Gartner: 7 Ways Midsize Enterprises Can Future-Proof Their Business

‘Do what midsize enterprises do well, and you’ll position yourself to succeed. And that’s easier said than done. There’s always the temptation to emulate what happens over in the enterprise. And that’s the one thing they can’t afford to do right now,’ says Mike Cisek, vice president and analyst for the midsize enterprise at research firm Gartner.

Gartner VP Mike Cisek

Research firm Gartner defines midsize enterprises as companies with between $50 million and $1 billion in annual sales and/or 100 to 1,000 employees. According to Gartner, the definition of the term “midsize enterprise” in the end is arbitrary and comes from a process of elimination to refer to companies that are neither Global 2000 enterprises or small businesses.

As such, it may be tempting for a midsize enterprise to spend like it is a large enterprise, but in reality there are several important considerations that make midsize enterprise IT investment unique, said Mike Cisek, Gartner’s vice president and analyst for the midsize enterprise.

Cisek, who Monday used his keynote presentation at the Spring 2023 Midsize Enterprise Services event in Orlando, Fla., to discuss key IT trends his organization has found in the midsize enterprise space, told CRN that companies in this space often need to relearn lessons that many businesses have either forgotten or ignored. The event is hosted by CRN parent The Channel Company.

[Related: 10 Midsize Enterprise Execs Talk Security And What Keeps Them Up At Night]

For instance, Cisek said, the IT industry is being impacted by the kind of inflation and recession that businesses haven’t seen for 15 years.

“A lot of the people in these companies have never been through this before,” he said. “So maybe they don’t believe it. It’s maybe like, we need to come up with new conspiracy theories because the old ones have all come true. But bad things can happen. And I don’t think a lot of people in leadership positions are ready to deal with that reality.”

Midsize enterprises have to deal with many of the same issues that impact large enterprises but need to understand that enterprise solutions are not necessarily right for them, Cisek said. For instance, he said, a new technology like ChatGPT seems like something worth investing in, but midsize enterprises need to ensure they have the right use cases. In another example, he said, midsize enterprises may be tempted to throw as many workloads to the cloud as possible as quickly as possible, but should instead find their own mix of on-premises and cloud use based on their actual workloads, which will likely change over time.

In the end, Cisek said, it is important that midsize enterprises embrace the inherent benefits of what works best for them.

“Don’t play large enterprise ball,” he said. “Do what midsize enterprises do well, and you’ll position yourself to succeed. And that’s easier said than done. There’s always the temptation to emulate what happens over in the enterprise. And that’s the one thing they can’t afford to do right now.”

Here is a unique look at the unique world of midsize enterprise IT spending.

Learn To Deal With Inflation

A major issue for midsize enterprises is the pressures of inflation and recession and cost control, Cisek said.

“That’s under the surface of everything that’s happening right now. … A lot of the people in these companies have never been through this before,” he said. “So maybe they don’t believe it. It’s maybe like, we need to come up with new conspiracy theories because the old ones have all come true. But bad things can happen. And I don’t think a lot of people in leadership positions are ready to deal with that reality.”

It will soon get to the point for at least some midsize enterprise people that they will have to take action because of inflation, Cisek said.

“They’re going to have to make really tough decisions around how to address business technology priorities if budgets get cut by 10 percent or inflation eats up what they had planned to do for modernization,” he said. “These are really hard things to do. And it just hasn’t been part of their reality for 15 years.”

Find Practical Uses For Emerging Tech

Another issue impacting midsize enterprises is the identification and implementation of practical use cases for emerging technologies, Cisek said.

“So while the whole world is talking about ChatGPT, what they’re doing in midsize enterprises are really practical use cases for it in terms of process automation, pattern recognition, physical security, facial recognition, things with a proven benefit and time to value,” he said. “And it takes a lot of risk out of the investment.”

This has always been the case with emerging technologies, Cisek said.

“But the underlying theme is, you hear all the noise kind of just go away when the dust settles and see what are you actually doing,” he said.

Scale Is Important

Midsize enterprises need to understand their unique requirements and not assume they can automatically take advantage of enterprise architectures, Cisek said.

“Let’s just say you had immature processes around financial transparency,” he said. “You want to know where every dollar is going, what it represents, what it could potentially represent. If you were average at that, or worse, you’re flying blind now, it’s going to kill you. Because the ties between architecture and cost in the midsize, you can’t overstate it. It’s just the people who ignore it or just feel like the economies of scale in large and midsize enterprises are the same just don’t truly understand the space.”

