Midmarket Shifting To Digital As Quickly As Large Enterprise: Survey

Business activity in the midmarket is moving to digital at a surprisingly rapid rate, according to a new joint research project from The Channel Company and IDC.

Midmarket companies are transitioning their businesses to digital at the same aggressive pace as the largest enterprises, according to a new survey of midmarket IT leaders by The Channel Company and market intelligence firm IDC.

The survey results were unveiled Monday by Joseph Pucciarelli, group vice president and IT executive advisor for IDC, during The Channel Company's Midsize Enterprise Summit: Fall 2019, which is being held this week in Phoenix.

[Related: The Channel Company Partners With IDC To Develop Midmarket Research, Content]

The survey is the first collaborative research project between IDC and The Channel Company, which is the parent company of CRN.

The survey included responses from senior IT leaders at 138 midmarket companies, and found that nearly half of their business activity will be driven by digital within three years.

"This notion that somehow the midsized organizations are not technologically aware, and not focused on these new emerging technologies, today needs to be set aside," Pucciarelli said during his keynote at the conference Monday.

The midmarket survey asked senior IT leaders to disclose what percentage of their business currently comes from digital products, services and channels, or digitally driven improvements to operations.

Respondents said that 33.4 percent of their business is digital as of this year. However, that percentage will surge to 49 percent by 2022, the IT leaders reported.

"That is just amazing to me. I was quite surprised with the survey findings," Pucciarelli said.

That’s because IDC, he said, is currently doing a separate study of "world-class enterprises" such as Walmart and Boeing, across 22 countries. And in that study, “we got almost exactly the same number -- 50 percent," Pucciarelli said.

"So what you are seeing in your world is consistent with what the largest organizations are seeing," he said, addressing the attendees of the Midsize Enterprise Summit.

It’s clear that the shift to digital “covers the entire range of verticals,” said Larry Fulop, vice president of Tempe, Ariz.-based solution provider MicroAge.

"You see all the industries moving in that direction," Fulop said. "You see it as you talk to clients, as you talk to anybody that does any kind of manufacturing or deliverable of product. It is something they're all talking about--and figuring out how to get there faster, and more efficiently."

As solution providers that are working with midmarket customers, "you try to figure out how you're going to help them get there," Fulop said. "I would definitely say there's an opportunity there for the midsize VARs."

Technology Investments

The survey also looked at where senior IT leaders are placing their bets on new technology investments going forward.

Nearly 48 percent of survey respondents said that advanced security solutions will be among the most important IT-focused tech spending priorities over the next 12 months. Nearly 46 percent of respondents cited backup and disaster recovery, while 35 percent mentioned servers and 32 percent mentioned cloud and hosted resources.

The midmarket push to digital is partly due to the fact that midsized companies are part of a broader business ecosystem, where they are supplying and interacting with larger enterprises that are increasingly requiring digital methods, Pucciarelli said in an interview with CRN.

Another reasons is that midmarket companies themselves are using new technologies “in order to create value for their own customers. So when you look at the business priorities for these companies, one thing that the CIOs identified as one of their top business priorities was to improve customer service," he said. "And what a lot of organizations are doing to improve customer service is using artificial intelligence systems to interact with customers electronically. What we're seeing is that these organizations are beginning to implement these types of technologies, which before were the purview of only the largest companies."

Channel Opportunity

Acquiring talent is the No. 1 priority for midmarket companies to drive digital transformation, according to the survey results.

Among the most sought-after roles are data scientists, cloud architects, DevOps architects and data architects, the survey found.

But these jobs are in short supply, Pucciarelli noted in the interview with CRN.

"We think that that's going to create service opportunities for companies like solution providers," he said.

Michael Cass, partner and director of business technology for midmarket office at Bannockburn, Ill.-based IT consulting and managed services firm Netrix, said his company's focus for working with the midmarket has moved to embracing automation.

"Our vision for 2019 was to develop specifically this practice around midmarket office, which embraces automation--automation of consumption, automation of technology enablement, deployments and support. In order to stay relevant, we had to automate," Cass said.

In the past, building out a customer relationship from the initial discovery to onboarding and enablement could be a two to fourth month process, he said.

”We have already been able to demonstrate that with our new portal, our toolset, we are shrinking that timeline down to a matter of sometimes just days,” Cass said.

Regardless of whether midmarket companies have the necessary digital talent in-house, in many cases "it still goes back to the VAR and MSP who's got the experience in doing this many times over," Cass said.

Tony Safoian, CEO of Los Angeles-based cloud solutions provider SADA Systems, said "there's no reason for midmarket to be behind [on digital], other than them just being drastically underserved" by partners with the necessary capabilities.

"The [partners] who can do it are generally not the regional small players. They don't have the technical expertise and the enterprise-grade execution ability," he said. "There's very few SADAs that can provide an enterprise-grade, transformational experience for the midmarket."

For SADA Systems, "our approach to the midmarket is really around enablement and culture change -- let us help you get started," Safoian said.

Ultimately, Pucciarelli said, the opportunities for solution providers are massive as midsized companies “basically have the same technology profile now as the largest companies.”

"What we see now is a convergence of the approach to technology at the largest companies and midsize companies,” he said. “And I wouldn't have expected it to that degree."