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Software-as-a-service path for the midmarket

The disconnect at many vendors between forward-looking SaaS and cloud computing strategies and their more tactical midmarket plays is, at the very least, a strategic oversight.

Lots of large system and software vendors, even (or perhaps especially) those who have traditionally focused largely on enterprise sales, talk loudly and often about the midmarket these days.

Or they use terms like "SMB" (small and medium business) or "SME" (small and medium enterprise)--categories that aren't really the same thing but nonetheless often get used more or less interchangeably to denote companies with about 100 to 1,000 employees.

The reason for the interest is pretty simple. There are far more smaller businesses than there are larger ones--especially in developing economies. Midmarket IT spending is also growing quickly in many categories. As a result, it's not especially surprising that even those vendors most accustomed to selling to enterprises are itching to boost their midmarket share as well.

The challenge they face is that IT at midmarket companies bears, at best, a passing resemblance to that of enterprises. Development and operations staffs are small and are far more likely to be made up of generalists than specialists. Furthermore, most selling to midmarket companies takes place through regional or vertical market partners of some sort. Thus, the vendor seeking to increase midmarket footprint typically has to put together different types of product packaging, if not entirely different products, and craft go-to-market (GTM) approaches that differ in substantial ways from those supporting large enterprise sales.

Given these complexities, it's natural that historically enterprise-y vendors have taken awhile to craft successful midmarket plans. Even IBM, which has long had a strong midmarket presence with System i (and the AS/400 that preceded it), has gone through numerous GTM and organizational iterations to improve its ability to tap the midmarket with other product lines. However, most large vendors have made progress. The best are doing quite well (as we've noted in the case of Hewlett-Packard for example). Others, such as Sun Microsystems, have at least made improvements to their partner programs even if their overall grade remains middling.

Expanding market reach in this way is all well and good. Certainly, many small and midsized businesses continue to run their IT departments in much the same way as in the past on in-house systems running a combination of packaged and custom applications.

However, we're also struck by how tenuous the connections are between many vendors' midmarket planning and any sort of software-as-a-service (SaaS) or broader cloud computing initiatives.

Computing isn't going to jump from the data center to the network overnight; if nothing else, the rate and specifics of such a shift are matters for spirited debate. But as a general direction for computing, it's hard to make much of an argument.

It's also hard to argue with a contention that, again as a general rule, SaaS should have more near-term appeal in the midmarket than in the larger enterprise. The list of reasons why is substantial: midmarket companies have smaller IT staffs; they tend to use more pre-packaged and less complex applications; their IT infrastructures tend to have fewer "moving parts" (and therefore better lend themselves to carving out pieces to run over the network); and existing relationships with midmarket ISVs and VARs could make the transition to SaaS applications from those partners fairly natural.

Or, to put it more bluntly, enterprises may find running their own IT infrastructures costly, but for many midmarket companies, it's genuinely hard and even harder to bring new applications and the like online.

Therefore, the disconnect at many vendors between forward-looking SaaS and cloud computing strategies and their more tactical midmarket plays is, at the very least, a strategic oversight.

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