The mid-market conundrum

How to achieve best -in- class IT application delivery with limited resources

June 2013
Mid-market organisations live or die by the quality of the applications that drive their business operations; from sales generation through supply chain management to post-sales services. Similar IT complexity to that in large enterprises has to be managed to support these, but with more limited resources. Somehow, the aspiring mid-market CIO needs to achieve peace of mind, confident that these applications are consistently delivering the desired business outcomes. Most acknowledge that they cannot achieve best-in-class application performance, availability and security, at an affordable cost, based purely on their own resources. To deliver a given application effectively requires the help of an IT service provider (ITSP). The conundrum is finding the right partner with both an applications focus and flexible access to the necessary resources to adapt as workload and technology change. The research presented in this report shows the extent to which UK-based midmarket IT leaders recognise these problems and how effectively they are working with ITSPs to deliver improved services to their business.

Bob Tarzey Quocirca Ltd Tel : +44 7900 275517 Email: bob.tarzey@quocirca.com

Bob Brown Quocirca Ltd Tel: +44 7940 526801 Email: bob.brown@quocirca.com

Copyright Quocirca 2013

The mid-market conundrum

The mid-market conundrum

How to achieve best-in-class IT application delivery with limited resources
Mid-market organisations live or die by the quality of the applications that drive their business operations; from sales generation through supply chain management to post-sales services. Similar IT complexity to that in large enterprises has to be managed to support these, but with more limited resources. Somehow, the aspiring mid-market CIO needs to achieve peace of mind, confident that these applications are consistently delivering the desired business outcomes.

Mid-market CIOs recognise that they must deliver desired business outcomes Best-in-class applications are a key competitive asset for any mid-market business Mid-market businesses need the capability to scale people, processes and technology Finding partners with the right skills who are willing to engage is a key challenge Help with facing up to current IT trends must be part of package Both end user organisation and ITSP need a partnering mind set to succeed

The majority of mid-market IT directors already have a CIO (chief information officer) mind set. They focus on applications over infrastructure and take a holistic view of both the application and the supporting infrastructure to ensure delivery of the only thing that really matters; the desired business outcome. Only when this is the case will they achieve the peace of mind that a given application will perform reliably, be available and secure on a day-to-day basis and free up time to focus on other strategic initiatives. 97% of mid-market organisations transact directly with users from partners, customer organisations and/or consumers and 72% of their employees rely on access to applications to do their jobs. On average the number of external users engaged with is 40 times the number of internal users; for some organisations it is considerably higher than this as they run hundreds of thousands or millions of external transactions per year. Any inefficiency or inaccuracy that results from poorly implemented or integrated business-critical applications is instantly visible to key stakeholders and will lead to competitive disadvantage and lost revenue. Most mid-market IT leaders recognise that if they rely on internal resources alone, they will not be able to deliver best-in-class applications. On average they have 73 users per IT staff member; with smaller organisations being half as efficient as larger ones. So most work with third party IT service providers (ITSPs) to gain access to scalable resources including people, processes and technology. Mid-market businesses cannot afford the upfront capital and ongoing investment that this requires, but ITSPs can as they share the costs across multiple customers. Mid-market businesses are typically not of interest to most large system integrators, and they become less interesting the smaller they are. Companies with just a national focus are also less likely to deal with larger providers. The quality of service provided by smaller IT service providers (ITSP) that do focus on the mid-market is variable and inconsistent; all too often the experience is disappointing and for a better-than-expected service to be delivered is a rarity. This explains why their mid-market IT directors are often serial experimenters. Mid-market organisations accept that new technologies are a key part of the solution to their challenges, including support for mobility and cloud-based services that provide an opportunity to enhance operational efficiency. Help is also needed in other areas such as big data and consumerisation. Mid-market IT directors and their management teams need access to partners with proven skills and capabilities to enable them to harness these technologies with confidence and in a way that ensures the desired business outcomes are achieved. A better experience of working with ITSPs is usually reported if both parties see a partnership as the basis for the relationship. However, many mid-market organisations engage on a tactical basis, which leads to fragmented overall delivery. They struggle to find the right balance, with the number of suppliers going up and down over relatively short timescales. Those organisations that seek to engage in a true partnering fashion, with risk shared between both parties, are the ones that will achieve real long term benefit from their ITSP engagements.

The mid-market conundrum summarised:

The problem for mid-market IT directors is to find ITSPs that focus on applications and business outcomes rather than technology alone and that have access to scalable resources; this is as much about values as it is about capability and competence. The end user organisation and its ITSP need to share the risk involved and when this is the case both should benefit from the success that follows.

