What constitutes the mid-market?

Sliced and diced

As enterprise application vendors have seen their licence revenues slip recently and average transaction sizes plummet, many have turned their attention to focus on the "mid-market". Notwithstanding the recent flurry of acquisition announcements in the enterprise applications space, many of the vendors in this market, including Siebel, SAP and Microsoft, have made announcements over the past couple of years that they are moving down the market in their focus.

But what is the mid-market? In the US, it is often defined as firms with revenues in the $50 million to $1 billion range. In Europe, which overall has a smaller proportion of extremely large firms than the US, the mid-market is generally considered to be at a lower range.

And the vendors themselves vary widely in how they define this segment. For SAP, the mid-market means companies with annual revenues that do not exceed $200 million. For consultancy eBreviate, the mid-market means companies with annual spend of less than $2 million.

But Microsoft, on the other hand, defines the mid-market as companies with 1,000 employees or fewer, although it admits that its real sweet spot is in companies with ten to fifteen users of its products.

So, with such divergent views of the mid-market, what does it really mean as a segment? The answer is that it is not really a segment per se, but rather a large varied market, with equally varied requirements. At the higher end of the mid-market, many companies essentially mirror their larger counterparts in their needs, albeit at a slightly less complex level.

An example here would be a company that deals with tens or even hundreds of business partners - as opposed to the thousands that are typical in very large organisations. At the low end, a company may be a specialist supplier that deals with a relatively small number of organisations.

When evaluating IT products to buy, customers should look very carefully at how a vendor is defining the mid-market in order to ascertain whether or not the products are suitable for the needs of their particular size of organisation. For firms at the higher range of the market, vendors are producing scaled-down versions of their products - essentially lighter versions of the products designed for less complex requirements. Customers should also look at the delivery options since hosted solutions have fewer implementation requirements and hence less up-front cost. Many of the former ERP vendors, as well as some pure-play technology vendors, are taking this route.

At the lower end of the market, many small companies have found recently that they are being forced to hook into whatever technology system their business partners are using - and this can multiply fast if those business partners are using a range of divergent technologies.

Smaller companies should be looking for technology solutions that provide them with a unified platform that handles seamlessly a range of communication protocols on their behalf. This is the route that companies like Microsoft are taking with the development of a platform for smaller companies that allows them to perform simpler business requirements, such as order communication and processing, without needing to train users to handle the variety of business technologies that its partners are using.

The message is that in the "mid-market", one size does not fit all. Look carefully at your own company requirements and decide which areas of functionality your organisation actually needs - as opposed to would like to have. Many of the vendors are struggling to find their feet in this market and product messaging remains weak. ©

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