins, 2) an increase in its backlog for professional services, 3) the recent announcement of a major software release, and 4) major recent announcements of sales and marketing alliances with large global firms.

Since I wrote my October 7, 2013 ATEA report, competitors Clicksoftware Technologies (CKSW), and ViryaNet (OTCQB:VRYAF) have reported record financial results blowing away the most optimistic estimates both in terms of revenues and net income!! And the market has rewarded them accordingly because fundamentally this trend is expected to continue going forward. As you can see in the chart, ATEA is still lagging behind the two because it will not report its 4Q and FY 2013 financial results until mid-March. However, because ATEA has the lowest float of the three, it could potentially gain more than VRYAF once its financial results/guidance are known.

Is there a reason for this madness? Yes there is - one of the key factors contributing to this explosive growth is the sudden rise in the demand for FSM solutions from small and medium-sized (SME) enterprises. A major contributing factor is and the wide acceptance of software-as-a-service-based (SAAS) or cloud-based field FSM solutions.

According to a recent industry report, the key vendors dominating this space include Astea International Inc., ClickSoftware Technologies Ltd., Oracle-Siebel Corp. (ORCL), VyriaNet, and TOA Technologies Inc.

It almost appears that the service industry has suddenly realized that cloud-based FSM solutions are much more cost-effective than on-premise license-based solutions. FSM vendors like ATEA, CKSW, and VRYAF provide cloud-based solutions for an annual subscription or on a pay-per-use model. Furthermore, the implementation of cloud-based solutions saves the cost associated with installation and upgrading of license-based solutions. Also, the total cost of ownership reduces because there is no capital investment. The growth rate of the SaaS-based FSM solutions is expected to be much higher than that of the on-premise FSM solutions.

SMEs cater to a large number of customer segments, and this requires constant innovation in service and product offerings to remain competitive. FSM solutions help SMEs achieve their business goals by fulfilling customer demands, which in turn helps them improve their operational efficiency, including technician scheduling and dispatch, inventory management, asset tracking, and help desk service.

Just a few years ago, most people had never even heard of "the cloud." How quickly times have changed. In a recent survey conducted by The Service Council, 84% of the respondents indicated they have little or no reservations about using a cloud-based offering to run their Field Service operations. Some of the biggest draws to a cloud-based FSM solution include intuitive use and ease of training (cited by 79% of respondents) and the ability to roll-out quickly (71%). Indeed, it is not uncommon to measure in hours rather than days the time a field service technician spends learning to use a cloud-based tablet.

Other benefits derived from the cloud-based model make for a long list: It removes the constraints of time and geography, allowing access to scheduling and customer information anywhere, anytime, and across any of multiple devices and platforms simultaneously. It facilitates communications between field technicians and the back office, allowing the back office visibility into which field technicians are where, what skill sets they have, what jobs they are scheduled to do, and when they are scheduled to do them, enabling optimized work order creation, optimized scheduling, and optimized dispatching, not to mention increased billing speed. This way services organizations can respond to customer demands faster and more efficiently, and the field technician can spend more time working on customer sites. The reductions in travel times, mileage, and overtime labor reads to lower operational costs, increased first-time fix rates, and an overall better customer experience. It is no wonder, then, why 67% of respondents planning to invest in new mobile tools this year are considering the use of cloud computing.

ATEA has been busy in recent months promoting its best-of-breed cloud and on-premise FSM solutions although it has not made any announcements since November 2013. They've attended and participated in several industry conferences. The most recent one took place this week in the Field Service Medical Conference that took place at the Rancho Bernardo Inn, San Diego, CA (February 10 - 12, 2014). ATEA was one of the sponsors of this event along with recently announced solutions partner Wipro. The company has issued a number of white papers and shared several recent case histories in various industry forums/publications in the last 12 months but with increased frequency in the last 6 months.

The last few years have been bumpy for the stock as seen in its 5-year chart. This is because its revenues have been highly dependent on the timing of large license wins. Sales cycles for large enterprise applications are long and therefore the chart reflects periods of feast and famine. It is almost a certainty now that the cyclic behavior of ATEA's stock price will change into one of steady move upwards by capitalizing on the explosive growth of cloud-based FSM solutions.

ATEA has timely recognized this opportunity and have made moves ahead of time to capitalize on it. Zack Bergreen, founder and CEO of Astea International stated recently, "We've optimized our business both strategically and operationally, to better adapt to the increasing customer adoption of the cloud SaaS business model, and as a result, these actions are already improving our business and we are now well positioned for growth and increased revenues. We are seeing an increase in the number of sizable companies, around the world, that are interested in our robust end-to-end service management solution. In addition to this positive trend, our professional services backlog is growing. Accordingly, we are confident that we will return to profitability by the end of the year."

To drive growth globally, the company has been actively and successfully expanding its partner ecosystem. The most significant recent announcements is this area was their partnerships with Capgemini and Wipro (WIT). The Capgemini-Astea deal offering will combine Capgemini's infrastructure services experience and cloud expertise with Astea's Alliance 11.0, the latest release of its famed global field service management solution. Regarding the Wipro partnership, CEO Bergreen stated in the company's 3Q 2013 Conference Call: "with this partnership, we will have a global focus and we'll be able to work together on several markets and implement our pivotal service management solution ... We are aggressively on boarding this new partner and we already had initial meetings with some of the enterprise customers to discuss the capabilities of our solutions. We are very excited about this new partnership and we are confident that it will have positive impact on finding new customers."

To sum up, I believe ATEA is poised to catch up with recent sector high-flyers CKSW and VRYAF. And I feel confident that the company will show that it has turned the corner as revenues will likely go up due to current sector trends as discussed above. I also expect net income to improve significantly because the company has shown in recent quarters a leaner and leaner cost structure and because of the low share count.

Investors looking into buying ATEA stock should recognize that there are significant risks associated with investing in any micro-cap having a tiny float. Potential losses can be significant if the company fails to execute its plan, if market conditions change adversely, if the overall economy worsens, and many other unforeseen circumstances. For a complete discussion of all risks and uncertainties, I advise potential ATEA investors to carefully read the most recent company 10-Q and 10-K filed with the SEC.

Source: Astea International Inc. Poised To Participate And Compete In Explosive Sector Growth