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Introduction the mid-market CIO

Mid-market businesses come in all shapes and sizes and are found in all industry sectors. Each one faces its own competitive challenges and has its own goals and aspirations. There is no strict definition of what a mid-market business actually is; typically they have hundreds or a few thousands of employees, several millions in revenue and they are usually not household names. From an IT perspective mid-market businesses generally have limited resources, overseen by someone who is likely to have the title of IT director, rather than a chief information officer (CIO). Attitudes matter more than names, but many consider that the ideal CIO in a large enterprise should be thinking about how IT delivers business outcomes, including everything from sales generation through supply chain management to post-sales support. Success requires a focus on application delivery rather than IT infrastructure. The good news is that most mid-market IT directors already understand this. They accept that their responsibility is to deliver the applications to the business, seeing the platform as subservient. This attitude goes hand-in-hand with the way the platform to run a given application is selected (Figure 1). The challenge is to ensure these applications perform consistently, with high availability, are secure and, of course, that the desired business outcomes are being met. In short, just like large enterprises, mid-market organisations need best-in-class applications delivery to operate effectively. Few IT directors believe they can achieve this by relying purely on in-house resources, so the need to engage with IT service providers (ITSPs) is widely recognised. The majority of mid-market businesses are more likely to outsource a given application than they were two years ago (Figure 2). To fulfil their CIO aspirations, mid-market IT directors should be looking for more comprehensive ITSP relationships, with contracts focussed on how applications deliver the desired business outcomes, rather than caring about the technology per se. By doing so, time and resources can be freed up to look at strategic initiatives, focussing on what their business does rather than just keeping the lights on. For example an IT director responsible for an online retail application should be ensuring excellent customer service not checking bandwidth allocation to web servers. Many large enterprises have benefited from IT outsourcing, reducing operating costs and improving responsiveness, but, historically, this has been less likely to be the case with mid-market companies. In designing the research presented in this report, a key objective was to understand why this has been the case; to identify some of the obstacles and attitudes that have impeded progress and how some mid-market IT directors have overcome these to achieve peace of mind through effective engagements with ITSPs.

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Why IT is business-critical for the mid-market

For any business, IT now offers much more than the opportunity to drive efficiency in any given area. It has the potential to enable completely new business processes through the delivery of innovative applications and, as such, has become one of the most important levers for competitive advantage. Any company, of any size, has the ability to take advantage of the possibilities on offer size is no longer a constraint. However, size is relevant to mid-market organisations, as they have historically been the least agile. Small businesses have relatively simple needs and less legacy systems to worry about, whilst large enterprises share complexity with mid-market organisations but can throw resources and/or investment at their problem. Nevertheless, the average mid-market organisation aspires to acquire the same quality of IT services that are available to its enterprise counterparts (Figure 3); second best is no longer good enough. The needs that drive this are very real. First there are the internal needs; 72% of an average mid-market organisations employees now rely on IT applications to do their jobs (Figure 4). Second, and even more importantly, for most mid-market businesses, constantly available IT applications are now critical for interaction with external users. Whilst employees will accept an application being unavailable for a period of time, external users can often just go elsewhere. 97% of mid-market organisations rely on some sort of interaction with users from partners and/or customer organisations and, in many cases, consumers. The number of external users ranges from tens to millions, with the average mid-market organisation interacting with forty times as many external users as internal ones (Figure 5). It is little wonder that mid-market IT directors feel the pressure to make sure that the mission-critical applications driving all these transactions perform consistently. Furthermore, there is a constant need for innovation to stay ahead of competitors and react to demand, which can rise and fall sharply (especially with external users). Few mid-market IT directors can maintain all the infrastructure and skills they need inhouse and therefore have to turn to ITSPs for help in order to scale people, processes and technology, and deliver best-in-class IT services.

