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There’s been a lot of buzz over the past few months regarding how enterprise software vendors such as Oracle, SAP and IBM are directing more of their sales and marketing muscle at midsized companies. It’s hardly surprising, given how other technology vendors similarly pushed their gear a lot more aggressively in the midmarket space ($50 million to $1 billion in annual revenues) after IT spending among Fortune 1000 companies had dried up following the post-9/11 recession.
According to Aberdeen Group’s recently-published annual report on the topic, ‘ERP in the Midmarket 2009’, the need among midsized companies to reduce costs continues to be the top business driver influencing ERP strategies for the second year in a row. But second on the list are the interoperability challenges being faced by many of the 762 respondents surveyed by Aberdeen Group as their organizations continue to grow and open new locations.
These interoperability challenges also present opportunities both for IT leaders at midmarket companies as well as for enterprise software vendors. Companies like Oracle, IBM and Red Hat have become much more active in the middleware space to help midsized and other companies (i.e. Fortune 1000 M&A hunters) to integrate systems and operations between various entities they’ve either deployed or may have acquired. Their salespeople are pushing these capabilities hard, particularly at prospective midsized customers whom they often view as a largely untapped revenue stream.
But there’s also a chance for IT executives at midsized firms to exploit the soft business conditions that enterprise software vendors are struggling with and land the best possible deal. According to a report issued by Forrester Research a few months ago, enterprise software vendors are making serious concessions to the terms and conditions on licensing deals and maintenance agreements. Even Oracle and SAP, which have each historically been rigid about negotiating on maintenance terms, have softened their stance a bit as new licensing revenues have narrowed, according to former Forrester analyst Ray Wang who's now a partner with Altimeter Group.
In a strong economy, midmarket CIOs often complain that they feel they’re being overlooked as vendors focus their attention on enterprise customers. Granted, midmarket IT leaders don't have nearly the same buying clout as Fortune 100 CIOs. But in a recession, software companies are hungry for new business, which eventually translates into recurring (and highly profitable) maintenance revenues for them. It’s a good time for midmarket IT leaders to play hardball and shop around for some plum deals.
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