How To Become A Master Of The Midmarket

IT products and services, but sound advice as well. We can say that with confidence because of our just-completed survey of the technology-spending intentions of midmarket companies, which employ between 100 and 999 workers. The midmarket's steadiness attracts and sustains solution providers, while its elusiveness confounds vendors.

You will start to see findings from our State of the Midmarket study in the next issue of VARBusiness, as well as subsequent issues, as we analyze the data we collected from 277 IT executives, CEOs and line-of-business managers. Their companies generate between $1 million and $999 million in sales, with the bulk in the $1 million to $50 million range.

At the time we contacted these individuals, we were in the midst of a surge in oil prices, uncertainty over who will occupy the White House come November and a jittery stock market. Yet they expressed optimism about the outlook for their organizations, along with confidence that they would be spending more on technology this year vs. last year.

When I spoke to one VARBusiness 500 CEO to find out if he was experiencing joy in the midmarket, his optimism was contagious. His firm has seen an uptick in spending from such customers that remain hesitant to hire internal IT staff yet feel pressure to invest in IT as a result of customer demands or the moves of a competitor. Either way, his firm is reaping the rewards of focusing on this market. In a single breath, he rattled off Web security, Web development, Notes-Domino migration, and ERP assessments and deployments as areas of spending by existing and new midmarket customers. In the next breath, he wondered, "Are we getting smarter about asking the right questions [of our customers] or is the market opening up?" Well, given that 40 percent of the companies we spoke to said they plan to spend more on IT in 2004 than in the previous year, he is definitely experiencing an uptick in spending. If you consider that the largest of midmarket companies plan to spend more than the average customer, then solution providers have even more reason to feel optimistic, as these firms expect to spend slightly more than 11 percent of their revenue on IT goods and services this year. Many of these companies, one VAR noted, have recently had a change in management where the newcomers are much more IT-literate and comfortable with outsourcing their technology needs.

Without drowning you in stats, let me share some of the key findings from the study, which we broke into three subsegments: companies with 100 to 249 employees (small), 250 to 499 (midsize) and 500 to 999 (large).

• Nearly every company we surveyed has an IT department to a varying degree, and, as you can imagine, the firms without internal IT tend to be the smaller firms. In fact, 14 percent of the small midmarket firms we surveyed had no IT department at all. Obviously, their solution providers are the IT departments for those organizations.
• Not every company in this group uses the services of a solution provider (16 percent said they go it alone), but, on average, a midmarket customer hires nine VARs to take care of its needs. Large midmarket companies typically engage 25 VARs to handle general IT consumption along with more specialized needs for application development or infrastructure work. Approximately 20 percent of firms said they are looking to hire internal IT staff.
• As for vendors, we asked midmarket firms which ones they viewed as strategic based on their own views or the input of an IT consultant; the top three were Microsoft, Cisco and Dell, followed by HP, Intel and IBM. Not to oversimplify the findings, but there is no doubt that Dell is a fierce rival in this space and IBM still has an image problem.
• We also asked respondents which vendors they viewed as unimportant. It was not surprising that EMC, Oracle, Sun, Xerox and IBM topped the list. It is notable that each of those vendors is working to crack the midmarket code with changes not only to their distribution strategy, but to their product offerings as well. They obviously have a great deal of work to do to make their channel partners comfortable selling their products to midmarket customers.
• Let me know your thoughts on the midmarket. Tell me about your customers, which vendors you like supporting and those without a clue. Contact me at [email protected].