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Overcoming resource limitations

The need to have access to best-in-class IT services is one thing; however, achieving this is another. Over 70% of mid-market organisations say they find this hard to do using purely their own resources (Figure 6). The average mid-market organisation supports around 70 users per IT staff member. The smaller an organisation is the proportionally fewer resources it will have to deliver IT (Figure 7); the IT operational headcount per internal user is twice as high in smaller organisations as larger ones. Furthermore, these resources are stretched, often being used simply to keep the lights on rather than deliver strategic projects (Figure 8). This includes dealing with unexpected infrastructure issues, worrying about compliance and, despite the limited numbers, for IT management time to be taken up dealing with staff issues. Mid-market IT directors have a real need to free up members of their teams from an unending cycle of fire-fighting and mundane maintenance, in order to focus on innovation and delivering the applications that help drive the businesses forward. The answer is to share the workload with ITSPs. In the first instance engagements are often about off-loading the management of infrastructure, with service level agreements simply around availability, performance and so on. However, such utilitarian arrangements often lead to fragmented delivery; the average midmarket organisation currently has more than nine outsourcing contracts. Perhaps this is not too bad when you consider this might include network service providers, software-as-aservice (SaaS) suppliers, co-location data centre agreements and so on. However, whilst the overall number of suppliers has not changed that much over a two year period (Figure 9) the detail shows that there is more flux than first appears, with the number of suppliers going up and down (Figure 10). Such serial experimentation is likely to lead to poorly optimised outcomes.

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However, some go much further than this and engage at the application level, contracting with partners to achieve defined business outcomes. The challenge here is to find ITSPs with the right skills that are willing to think holistically about joining together the complex technologies and delivering integrated services to achieve the agreed goals. This is the nub of the mid-market conundrum; finding an ITSP that can not only deliver best-in-class IT services but one that can also provide flexible access to the necessary resources as application requirements change, to ensure that their clients can take advantage of changing technology trends.

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Adapting to changing IT trends

Mid-market organisations need access to ITSPs that have an appropriate skill set to help them benefit from the changing technology landscape. Embracing the new ways that IT is delivered and supported can help to reduce costs and provide added value. There are also many new opportunities for improved customer engagement. That said, an organisation should adopt new technology because there are real business benefits, not just because they think they should. There are three major areas where many mid-market organisations recognise they need help: these are the use of public cloud, big data and the consumerisation of IT.

The use of public cloud

Overall, businesses are prepared at some level for the use of public cloud services (Figure 11). Another Quocirca 1 research report shows that the blockers to use can be overcome, if the resources and skills can be found. These will often have to come from the cloud service provider itself. The term cloud is very broad and, generally speaking, it is better to talk about specifics such as infrastructure-as-a-service (IaaS), software-as-a-service (SaaS), on-demand security, remote system management and so on. Regardless of confidence levels around the use of cloud services, security of data remains the top-level concern. Even reasonably well placed is problematic; imagine a board-level conversation about taking up a cloud service and an IT director saying, we are reasonably confident about cloud security . This will not be good enough when the perceived protection of customer or personal data and intellectual property are involved. That said, cloud-based services are a big part of the answer to delivering mid-market IT aspirations. Many of the concerns about security are misplaced; indeed such services can deliver increased levels of security in many cases, and provide the fastest and cheapest route to best-in-class IT. Providing of course, these services are backed by providers that are qualified for the job.

Dealing with big data

Confidence amongst mid-market organisations to deal with growing volumes of data is not much better; this is more so the smaller they are (Figure 11). There are two elements to this: First there is dealing with the volume itself, processing it, keeping network traffic at manageable levels, backing data up and keeping the data with most short-term value readily accessible. Second is the big data opportunity, extracting value from the data itself. This may be for business planning purposes, providing context-aware security or for compliance reporting. Big data is a reality to be dealt with and mid-market organisations should seek ITSPs that have experience and resources to guide them through the issues involved, delivering the right requirements for the business.

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The mid-market conundrum The consumerisation of IT

Broadly speaking, there are two overlapping aspects to consumerisation: use of social media and so-called bringyour-own-device (BYOD). Few mid-market organisations feel very well prepared for either (Figure 12). As with big data, both are realities to be dealt with and opportunities to be embraced. Employee use of social media at work may often be seen as a distraction affecting productivity, until it is realised that LinkedIn is being used for lead generation, and YouTube is a good way to distribute training videos. 2 Furthermore, another recent Quocirca report has shown that social media is proving an effective way to engage with all of those external users talked about earlier, whether it is using Facebook as a source of identity, or mining Twitter to understand the views held about a given organisation and/or its products and services. BYOD is a reality that must be dealt with. A few organisations have adopted a formal policy where employees are given an allowance to buy their own device for work. However, the real issue here is that every employee and guest now walks through the door of any premises with one or more of their own computers about their person. Many will try and connect these to the network with good or bad intent. Any business must at least decide what its policy is and deal with it. However, forward thinking organisations recognise the benefit of embracing this de facto use of personally owned devices. If giving users access to certain applications in a controlled way means they answer a customer email in the evening and update their sales figures or timesheet over breakfast, then this is surely a good thing. Almost any application will touch these three issues (cloud services, big data and consumerisation) at some level. So, recognising a good ITSP requires not just establishing their ability to deliver applications, but also ensuring they are well positioned to do this flexibly within the constant flux in the technology landscape.

