The study from PeoplePerHour.com, which claims to be Europe's online business market-place, took in responses from most of its 50 000-plus users and found that 37% of small firms didn't know what cloud computing and SaaS technologies are.

The agency says that the findings are particularly interesting for Erply, a new business software company that offers its services in the cloud.

Erply's co-founder Kris Hiiemaa said he believes that small businesses are put off by the terminology used by the IT industry when it comes to cloud computing and SaaS issues

"Cloud computing and SaaS mean nothing to most small business owners", he said, adding that his company consciously tries to avoid using such terms in relation to its service.

"They might be technically accurate, but they alienate the majority of our target market. We need to demystify the technology if small businesses are to benefit from it. It's actually extremely simple to use and understand", he explained.

The survey also revealed that 62% of small businesses planned to increase their investment in IT in 2010.

"The business software industry has focused on targeting a narrow big business market and has priced out the UK's four million small businesses", said Hiiemaa.

"The challenge for us is to communicate the benefits of Cloud Computing and SaaS to the small business market if we are going to successfully tap-in to their growing buying power", he added.