Midmarket: VARs See The Light

Not so.

Solution providers that hail from the CRN Fast Growth 100 ranking said the trick to sealing IT deals in midmarket companies lies in improving their capacity to innovate: their ability to outpace competitors both large and small. But there is no one surefire approach. Getting prospects to take the bait means understanding their real business problems and piecing together solutions that will help them distinguish themselves.

The good news is solution providers that can show customers the greatest return on investment often wind up winning business. According to a recent survey of 200 midmarket companies by CRN, spending priorities for midmarket companies run the gamut of IT offerings including security, Web services, wireless network infrastructure, servers and storage. “We find that [midmarket companies are] implementing technologies that were implemented by the enterprise three or four years ago,” said David Temple, president of Saratoga Technologies, a Johnson City, Tenn.-based solution provider that offers basic infrastructure such as firewalls and security, including network-grade antivirus systems. “A lot of them are just implementing servers.”

Here&'s more evidence: Gartner&'s GCR IT Watch conducted a survey of 125 midsize companies and found that many plan to spend up to one-third of their IT budgets on notebook PCs. The survey also found that midsize companies plan to expand their budgets on the order of 5 percent to 8 percent next year.

Temple sees Web development as one key priority growing in the midmarket, helping smaller businesses seem bigger and therefore more attractive to clients.

“There are thousands of companies that have no Web sites. [Meanwhile], some companies are doing $2 million to $3 million a month in revenue that didn&'t have a Web site at all,” he said. “Most of the people know that it&'s something they need to do, but none of the Web developers that are large in the surrounding areas want to do a $10,000 Web site. They&'re not interested in that.”

Every advance toward enterprise-level technology made by midmarket companies striving to innovate creates a market opportunity for Temple and other solution providers targeting those customers.

“Our biggest selling feature is the one-two punch of actively finding and taking an interest in the company, and saying, ‘Do you know what you can get that was three years ago an enterprise-only solution?&' ” Temple said.

Acuity Solutions is also benefiting from the downmarket shift of many enterprise technologies, said David Gilden, partner and COO of the Tampa, Fla.-based solution provider.

“The focus of our company is security, so we&'re seeing an overall trend that&'s been going on for the past several years that&'s only accelerated. We&'re seeing an accelerated trend into the midmarket that&'s trickling down from the enterprise. They&'re spending money on the same types of things,” Gilden said.

“Security is a concern that transcends the size of your business,” he added. “It&'s more about the nature of your business as opposed to the size, regardless of what you&'re selling.”

Taking the time to get to know the customer is key to any successful business pitch but especially so with midmarket companies that are struggling to find a balance between adopting new technology to make business better and keeping costs down.

“There are a number of companies out there that have service practices that will do high-end IT consulting; they try to boil the ocean, if you will,” said Brian Casey, general manager of storage solution provider Daymark Solutions, North Billerica, Mass. “In the midmarket space that isn&'t what they need nor what they can afford.”

Midmarket businesses make up more than 75 percent of Daymark&'s customer base, and Casey said that while they have individual needs, their common concerns are price, value and rollout timing. “They don&'t want it to take six months,” he said. Daymark&'s customers want Casey to tell them what is available and what he thinks will be the best fit for their needs.

To help streamline the process, Daymark offers storage solution packages in key areas that customers frequently need to address including backup, networked storage, data recovery and tape technology. Daymark assesses the customer&'s system, makes recommendations and sometimes sells the software and hardware.

Storage is a tricky sell when it comes to convincing customers they are making a wise investment that will help them remain competitive, Casey said. But advocating strong backup and recovery programs can make a midsize business seem more competent to its clients.

“Risk mitigation is a huge piece of it,” he said. “The second thing is an ability to reclaim time that in many cases is needlessly spent administering to an environment that if was properly set up and configured wouldn&'t waste resources.”Being in compliance with federal regulations is another area worth solution providers&' attention. This simple act can only boost a solution provider&'s profile in the eyes of potential customers. Meanwhile, a midmarket company could win more business from larger companies facing those same regulations once they realize they&'re in compliance.

“You could use it to a competitive advantage if you were up against a regulated industry and people are evaluating using your product offering,” Casey said. “One of the things that they can be concerned about is if your organization gets audited or fined, would that impact their ability to do business or operate?”

Sometimes it also helps to be on the edge. The cutting edge, that is. Offering up technology innovations such as virtual tape is helping solution provider PeakData sell storage products to midmarket customers.

“We&'ve been able to, probably more than your average reseller, better understand how virtual tape can benefit those midmarket companies,” said Michael Klatman, vice president of marketing at PeakData, Boulder. “What everybody needs in that space ... is a partner who understands not only what virtual tape is but how to deploy it properly in their environment.”

Yet, not all midmarket companies are looking to be ahead of the technology curve. Some PeakData customers simply want to get a handle on their systems so that they can focus on their core business concerns.

“I think the main issue that they&'re dealing with is explosive storage growth and the inability to keep up with it and to manage it,” Klatman said. “All of the technologies that have been introduced in storage in the past 20 years have been useful in productivity enhancing, but you still have multiple silos.”

Consolidation is also a concern for midmarket companies that have been creating piecemeal storage environments, and Klatman said solution providers need to help illuminate how this strategy can be a good business investment that inspires innovation.

“The low-hanging fruit is in operational savings because if you have multiple islands of servers, and you have multiple kinds of backup software, then you&'ve got more of an administrative burden,” he said.

Indeed, ROI is a priority for clients of FusionStorm, a San Francisco-based solution provider that has pushed more of its revenue into recurring services. Often midmarket companies are seeking ways to stretch their IT dollars while filling gaps in their IT infrastructure, again to help stoke business agility.

“We&'re a $150 million reseller this year, and most of our business is to the midmarket,” said FusionStorm CEO Jay Varel. “The No. 1 driving initiative, since the end of the dot-com craze, is still ROI. The smaller and midsize companies don&'t have the breadth of the IT staff to cover everything they need in the IT area.”

Managed services can help unlock that ROI, he said. For example, if a company purchases a VoIP system from FusionStorm, that customer saves on hiring people with VoIP skills or training staff to gain the expertise necessary to run the system, Varel said.

“The outsource model works if people trust their provider, and if the ROI is there. We can clearly show no less than 100 percent ROI per annum. Most of our customers will tell us it&'s three, four or five times that,” he said.

What matters most to midsize companies is having someone who is willing to learn their business and who pays attention to their needs and budgets, according to the Fast Growth solution providers interviewed for this story.

“They&'re completely underserved,” said Saratoga Technologies&' Temple. “We can give [them] enterprise-grade stuff now, mainly because it is so much cheaper.”

Gilden agrees, noting that the channel serves as a technology interpreter for its customers, regardless of size.

“Don&'t assume that just because a company is a certain size that they&'re going to behave in a certain way,” he said. “At the end of the day you need to understand what they need and how they work. Really, it&'s all about the nature of their business as opposed to the size. We deal with a lot of midmarket companies that operate like enterprises, and we [deal] with a lot of enterprises that operate like small companies in the IT department.”

The secret to closing those deals is demonstrating technology&'s potential to address operational issues, while unlocking innovation.