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Conclusion: Solving the conundrum finding the right ITSP

Most people who have been around the IT industry for some time can reel off the names of some of the largest system integrators (SI). However, when it comes to solving their own IT problems, mid-market IT directors feel that they cannot get a meaningful long term commitment from larger SIs; this is more likely to be the case the smaller they are (Figure 13). The result is that mid-market organisations rarely engage with large global SIs, rather favouring smaller ITSPs. This is especially true if their business is UK-focused rather than multi-national (Figure 14). Whether the ITSP is large or small, the ultimate experience is often underwhelming, with almost 40% saying it is worse than expected; and this rises to 50% for smaller organisations (Figure 15). Few are taken by surprise and say the experience is better than expected. Even more worrying, given the mid-market reliance on ITSPs, is that the experience is less likely to be better than expected when dealing with smaller rather than larger providers (Figure 16). However, this depends on the nature of the partnership that is established.

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Evaluating prospective IT service providers

WHAT SORT OF ITSP IS IT?
Does the ITSP talk about applications or technology? A business-focussed ITSP should start the dialogue by asking what applications need implementing or changing to ensure that your organisation can achieve desired business outcomes. Is the ITSP prepared to share the risk and commit to service levels that are focussed on achieving those business outcomes? Does the ITSP have a mid-market focus and reputation? A given sales rep in a large SI may come touting for business but will the required commitment to an organisation of your size still be there when it comes to service delivery and continual service improvement?

LEVEL OF ENGAGEMENT
Does the team that you engage with at the ITSP have the ability to speak to your organisations business managers as confidently as they can with your IT managers? Do they ask for access to the business stakeholders? At what stage can you meet the service delivery team? An early introduction should inspire confidence. Are they people that you can work with in the long term? Are you confident that the ITSP can help you overcome barriers within your organisation about the business value of cloud-based services and other emergent technologies?

DELIVERY CAPABILTY
Does the ITSP demonstrate an understanding of hybrid delivery? i.e. the ability to make best use of your organisations existing in-house IT resources, supplemented by its own and other third party resources, and delivery models, as required? Does the ITSP offer a broad portfolio of services to help reduce the number of overall contracts that your organisation has to manage? Can the ITSP integrate and work with other partners with whom your organisation is already committed? Can the ITSP help your organisation to benefit from, and cope with, the changing trends in IT such as public cloud, big data and consumerisation? Is the contract offered flexible enough to cope with changes to your business requirements over time?

WHAT RESOURCES DOES THE ITSP HAVE?

Does the ITSP have access to best-in-class infrastructure services? Does it have access to the services that you require today and those you might need in the future? For example, co-location data centre facilities, shared cloud platforms, software-as-a-service applications etc. Are those infrastructure services the right ones to easily enable you to offload your businesss utility IT services? Have you visited the ITSP and seen its infrastructure platform(s)? Does this inspire the necessary confidence? Who does the ITSP partner with to broaden its portfolio of IT services? Are these trusted partners acceptable to your organisation?

PROOF POINTS
Can the ITSP demonstrate that it has delivered best-in-class IT services? Have you spoken to any of its existing customers as a reference?

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When ITSPs are seen as partners, the experience is more likely to be better than expected (Figure 17). Clearly a partnering mind set for both end user organisation and ITSP is key to success, if business-critical IT applications are to be successfully delivered; achieve this and both the buyer and supplier of IT applications and services should find themselves working effectively together to meet business goals. This means finding a supplier with not just the right skill set but, just as importantly, the right mind set with a long-term client-centric approach. The mid-market CIO needs ITSPs to provide much more than technology; she or he needs applications that deliver the required business outcomes. The table on the previous page summarises the main evaluation criteria that should be considered when evaluating and selecting an appropriate mid-market ITSP. Only a small percentage of mid-market IT leaders are truly confident that they are establishing the right relationships with ITSPs to meet these criteria. They want to see long-term relationships established to avoid the supplier churn that results from disappointment. On the whole, things are moving in the right direction; the relationship mid-market buyers have with ITSPs is improving and they are more likely to be seen as partners than in the past (Figure 18).

