Globally the annual mid-market (companies with fewer than 1000 staff) spend for IT hardware, software and services exceeds $250B acording to Andy Monshaw, IBM’s General Manager for Mid-Market. Andy lives and breathes mid-market, he personally leads as many as 15 end user and IBM partner round tables a month, spending his time listening to customer problems and getting intimately familiar with the output of IBM’s comprehensive smart analytics reports and dashboards.
Mid-market is a highly valuable segment that is served almost exclusively by the channel, predominately Independent Software Vendors (ISV), Managed Service Providers (MSP), Systems Integrators (SI) and the other independent partners of the major players (IBM, Dell, HP, SAP, Microsoft etc..). The majors support this route to market because of the costs and complexities of engaging smaller businesses with limited IT capabilities and modest annual budgets in line with their size. Interestingly this is a market that Oracle does not figure strongly in at all!
Andy also claims that 20% of the total addressable market (TAM) from this segment is driven by direct hardware and software sales, so only one fifth of expenditure is do-it-yourself supported by in-house IT staff, leaving a massive $200B of revenues coming from solutions, consisting of integrated hardware, software and services. Competition for this solutions market is tough with tens of thousands of integrators in play and no single vendor owning even 1% of the market. IBM research shows that mid-market end customers make product and integrator selection by leveraging the Internet with 85% of new business coming from search and social media.
IBM have recognised the importance of social media, search, blogs, twitter and other Internet based influences in the IT mid-market, in the same way that LinkedIn has changed the job market and TripAdvisor changed the hotel business. A $100M per annum marketing budget is in place to support IBM’s mid-market presence in the social media ecosystem.
My own research shows that small and medium enterprise customers are adopting cloud services much more strongly that their corporate equivalents. This massive uptake in cloud is supported (although not scientifically) by a recent IBM roundtable straw poll where 80% of attendees indicated have already adopted SaaS in both the messaging and collaboration and CRM areas.
IBM’s approach has been to develop proven, cloud based solutions and market them as branded IBM products or as white label services delivered by their partners. IBM research shows that one of the major impediments to cloud adoption – concern about security – is actually a market advantage in the mid-market. Mid-market clients are certain that IBM’s investments in securtity and attention to detail in the IBM Cloud outclass anything that they might do internally. The IBM brand stands for reliability, security and availability much more that Amazon, Google or Microsoft who also play in this space. This is a powerful insight showing that different market segments react to risk quite differently.
The IBM product development areas that Andy has focussed on for the mid-market are:
- Business Analytics (Cognos)
- Cloud Integration (Cast Iron)
- CRM (Sugar)
- Back Office (MS Dynamics, SAP)
- Messaging & Collaberation (Lotus, Sametime)
- Security (Tivoli BigFix)
Partners add value by integrating these products with ISV offerings, local and domain expertise to serve the mid-market clients better.
IBM really seem to get the mid-market segment with an understanding of the new dynamics driven by cloud services and social media. Andy Monshaw is driving a very significant investment program in terms of product development, social media and channel support. IBM have been smart enough to put a very senior and experienced General Manager in charge in Andy Monshaw. Andy is a seasoned change agent who stood IBM’s strorage business on it’s head some years back with the introduction of XIV along with a new brand and salesforce who went on to win significant market share against the incumbents. Watch this space.