Robert Kugel's Analyst Perspectives

The Midsize Millennium

Posted by Ventana Research on Jun 4, 2010 4:23:24 PM

The word "millennium" not only means a 1,000 year span but also denotes a period of joy and prosperity. A decade into the current millennium, I think a new millennium is dawning for midsize companies (which we define as those with between 100 and 999 employees), at least as far as information technology is concerned. Midsize companies have been 'stuck in the middle' almost from the start of the computer age in the sense that their requirements tend to be as demanding as larger companies (the main exception being scalability), but they have fewer resources (both relatively and absolutely) than larger companies to buy and support IT systems. Technology has been evolving since the turn of the century in ways that are making it much easier for midsize companies to use increasingly sophisticated software.

Cloud computing is one of the most important enablers of midsize company's ability to use more effective IT solutions. It's not just the initial cost of on-premises software that makes it hard for them to acquire a solution, it's the ongoing time and cost of maintaining it both in terms of money and management attention. Depending on the industry, a large corporation may have dozens or even hundreds of people in their IT department, so the addition of some additional technology-driven capability may require no incremental increase in IT headcount because there are sufficient skills and time available. On the other hand, larger midsize companies may have only 5-10 IT people scattered around and a smaller midsize company may have only one jack-of-all-trades. Adding another IT person and committing to ongoing maintenance fees and upgrade efforts can be a daunting proposition for executives of a midsize company. Technology and attitude barriers to cloud computing are falling and I expect companies that either couldn't or wouldn't consider it will find it increasingly compelling. Software-as-a-service delivery methods make it easier for vendors to provide essential data services that complement their software offering, such as up-to-the-minute tax tables or benchmarks of similar companies.

The consolidation of the software industry itself is having a positive impact in the sense that it's makes much more economic sense for these companies to provide packages that combine a range of disparate functions (transactions systems such as ERP combined with business intelligence, reporting and performance management capabilities). The larger companies have the scale to provide more verticalized solutions that require far less ongoing customizations and offer many more out-of-the-box solutions that are less expensive and have a much shorter time-to-value.

Moore's Law and Metcalf's Law are also driving improvements. Systems are far more capable today than a decade ago and therefore can support a wider range of features and functions. In-memory computing can give managers the ability to do that much more complex "what-if" analyses that it becomes a must-have management capability. The use of mobile phones and other such devices is all the more important to executives and executives and managers in midsize companies because they do more managing-by-walking-around and need easy access to information and systems around the clock.

If you spend a lot of your time focused on the cutting edge developments of IT, I think you run the risk of believing the cutting edge is as good as it can be. I've thought for many years that today's IT, while advanced relative to earlier decades, is still at an early, awkward stage, comparable to the Model T era in cars. (By the way, try driving one of those cars. Even if you know how to handle a stick shift, there are so many ongoing adjustments required, non-standard gestures and irregular placement of pedals and such that it's hard to keep going without running into something.) We're still making progress, and I think this decade will bring much more sophisticated information technology capabilities well within range of midsize companies.

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Robert D. Kugel - SVP Research

Topics: Operational Performance Management (OPM), Business Performance Management (BPM), Financial Performance Management (FPM)

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