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Four Areas Of Focus In The Realignment Of The Mid-Market And Technology Vendors

Forbes Business Development Council

Chief Strategy Officer at Zoho Corporation overseeing strategy, channels, account management and various marketing and operational efforts.

In the United States, there are roughly 350,000 middle-market or mid-market companies, producing an estimated 33% of the nation’s GDP. In the years leading up to the pandemic, mid-market (MM) businesses were booming and most companies experienced year-over-year employment growth. Favorable conditions led many companies to increase their investment in both skilled labor and emerging technologies.

Today, after a period of lost revenue and layoffs, the mid-market is only beginning to recover, yet business leaders continue to view technology as a means of staying competitive and gaining customers. But while software demand is high, vendors often miss the mark when selling to the mid-market. Likewise, mid-sized companies don’t always know which tools are the right ones for their business. The survival and expansion of the middle market, which accounted for 60% of job growth pre-pandemic, is critical to the overall health of the U.S. economy. By understanding some basics about this segment’s technology needs, businesses and vendors can help ensure a lasting recovery for the middle market.

Capital

Eighty-five percent of mid-market businesses are private, which means very few of them have access to capital from the public markets. On top of this, mid-sized companies historically have struggled to get outside investment. As this Harvard Business Review article puts it, “Whether they’re looking for debt, an equity investment, an acquisition, or a company exit, midsize companies have, for the most part, been ignored.”

Yet in 2019, the middle market spent more on technology than in previous years. According to Deloitte’s 2019 Technology in the Mid-Market report, “43 percent of respondents say they are spending more than 5 percent of their firm’s revenue on technology. That compares to 28 percent of respondents who devoted more than 5 percent of revenue to technology in 2016.” In 2021, software budgets have decreased for nearly every business, and the stress on mid-market businesses is even greater because they have less access to capital than large enterprises. More than ever, MM companies won’t overspend on systems they either don’t need or won’t use, and developers and vendors will do well to recognize this fact. As chief strategy officer at Zoho, I’ve witnessed the adjustments and changes needed to meet this particular market of customers.

Culture

Serving the mid-market requires a different culture that is not compatible with high prices, pricing opaqueness, long sales cycles, expensive old-school enterprise salespeople and a dated and inflexible approach to sales and customer engagement. A software vendor can’t be everything to everybody, and this is why most mid-market businesses seek out like-minded and similarly sized vendors. Mid-market companies have a long-term outlook, invest in their people and must be nimble with lean hierarchies to make decisions quickly. They also tend to have regional ties and promote social responsibility. Such companies want their technology providers to share these traits and beliefs.

Connected Cloud Platforms

The large vendors respond to the mid-market by scaling down their existing complex, over-engineered enterprise solutions and ERP systems, as a quick and lucrative fix. But they cannot get away from time-worn practices like long deployment times, inflexibility and high price. Consider a U.S.-based online retailer that sells globally, with a thousand employees. This business may have modest HR needs but very complicated global sales, fulfillment and accounting requirements. They need a flexible solution, designed for a global business that is also well priced, intuitive and extensible enough to encourage adoption and growth. This is a business segment looking for modern, integrated applications, rather than bloated, over-priced traditional ERP software. It’s for this reason that some mid-market companies have turned to cloud computing and connected platforms rather than best-of-breed apps to drive their business.

Analytics

As businesses start to come out of the pandemic, they are increasingly looking to business intelligence tools to identify areas for potential new revenue and growth. This is a perfect example of a solution that until recently was too expensive for the mid-market and too difficult to scale without the cloud. At the same time, all that data being analyzed is coming from different departments — like marketing, sales, invoicing, ticketing and other systems —running through different software. Rather than spend big on multiple systems and invest additional multiples on the professional services to integrate them, MM leaders often look to connected cloud suites wherein all the applications and data come pre-integrated and supported by a full-fledged BI system so that they can get the insights they need and focus on growing their business, rather than taming the software.

The software demands and expectations of mid-market companies today are radically different than even 10 or 15 years ago. Mid-market businesses now serve complex, often global markets. They have proprietary business processes that require sophisticated solutions, yet they do not have massive IT budgets to develop custom solutions to meet those needs. In order to serve the mid-market well, and thereby support the larger global economy, vendors and business leaders must better align on what type and how much technology is needed to sustain growth.


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