The Midrange, Stuck in the Middle with You

January 24, 2011 Timothy Prickett Morgan

You may not be aware of it, but IBM still has a cross-platform Midmarket Division even if we no longer have a System i Division. While we could talk on into the night about what Big Blue does and does not do to support the OS/400, i5/OS, and IBM i platforms, there are actually people at IBM who are dedicated to the midmarket customer base. They think about your business and what it might need in the way of IT products and services, and they want to know where you are going.

Just to put names to the roles, Andy Monshaw is general manager and Ed Abrams is vice president of marketing for the Midmarket Division. They recently commissioned a study of the worldwide midrange base to get a sense of how they coped with the Great Recession and what their plans were as the established economies, for the most part, begin to recover. In the fourth quarter, when the IT sector was looking pretty good, IBM hired pollsters KS&R to interview a wide cross section of midrange companies in 27 countries, including the United States, Canada, Mexico, and Brazil on this side of the Atlantic, most of the major countries in Western and Eastern Europe, plus Japan, China, India, Australia and New Zealand on the other side of the planet from here. (“Here” being New York, of course.) KS&R talked to 2,112 companies, which had between 100 and 1,000 employees and which spanned the banking, insurance, transportation, retail, wholesale distribution, consumer products, and industrial products industries.

This is the classic DNA description of the midrange as we described it when talking about AS/400 shops from decades ago, and it also accurately described plenty of companies that adopted DEC VAXen and HP 3000 minis as well as a slew of Unix gear in the 1990s. If KS&R asked questions about platforms, in use at midrange shops in its latest study, which is called Inside the Midmarket: A 2011 Perspective, they didn’t say anything about it in the report. That’s because unlike those of us who live in the platform trenches every day, IT vendors seem to be above that sort of thing. IBM has long-since moved on from the separate and competing platform zealotry of the 1980s and early 1990s to the platform agnosticism of the late 1990s to the platform atheism of cloud computing and smarter planet here in the 2010s. To most people, the server is not the computer any more–the Web browser is. (Yes, I know that is not true. The Web browser is just a souped-up green screen, as you well know, and the systems that drive the Web matter more than the browser.)

So what are midrange shops up to now that the economies of the world seem to be improving? In a nutshell, they are thinking less about slashing costs and more about applying new technologies to solve business problems. And that is another data point in the trend line that shows things might just be getting better. Or, in this case, the bar chart, as seen below:

IBM did a similar survey of chief information officers 18 months ago, in the belly of the Great Recession, and increasing operational efficiency and cutting costs were the main mindset of the midrange CIOs, cited by 53 percent of those polled as being the primary focus. As 2010 came to an end, only 21 percent of those polled said that cost cutting was the big concern. Now, CIOs are focusing a little more an growing revenues for the company (30 percent of those polled said it was a big deal now, up 5 points from the prior survey), and now 31 percent of those surveyed said they are looking at technologies that help them find and keep customers, such as social media and mobility applications, among others. That’s a 20 point swing from 18 months ago. Another 18 percent of midrange CIOs polled said they were looking for other kinds of technical innovations and business processes to make them more agile and better competitors, a seven point swing.

What goes unsaid in the report is that cost-cutting moves such as server consolidation enabled by virtualization (to name one), which has secondary effects on the budgets as virtual servers are easier and cheaper to build and maintain once you get the hang of it, are helping to fund the new development. What KS&R should have asked midrange CIOs is how much money they allocated for what particular cost cutting maneuvers 18 months ago, and if they panned out, by how much and has that enabled further innovation in the IT department even though a gross budget figure may not indicate innovation happened because more money was not spent.

Looking ahead to 2011, the midrange CIOs told IBM that their number one priority was making IT infrastructure improvements, particularly after many server and storage upgrade plans were back-burnered when the Great Recession kicked off. Some of the servers out there are three years beyond their normal upgrade date, and 75 percent of those polled said they were planning or were in the middle of doing such IT system upgrade. Some 70 percent of those polled said that collaboration, business analytics, and business performance management applications (each of those is a different initiative) were top IT projects this year. Virtualization was cited by 67 percent of those polled as being a top priority, and 66 percent said cloud computing was going to be important this year. Software as a service (SaaS) was cited by 65 percent of those surveyed, and customer relationship management, regulatory compliance, and security ranked further down the list but were still cited by more than half of those who talked to KS&R.

Like everyone else, midrange CIOs said they were looking to cloud computing–the utility-style, virtualized infrastructure that you can turn on and off as you please and that has a metered price so you only pay for the resources that you use–to reduce costs; 73 percent of those polled said this was the main reason to move some applications to the cloud. Cost/manageability (70 percent), system redundancy (68 percent), uptime and availability (67 percent), rapid provisioning (66 percent), and flexible pricing (66 percent) were all cited as key expected benefits from using clouds. It was not clear if KS&R made the distinction between private clouds in the data center and public clouds like Amazon EC2 and Rackspace Hosting Cloud Servers.

You can get the latest IBM midmarket study here. An executive summary of the 2009 survey results can be found there.

My take on all of this is that the midrange is always the toughest place to be. You are expected to do more sophisticated things with IT than small businesses, but you don’t have the bigtime budgets and resources of large enterprises. And it is no coincidence that it has been the midrange, stuck in the middle between these two extremes, that has done a lot of the innovating in the IT sector, despite not getting a lot of credit for it. I don’t expect this to change any time soon.

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