The Changing Dynamics of Midmarket IT

Michael Vizard
Slide Show

Top Midmarket IT Priorities

Midmarket IT organizations don't trail large-scale enterprise IT organizations by much when it comes to emerging technologies; they just have to figure out how to take advantage of them.

When all is said and done, most providers of IT hardware and software don't do a particularly good job of serving the needs of the midmarket IT organization.

Most vendors typically use large-scale IT organizations serving the needs of companies with over 10,000 employees as the focal point of product design efforts. The end results are products designed not only with the expectation that there are dedicated specialists available to manage them, but that these products will also generate a fair amount of after-sale services revenue in the form of additional software licensing and consulting fees.

At the same time, providers of IT hardware and software profess their undying commitment to expanding the overall size of the market, as long as their high-margin services revenues are not unduly threatened. The good news is that the advent of cloud computing has finally put a spotlight on all the management costs associated with IT, which is probably the primary reason that so many midmarket IT organizations are investigating cloud computing.

In a recent survey of 389 worldwide IT executives, conducted by Forrester Consulting on behalf of HP, reducing costs, right after increased security, is the top priority for most of the 353 small to medium-sized enterprise IT executives working in companies with 1,000 to 10,000 employees. In fact, it's this need to reduce costs that has so many of the executives surveyed evaluating cloud computing services.

But from a vendor's perspective, too much consolidation into the hands of a few cloud computing providers is not a good thing. They worry that the number of buyers of their goods and services is likely to decrease as more purchasing power is concentrated in cloud computing providers negotiating terms and conditions on behalf of thousands of customers.

This is why we see so many vendors suddenly focusing on how to make their products more manageable for the internal IT organization. The hope is that if the internal IT organization can manage IT products more effectively, they'll opt to build their own private cloud computing platform rather than outsource more "purchasing power" to the providers of public cloud computing services.

There's no doubt that internal IT organizations would prefer to build private cloud computing platforms that they control instead of essentially outsourcing their jobs to a public cloud computing provider. But for that to happen, IT vendors in the next six months need to make huge advances in making their products easier to manage. In the meantime, most midmarket IT executives are going to have to look to public cloud computing services to reduce costs.

Renee Knee, vice president and general manager for commercial sales and growth initiatives in Hewlett-Packard's Software and Solutions unit, says there's no doubt that IT vendors as a whole need to do a much better job in terms of meeting the unique requirements of the typical midmarket IT organization. To that end, HP has kicked off a ten.to.one campaign to reduce IT complexity in the midmarket, which includes both private and public cloud computing offerings.

This and similar initiatives may signify that consolidation driven by public cloud computing might be too much of good thing. After all, going from thousands of customers to tens of customers that buy on behalf of thousands of others sounds good financially, until the people working at the vendors start thinking about the law of diminishing returns and the fact that if there are fewer actual buyers, there won't be the need for as many vendor sales and marketing people either.

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