CXO

Cloud and consumerization edge IT vendors out of the mid-market

Major tech companies have done a poor job of serving the mid-market. Patrick Gray explores the reasons why these IT vendors are about to be pushed out of the market entirely.

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IT vendors have long regarded the mid-market — the huge swath of companies between small businesses and Fortune 1000 behemoths — as a major growth area. The Fortune 1000 are a rarified and inherently limited breed, and small businesses often lack the budget or desire to afford higher-end IT products. There are also tens of thousands of mid-market companies, quickly putting a twinkle in the eye of any IT salesperson as they plan on how to achieve their sales targets.

Too hot, or too cold

The products IT vendors historically offered the mid-market have often been reminiscent of the story of Goldilocks and the three bears, except that mid-market companies rarely find the porridge that's "just right." This is due to many vendors either dumbing down their enterprise offering, or putting a low-grade, small business product in a fancier box and slapping an enterprise label on it.

In the first case, the reduced functionality enterprise products might have reasonable pricing, but would lack a few critical features, or retain so much complexity that implementation and maintenance were significantly more costly and difficult than the acquisition of the product itself. In the latter case, until fairly recently there was a disturbing trend for major enterprise vendors to slap their name on poor-quality products that were functionally completely different than the rest of their line. A mid-market IT manager would purchase what he or she thought was a reasonable product, often to find a nice feature set marred by poor reliability.

Consumerization and the cloud cometh

What's revolutionized the IT available to the mid-market has not been better products from enterprise vendors; rather, it's largely been consumer solutions that are better, updated more frequently, and less costly than traditional mid-market offerings. In software development, new development tools from the open source movement (further fueled by the recent Silicon Valley renaissance) are often more capable and readily accessible than the major vendors' tools. In hardware, everything from iPhones to Xboxes has brought powerful capabilities to mid-market companies, bypassing niche vendors and traditional enterprise vendors alike and largely taking over end-user computing devices.

The one area where consumerization has not significantly benefited mid-market companies is in the data center, where these companies are still faced with a painful choice: buy an inferior "mid-market" product and risk reliability problems, or spend 2-5X more on an "enterprise" product, often not much of a choice for critical devices like network infrastructure, servers, and storage. In this space, however, cloud computing is increasingly making this choice moot. Rather than purchasing a full complement of IT infrastructure, mid-market companies can increasingly shift their spending toward high-bandwidth internet connections and pay someone else to worry about their servers and applications by shifting toward the cloud.

While there should be careful consideration placed on any decision to move critical infrastructure and applications to a cloud provider, for the mid-market I find this shift especially compelling. Rather than cost savings, I see the cloud as a way for mid-market IT departments to shift scarce human resources away from keeping the lights on, to focusing on more strategic areas. In industries from manufacturing to broadcasting, IT is beginning to affect the company's core business, and if IT resources are busy keeping email and basic services running, they cannot help anticipate and mitigate these changes.

The major IT vendors have historically done the mid-market a disservice, offering inferior products at prices that didn't make much sense when support and implementation costs were considered. However, the rise of consumerization and cloud devices are not only offering the mid-market extensive capabilities at commodity prices, but also allowing IT to focus on more important priorities.

About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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