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However, there is plenty more that mid-market buyers expect from ITSPs. They find it hard to differentiate offerings with too many saying the same things, whilst not demonstrating they can actually meet the needs of aligning business and technology (Figure 19). This is not easy for either side; it is difficult for an ITSP to stand out through the dilution of proven quality providers, with so many new entrants all jumping on one or more of the various IT bandwagons: cloud, big data and consumerisation. Mid-market organisations have to see through this fog to identify those ITSPs that not just say they can meet their needs, but can also help to facilitate the right choices and then actually deliver them. Those ITSPs that differentiate themselves clearly will be at an advantage. Through this research (summarised by Figure 20) mid-market IT leaders have made their needs clear. The fact that IT innovation comes low on their list should not mislead. Once the basic issues are under control, then the mid-market organisation and its chosen ITSP partner can focus on the long-game; exploiting IT to get ahead in their market, truly embracing IT as a business enabler, and not just a technology platform.

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References
1 Quocirca 2013; The adoption of cloud based services July 2013 freely available on request from Quocirca, to be published on the Quocirca web site later in 2013. 2 Quocirca 2013; Digital identities and the open business freely available at the link below: http://www.quocirca.com/reports/855/digital-identities-and-the-open-business

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Demographics
100 UK-based mid-market organisations were interviewed in this survey. The demographic breakdown of the sample was as follows.

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About Attenda
We (www.attenda.net), are the UKs leading managed service and cloud platform provider, specialising in running business-critical applications. Our Business Critical IT approach combines business outcome focus with a structured engagement methodology and supporting services and infrastructure. Through building enduring relationships, and by harnessing technology to drive successful business outcomes, we deliver complete Peace of Mind; enabling our clients to focus on strategy and their business making them more competitive. We have built up a commanding market reputation, with the industry's leading accreditations, and an unrivalled portfolio of UK enterprise clients who share our passion for application availability. We are ISO 9001, ISO 27001 and ISO 20000 accredited, a Microsoft Gold Hosting Partner, VMware Premier Service Provider, a SAP Partner, SAP Certified in Cloud Services and a G-Cloud iii certified service provider. We are also th positioned 35 in the Sunday Times 100 Best Companies to Work for 2013.

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REPORT NOTE: This report has been written independently by Quocirca Ltd to provide an overview of the issues facing organisations seeking to maximise the effectiveness of todays dynamic workforce. The report draws on Quocircas extensive knowledge of the technology and business arenas, and provides advice on the approach that organisations should take to create a more effective and efficient environment for future growth.

About Quocirca
Quocirca is a primary research and analysis company specialising in the business impact of information technology and communications (ITC). With world-wide, native language reach, Quocirca provides in-depth insights into the views of buyers and influencers in large, mid-sized and small organisations. Its analyst team is made up of real-world practitioners with first-hand experience of ITC delivery who continuously research and track the industry and its real usage in the markets. Through researching perceptions, Quocirca uncovers the real hurdles to technology adoption the personal and political aspects of an organisations environment and the pressures of the need for demonstrable business value in any implementation. This capability to uncover and report back on the end-user perceptions in the market enables Quocirca to provide advice on the realities of technology adoption, not the promises.

Quocirca research is always pragmatic, business orientated and conducted in the context of the bigger picture. ITC has the ability to transform businesses and the processes that drive them, but often fails to do so. Quocircas mission is to help organisations improve their success rate in process enablement through better levels of understanding and the adoption of the correct technologies at the correct time. Quocirca has a pro-active primary research programme, regularly surveying users, purchasers and resellers of ITC products and services on emerging, evolving and maturing technologies. Over time, Quocirca has built a picture of long term investment trends, providing invaluable information for the whole of the ITC community. Quocirca works with global and local providers of ITC products and services to help them deliver on the promise that ITC holds for business. Quocircas clients include Oracle, IBM, CA, O2, T -Mobile, HP, Xerox, Ricoh and Symantec, along with other large and medium sized vendors, service providers and more specialist firms. Details of Quocircas work and the services it offers can be found at http://www.quocirca.com Disclaimer: This report has been written independently by Quocirca Ltd. During the preparation of this report, Quocirca may have used a number of sources for the information and views provided. Although Quocirca has attempted wherever possible to validate the information received from each vendor, Quocirca cannot be held responsible for any errors in information received in this manner. Although Quocirca has taken what steps it can to ensure that the information provided in this report is true and reflects real market conditions, Quocirca cannot take any responsibility for the ultimate reliability of the details presented. Therefore, Quocirca expressly disclaims all warranties and claims as to the validity of the data presented here, including any and all consequential losses incurred by any organisation or individual taking any action based on such data and advice. All brand and product names are recognised and acknowledged as trademarks or service marks of their respective holders.