The Two Kinds Of Midsize Companies: IT Cost Cutters and Innovators

A new IBM study suggests that economic and technological pressures are separating midmarket companies into two distinct camps. Which group is your company in?
A new IBM study suggests that economic and technological pressures are separating midmarket companies into two distinct camps. Which group is your company in?The study, Inside the Midmarket: A 2009 Perspective, performed by Opinion Research Corporation for IBM, looked at companies with 100 - 1,000 employees in 17 countries.

According to the results, slighty more than half (53%) of midsize companeis are focused on cost cutting -- with technologies like virtualization, energy efficiency, process optimization, and IT standardization. The rest are looking to leverage innovation to find "new sources of growth, transformation for competitive advantage, and strengthening customer relationships."

The study further divides the 'innovators" into 3 subgroups:

Expanders (25%), are trying to capture new markets and take share from competitors.

Transformers (11%), who are trying to improve their business models and find new sources of competitive advantage.

Advocates (11%), are focusing on becoming more customer centric, often by experimenting with social media and Web 2.0 technologies to boost customer loyalty.

Among all these groups, though, some key concerns are fairly universal:

IBMchallenges Midsize companies' most pressing IT challenges.

The pressure seems even more intense in the United States, where almost 90% cite improving efficiency, reducing costs and increasing employee productivity as their top business priorities.

It's not all cut, cut, cut, of course. More than 70% of respondents said it's important to improve decision making and collaboration across employees, partners and suppliers.

Not surprisingly, though, how important these goals are depends a great deal on whether or not the company is in cost cutting mode:

Among midsize companies that are focused on spending reductions, 86% identify improving efficiency as a critical business issue. Alternatively, 78% of companies focused on business growth and entering new markets cite customer prospecting as a critical priority. Interestingly, 90% of companies that are focusing on selling more to existing customers identify cutting cost as a critical business issue, followed closely by improving service and pursuing new customers. This suggests that midsize companies are working to strike the right balance between enhanced operational efficiency and the need for growth and differentiation.

Still, the fact that almost half of midsize companies are trying to innovate is encouraging, especially since just 14% indicate growing IT budgets and 37% said their IT budget has decreased. And, to be sure, "the number one barrier identified across all industries surveyed is cost and limited budget."

IBMbarriers Top barriers to IT implementations among midsize companies.

Nevertheless, "Investments continue to be made," said Ed Abrams, IBM vice president of marketing for general business, the Big Blue unit aimed at the midmarket. Abrams said the study findings are consistent with what IBM is seeing in the overall market. Despite the cost cutting pressure, at least some midmarket companies are looking to use technology to differentiate themselves and create competitive advantage.

"It's not ubiquitous, it's not everywhere," Abrams said, and costs are more important than ever, but it is still happening.

ITE (in today's economy), that qualifies as good news.

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