Hosting propositions for the mid-market

The utility based approach to hosted solutions taken by the likes of Microsoft, Google, Amazon and others tends to appeal at the two extremes of the market. Smaller organisations like self-contained application offerings such as Office 365 that remove a lot of traditional complexity and give them access to functionality they would find difficult to implement on premise. At the other end of the spectrum, many in the corporate IT world happily set up raw servers on Amazon then drop their own application stacks onto them.

Meanwhile, there is an often neglected market segment that sits between the large enterprise market and what most people would regard as SMB. In terms of organisation size, we are in the 500 to 5,000 employee range. Within this, we find ‘enterprise-like’ requirements in terms of functionality, complexity, performance, resilience, security, and so on, but often over-stretched IT departments, with limited specialist skills, who are focused primarily on operations and routine maintenance and support. Before getting into the role of hosted cloud services in this space, it is worth taking some time to understand the nature of the beast.

We obviously need to be careful about over-generalising here, but we at Freeform Dynamics have worked on enough research studies over the years to have identified some traits in the mid-market that emerge time and time again. These include a prevalence of the attitude “If it ain’t broke, don’t fix it”, which in turn means mid-market organisations, unlike their corporate cousins, don’t invest that much in infrastructure for the sake of keeping the systems foundation up to date and future proof.

Modernisation and refresh programmes are therefore relatively rare, with most IT investment being associated with discrete projects to fulfil new or changing business requirements in a very explicit manner. Pure IT projects only tend to happen when something is broken, becomes obsolete, or reaches capacity – i.e. it’s usually reactive rather than proactive.

Enterprise-focused IT vendors that try to align their activities with the strategies and roadmaps of key accounts have struggled with this. They have also had problems working around the fact that mid-market customers often don’t have spare bandwidth to investigate and pilot the emerging technologies that a lot of corporate sales teams are incentivised to sell. At the same time, the implications of significant IT decisions from a complexity, migration, integration and risk perspective still means the sales cycle is intense, arguably more intense in some cases due to the scarcity of specialist skills and a higher emphasis on supplier and solution due diligence.

Not surprisingly, while they rarely admit it directly, the upshot of all this has been that vendors often come to the conclusion that the mid-market is more trouble than it is worth to work proactively.

Against this background, we have had some interesting discussions with hosted service providers over the past few months. Some are discovering that the mid-market is actually not a bad place to be selling into, provided you take the right approach. Part of this means acknowledging that IT departments in this sector may not be in a position to comfortably get into new technology areas in-house – e.g. more flexible and efficient private cloud or desktop virtualisation architectures – but have enough knowledge and expertise to understand the potential and appreciate propositions that remove traditional barriers to adoption.

There are three important barriers that are important to consider here. The first is the up-front capital investment required to start putting more modern architectures and solutions in place, which hosted service providers can clearly help with through the subscription/contract based commercial model. The second is to do with the skills involved in setting up the environment, which may only be required for a discrete amount of time while carrying out initial migration and integration work. The third is the big unknown of how to manage service levels and provide effective support to the business with an unfamiliar solution in place and limited resources to acquire experience and build confidence through prototypes and pilots.

It’s the direct addressing of these second two barriers that separates the mid-market focused providers we have spoken with recently from utility players such as Amazon, Google and Microsoft.

One example is Six Degrees, a relatively new entrant into the UK hosting market, but one which is already seeing a lot of success by blending the right kind of services with the right kind of mid-market engagement model. Campbell Williams, Group Strategy, Marketing Director, is very clear on how priorities and expectations of the mid-market differ from SMBs and corporates. His view is that a proper service rather than an infrastructure rental approach is required. Combined with the right level of investment in working with the customer pre-contract, he says this is the key to getting a stable and mutually beneficial long term relationship off the ground.

Another example of a provider recognising that mid-market customers must be dealt with differently is Cobweb Solutions. With a heritage in the SMB SaaS market, Cobweb continues to serve the needs of smaller businesses, but has had to invest in an alternative set of services and a consulting-led engagement model for mid-market customers.

We were recently discussing this with Oliver (Ollie) Moazzezi, a senior technical architect at Cobweb. As part of this conversation we talked through the practicalities of working with customers on ‘hybrid cloud’ solutions for messaging and collaboration. These include configurations in which the physical aspects of the Microsoft Exchange stack, for example, are looked after as part of the hosting agreement, but the local IT department is able to use native Exchange tools (rather than a dumbed down SaaS console) to manage the email environment as a fully integrated extension of their on-premise infrastructure.

Picking up on this last point, something highlighted during all of our conversations with successful mid-market service providers is the spirit of working with rather than against or around the customer’s in house IT team. This in turn highlights the importance of services incorporating a strong element of support to back up local IT pros, but also a need to put the time in up front to ensure that support and escalation processes are effectively coordinated, with clarity over who is responsible for what and properly managed expectations.

From a supplier perspective, players like Six Degrees and Cobweb are clearly going after a segment that gets them away from all of the utility-type activity in the broader SMB space that the likes of Microsoft and Google are going to continue driving. For mid-market customers, these more targeted and thoughtful offerings and engagement models are opening some interesting doors to bring advanced solutions into play in a more comfortable manner than before.


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Dale is a co-founder of Freeform Dynamics, and today runs the company. As part of this, he oversees the organisation’s industry coverage and research agenda, which tracks technology trends and developments, along with IT-related buying behaviour among mainstream enterprises, SMBs and public sector organisations.