The midmarket is wide open for software as a service offerings.

Enterprise vendors such as Oracle and SAP have failed to reach midmarket companies with the fading strategy of deploying broad -- and proprietary -- business suites as the market is too fragmented. 

Traditional IT and business process outsourcing companies, which have oriented their pricing, packaging, sales and support models to the large enterprise, are experiencing slow growth and declining profitability yet have not shown the capability to move down market.

 

Microsoft, which has a well developed technology strategy for small business markets, has struggled to move up the ladder.  Unable to afford customization across applications, mid-size companies, in what has proven to an expensive and less-than-optimal approach, have done what they can by bringing together functional applications via XML, APIs, and third party services.

 

As did the enterprise before it, the midmarket is beginning to focus on migrating from disparate, often standalone applications to suites of applications that share a common user interface.  Because the midmarket continues to mystify most vendors, there are significant opportunities for vendors and vendor/channel partnerships to deliver a platform of applications and services to mid-size companies.

 

The optimal platform is already defined as software as a service.  IDC reports that, in a survey of 512 IT professionals in North America, 79% had already purchased or were considering software as a service.  Research by Forrester further reveals that midmarket companies are leading that adoption.  The opportunity is to deliver a relevant suite of applications and technical and business enablement services through an on-demand revenue model on a trusted hosted platform.

 

Mid-sized companies want to work within standardized applications and processes.  The sheer size of the midmarket base -- approximately 275,000 companies worldwide according to widely accepted estimates -- and the dearth of trusted brands competently serving this segment, combined with the direct relevance of the SaaS technology and business model, have created considerable upside for those companies that can effectively execute an on demand strategy.

 

SaaS based application, services, and delivery partnerships are being created to serve horizontal and vertical industry segments.  There remains significant upside in bringing solutions together to target defined markets.  I'll address this and identify aspects of successful partnership strategies in another entry.

Traditional IT and business process outsourcing companies, which have oriented their pricing, packaging, sales and support models to the large enterprise, are experiencing slow growth and declining profitability yet have not shown the capability to move down market.

 

Microsoft, which has a well developed technology strategy for small business markets, has struggled to move up the ladder.  Unable to afford customization across applications, mid-size companies, in what has proven to an expensive and less-than-optimal approach, have done what they can by bringing together functional applications via XML, APIs, and third party services.

 

As did the enterprise before it, the midmarket is beginning to focus on migrating from disparate, often standalone applications to suites of applications that share a common user interface.  Because the midmarket continues to mystify most vendors, there are significant opportunities for vendors and vendor/channel partnerships to deliver a platform of applications and services to mid-size companies.

 

The optimal platform is already defined as software as a service.  IDC reports that, in a survey of 512 IT professionals in North America, 79% had already purchased or were considering software as a service.  Research by Forrester further reveals that midmarket companies are leading that adoption.  The opportunity is to deliver a relevant suite of applications and technical and business enablement services through an on-demand revenue model on a trusted hosted platform.

 

Mid-sized companies want to work within standardized applications and processes.  The sheer size of the midmarket base -- approximately 275,000 companies worldwide according to widely accepted estimates -- and the dearth of trusted brands competently serving this segment, combined with the direct relevance of the SaaS technology and business model, have created considerable upside for those companies that can effectively execute an on demand strategy.

 

SaaS based application, services, and delivery partnerships are being created to serve horizontal and vertical industry segments.  There remains significant upside in bringing solutions together to target defined markets.  I'll address this and identify aspects of successful partnership strategies in another entry.

---

Kevin L. Asay
Principal & Go-to-Market Specialist
Mural Consulting

The mid-market is also very complicated, having attributes of both large enterprise and smaller enterprise from both sales and implementation perspectives.  Vendors have difficulty determining which accounts to handle directly and which to handle with partners.  They often find themselves competing with partners in this segment as well, with only loosly defined rules of engagement.  Technology requiremnts can also be complex. Integration of SaaS  applications with on-premise applications and databases is often required to get maximum value of SaaS. 

The midmarket is complicated.  The reward will be great for the vendors that can get it right.  The level of complexity is reason enough to make certain that, as a provider or ISV, you are strategically positioned to get into the market.  The scope of this positioning is too broad to get into here, but it is worth mentioning that midmarket customers typically look first to those providers with domain or vertical expertise.  They also look to those vendors with which they feel they are strategically aligned.  Interestingly, according to VARBusiness research, even though Microsoft has not finalized a clear midmarket strategy it is perceived as strategic by 69% of midmarket companies, far higher than other key technology providers (Cisco and Dell were next, considered strategic by 47% of responding companies, followed by HP at 44%, Intel at 41% and IBM at 29%).

---

Kevin L. Asay
Principal & Go-to-Market Specialist
Mural Consulting

"Mid-sized companies want to work within standardized applications and processes" - For me, this is the most significant statement in this discussion as it represents the true nature of the challenge in addressing mid-market needs. It's clear that the main vendors in the mid-market space recognise this need - Sage, for example, emphasise the importance of their CRM solutions integrating tightly with their Accounting solutions and are keen that everything they do with 'structured data' in these environments should integrate, where relevant, with 'unstructured data' in areas such as collaboration and content management. You can see that once the key SME software vendors have truly integrated application suites that provide high reliability commoditised services, there is an excellent opportunity for service providers to focus on the particular needs of horizontal and vertical industry segments.