Death to the Mid-Market

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

One of the truisms of technology marketing is the mid-market company. Another great truism is that mid-market companies represent this huge untapped source of income, if only vendors could figure out how to reach these elusive technology buyers.

Like the blind men circling the proverbial elephant, software companies have been trying to define something they cannot see for a number of years, with more failure than success. When it comes to the so-called mid-market in enterprise software, there’s only one realistic position to take: there is no such thing as a mid-market company.

There are definitely mid-sized companies, to judge by revenues, number of employees, or market scope. But size does nothing to define how a company consumes technology – and any attempt to stratify the market according to size is dead on arrival.

There are legitimate market strata relating to technology consumption, and there is some minor correlation between these strata and company size. But there are other, stronger correlates, and the sooner the industry starts paying attention to what companies of all size really want, the faster those companies will line up to buy what the vendors are selling.

Here’s my simple market taxonomy, which I believe pretty much spells out the death of the mythical mid-market company.

Market segment #1 consists of buyers for whom IT is a utility, much like electricity and water, that is a basic commodity but has little if any role in defining strategic advantage. IT keeps the lights on, but it is really secondary to the task at hand.

Market segment #2 consists of buyers for whom IT is a major strategic differentiator, one of the things that drives competitiveness and supports innovation. These buyers also use IT to keep the lights on, but the real reason they buy technology is to deploy it at the cutting edges of their industry.

Related Articles

The “New” SAP and The Plattner Index

SAP vs. Oracle: Is Vertical the Only Winner?

IT In 2007: Budget and Trends

Virtualization: Xen vs. Microsoft vs. VMware

This dichotomy has nothing to do with traditional notions of complexity or commoditization – or company, for that matter. Most companies big and small fall into segment #1 when it comes to human resources management: it’s a must have in terms of being in business, but a good HR system isn’t going to turn a market laggard into a market leader. Hence their HRMS buyers look for low-cost, easy-to-deploy, HR systems – preferably on demand, and potentially open source – that get the job done for the lowest possible cost.

But for the company whose business is HR business process outsourcing, this commodity-based solution simply won’t do the trick. The BPO buyer thinks that HR management is a strategic differentiator, and is looking to buy a topnotch HR system, and customize it to reflect the unique IP of the provider. On demand and open source – fuggedabout it.

What’s driving a lot of this thought is the concept that process is what will define competitiveness in the 21st century. Among the companies that get this are big and small companies that are thinking big thoughts when it comes to process automation. And they’re consuming high-end BPM, SOA, and infrastructure technology and using it drive specific competitive advantage. Which also means that a least-common-denominator, no customization-allowed IT system might keep the lights on, but it would put them out of business too.

Meanwhile, over in segment #1 are a host of buyers, from companies large and small, who are tired of paying premium prices for commodity functionality. They need to free up IT dollars in order the spend them on what is truly competitive, and are willing to forego unnecessary control – and functionality – in order to focus on what’s best for the rest of the company. For them, bells and whistles are just added, unnecessary expenses, and cool technology is a barrier to success.

Bear in mind this is about buyers, not companies: many companies straddle both market segments, and vendors should be prepared to sell two classes of solution to these customers, depending on how an individual department or line of business views IT.

Call it big IT and little IT, more IT or less IT, the point is that mid-market is a term way past its due date. Talking about requirements, not revenue size, is the best way to segment the market. Anything else is just pandering to a preconceived notion that belongs in the discard pile. Now.