Our Midmarket CIO Forum starts in a few days and I hope to see a number of you there. What I find fascinating about this space is the increasing number of major players that have realized that the growth in IT isn't in the large enterprise, which is often bogged down by massive aging systems that can't be replaced and markets that have stabilized; rather, it's in the midmarket, which is generally defined by fast, agile companies that are more able to adopt new technologies because those markets are often growing faster, and tend to be less tied to older platforms.
I was at two analyst events over the last several weeks: one at Dell and then another yesterday at AMD. Both companies have pegged much of their future growth, at least when it comes to servers, on the midmarket and are making relatively large investments to address our segment.
Let's talk about that today.
The Problem and Promise of the Midmarket
One of the first things a vendor has to learn when it approaches the midmarket is that it isn't made up of second-class citizens who lust after enterprise hardware and can't afford it. The midmarket wants solutions that are specifically designed for its unique needs, and it also wants a relationship with the vendor that is supplying the solution.
Efforts to reach the midmarket have been a historic problem for vendors. Compaq and Microsoft tried to offer their own solutions in the 90's, but their approaches fell short due to acquisitions (Compaq) or a shift in focus and executive departures (Microsoft). Each now exist as a shadow of what they once were.
The reason behind this lack of midmarket reach is that the enterprise market requires massive amounts of resources and the value of each deal is massively higher, which makes it feel as though you can make more money with less work by focusing on the big companies. What folks often forget is that enterprises are generally more complex; the deployments are riskier in terms of profit, visibility, and final execution due to that complexity; and sales cycles can be measured in years. Folks seem to forget that the enterprise market actually killed Netscape.
Obviously, midmarket deals aren't as big as their enterprise counterparts, so if one goes south, it probably won't be in the local paper. But midmarket deals are less complex and, therefore, much easier to pull off in the first place. Sales cycles are also comparatively short, and you can better assure profit as a result. When all these factors are taken into account, the midmarket can actually be more attractive.
Dell and the Midmarket
Dell has woken up to the fact that a company, which was initially designed to provide better services to individuals and had scaled build to order down to a fine level of granularity, could more easily handle the midmarket than its enterprise class competitors. It also seems to have realized that the problem with those earlier midmarket efforts by Compaq and Microsoft were that the top executives simply weren't behind them.
Michael Dell is personally backing this run at the midmarket and as someone who ran a midmarket company himself, he is one of the few technology CEOs who has this experience today. At the analyst event, they showcased solutions that ranged from those targeted at small government and law enforcement, to general-use locally- and services-based virtualization, to those targeted at industries like health care and private hospitals. Each solution was parented by someone with midmarket or small government experience.
One of the more interesting groups was one that focused on partnering, which has been problematic in technology space. Partnering often seems to be an effort that is done as an afterthought, and as a result, nothing comes out of the partnership. Dell is dedicating substantial resources to focus on making sure this typical breakdown doesn't happen in its midmarket efforts, which should lead to more reliable results.
Dell is actually one of the sponsors of our Midmarket CIO Forum so you should be able to check out some of this stuff there.
At the event, AMD positioned itself as a born-again agile company focusing on fast-moving markets with their primary target being the midmarket. At an analyst lunch, its president, Dirk Meyer, indicated that one of AMD's past problems has been an excessive focus on the enterprise market, which had made the company excessively cautious and slowed the firm to a point where it lagged behind Intel for a while. Being small and slow was a failing strategy, so he has now put his efforts into using AMD's small size as an advantage-at least with regard to agility-making it not only much faster, but more closely aligned with the midmarket, leaving the enterprise to AMD's enterprise partners, such as IBM and HP, that are more capable of selling into it anyway.
One of the interesting comments was the realization that, in the midmarket, there is a growing expectation that the increasing trend of allowing employees to buy their own PCs and use a virtualized desktop to keep the related IT support costs down, will likely blossom in the midmarket first since it has been more open to programs like this. This could benefit AMD because its Fusion platform, with its combination of integrated high-end graphics and better CPU/GPU integration, appears to provide greater benefits to servers running these virtualized desktops (at least in theory) and better value for employees buying their own machines. By working with the midmarket to create a related solution, AMD is putting itself in a good position to establish a solid beachhead in this emerging and potentially, very lucrative market.
Wrapping Up: AMD + Dell?
With both of these companies increasingly focused on the same market, there seems to be an increasing opportunity to form a partnership with each other to create unique midmarket solutions. I expect it to happen next year. The fact that both of these companies are making a run for the midmarket indicates that midmarket companies are becoming a hot area again, and that means more focus on the companies from vendors, more solutions that are unique to the market, and an overall better experience this decade than the last.
Hope to see you at the Midmarket CIO Forum in Orlando next week, but if you aren't there (check out the sessions), a number of us will be blogging the highlights.