Midmarket Embraces Cloud Computing, Increases IT Budgets

Cloud computing is high on the wish lists of many mid-sized companies, with roughly 2/3 of them adopting cloud computing technologies, a recent IBM study found.

At the same time, IT budgets in the midmarket are increasing for the first time in years.

IBM queried more than 2,000 midsized companies, ranging from 99 to 1,000 employees, in 20 countries to determine their IT spending patterns in its study "Inside the Midmarket: A 2011 Perspective." Among the top priorities for many was the adoption of cloud computing.

"Midmarket companies are becoming more aware of the value of the cloud," said Ric Telford, IBM's vice president of cloud computing services.

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Despite identifying the cloud as a key priority over the next 12 to 18 months, Telford said that IBM's midmarket study also found that many midsize companies area already waist-deep in the cloud pool.

"Sixty-six percent of people that responded said they already have a cloud project in place or one coming," he said.

Additionally, Telford said, midmarket companies aren't just turning to cloud computing solutions for savings, but are instead focusing on the business benefits that the cloud affords. While 73 percent of midmarket companies surveyed said that cost reduction is the top business benefit of implementing cloud computing, other factors like manageability, 70 percent; redundancy, 68 percent; uptime and availability, 67 percent; and rapid provisioning, 66 percent, were among the top perceived benefits.

Telford said IBM found that the midmarket is looking to focus its attention on public clouds versus private cloud architectures. "Midmarket companies are looking at improving their overall IT quality by looking at cloud computing," he said, adding that revenue growth, customer focus and innovation are also key drivers moving midsize companies to the cloud. "They see cloud computing as a way to get to these other value propositions."

And while cloud computing is of major interest to the midmarket, the IBM study also found that 53 percent of midmarket companies will increase their IT budgets over the next 12 to 18 months. Thirty-one percent, however, expect their IT budget will remain flat while 16 percent think it will decrease or were uncertain.

IBM's findings that the midmarket will increase its IT spend comes on the heels a report from Raymond James & Associates that found IT spending in the fourth quarter marked the first year of double-digit growth in a decade.

The boost in spending comes as midmarket companies shift their IT focus. The study found that 79 percent said their focus is to concentrate on customers, growth and innovation, while 21 percent said efficiency and cost control is a dominant focus. That's a shift from IBM's 2009 midmarket study in which 53 percent of companies said efficiency and cost control were their main focus, while just 47 percent said they would focus on growth, innovation and customers.

"It's not just about savings," Telford said.

Other areas midsize companies plan to focus include security, 63 percent, CRM, 62 percent, and analytics and information management, 59 percent, IBM found. Seventy-five percent also plan to upgrade their core IT systems to increase and improve performance, security and reliability.

And the study bodes well for consultants and solution providers as well, as 70 percent of respondents plan to pursue consultative relationships with their IT providers versus just a transactional relationship.

"We've seen a boom in the number of midsize customers within the consumer products space who want to engage with us around analytics and cloud," said Jay Hakami, president and CEO of New York-based Sky IT Group, an IBM partner. "IT departments in midsize markets are adapting very fast to that fact that they must do much more with less. Companies are looking to quickly identify tools and efficient ways to support growth and innovation."