As hard as that operating dynamic is now, it will be much more difficult for those who are not prepared, Cisek said.

“There’s a lot of people who are going to look at maturity assessments from Gartner that are average,” he said. “That’s most people’s definition of insanity, right? They’ve done the same thing for 10 years and get the same results and can’t figure out why that’s not going to work. So if you’ve gotten away with a certain level of inefficiencies around budget and budget to architecture and implementation, when that slop is removed, you’re left with the painful reality that you’re going to have to make hard concessions, be it in terms of people, spend, innovation, how you execute against business priorities.”

Make Hard Choices To Improve Workforce Efficiency

There are some situations where a midsize enterprise has to make drastic cuts in its labor force, Cisek said.

“If you have situations where you have to make drastic cuts, what do you focus on?” he said. “You’re going to focus on the people who do the best job, right? It’s going to be meritocracy. It’s going to be about people who get things done, who move past obstacles and execute. And that’s a reality that a lot of us haven’t had to deal with,” he added.

“But when recessions come, meritocracies rise,” he said. “It just happens. You can only say that when you’ve lived through a few of them. It’s always hard to disconnect the person from the performance, but there’s dead wood that has to go. And that’s not a reflection on the person. It’s just a hierarchical structure and a decision. You’re sitting in front of a spreadsheet, looking at a team of 30 people. You know them all, know their spouses, their families, their problems. But you still have to look at it objectively and make those assessments because it gets back to the challenge of execution.”

Rise Above The Average

Companies that survive inflation and recession will see some of their flaws exposed, Cisek said.

Gartner has a number of maturity models that assign scores of 1 to 5, and the average over the last 10 years has never moved much around 2.4 or 2.5, he said.

“So when I tell people to pay attention to these particular disciplines, I’m talking about getting them to a 3 out of 5, which would in essence put them in the top 20 percent. That’s good enough, right? And there are people who go beyond that. But the point is, that’s going to be table stakes.”

A company that gets injured more than its peers in an industry that gets impacted a little bit more than others will need all their skills to survive, Cisek said.

“Now that’s a big gap,” he said. “So business which have been able to execute with inefficiencies in place to some degree will be more exposed. And their success is going to be a function not just of them and their ability to execute, but their teams’ ability to execute.”

The Cloud Is No Panacea

Rising above the average requires a focus on people who deliver outcomes, including leaders who have a good understanding of the cost implications of architecture, Cisek said.

For instance, a company that moves a disproportionate amount of workloads to the cloud will see a shift from Capex to Opex, he said.

“And that in and of itself isn’t good or bad, unless it flies in the face of how the business wants to manage their finances,” he said. “And we see that quite a bit. Or you make moves technically without thoroughly understanding it, and you go from a yearly infrastructure run rate of $1.5 million to $3.2 million. I’ve seen those scenarios a lot. Some of these things can be absorbed. But I don’t think some of them can at this point in time. So if that happens during a time of revenue and budget contraction, it’s a perfect storm.”

Bridge The Old And The New

Cisek said he recently talked with someone from Google who said the chasm between where people are and where technology is has never been greater.

“He said you have a whole generation of people who know and love and protect on-prem disproportionately,” he said. “And then you have this whole new generation that only knows cloud. So they don’t know or appreciate any of the alternatives or shades of gray in between.”

Cisek said his focus is on infrastructure operations where he supports a workload-specific, balanced hybrid approach where workloads go where they’re best suited.

“If it turns out to be 80 percent on-prem, 20 percent cloud, great,” he said. “If the reverse is true, great. But don’t go in with a preconceived notion of how it should look because then you’re going to be a victim of unintended consequences. [I hear all the time], ‘We’re going to be all-cloud by 2025.’ And so my first question is, ‘Based on what?’ It’s designed to provoke a response about how they came to that conclusion. You can then make them aware of things like running cloud services on-prem with things like Azure Stack HCI, Amazon Outposts and Google Anthos. So don’t go in there with a preconceived notion of what the end goal should be.”

It is important to understand the cloud is not the end-all, Cisek said.

“Just because something belongs there today, it doesn’t mean it won’t end up on the edge in three years, or in a regional co-lo,” he said. “You don’t know what the future is going to bring. For example, there’s political uncertainty when I deal with folks in Canada. They build architectures for speed, but because of the unpredictability of not just the federal but the provincial level governments, they don’t know what they’re going to do tomorrow. They’re saying there are laws, like certain workloads can’t traverse a province or leave the country. It’s just crazy today. California is adopting a lot of these same type things. So a company has to build for the unknown.”