IBM: Midsize Companies Must Work Smarter, Leaner

A new IBM-sponsored study shows that although the economy is driving midsize companies to work smarter and leaner, many are not actually decreasing their investments in IT, but maintaining current levels or increasing their IT spend to focus on strategic areas.

And despite pressure to cut costs, these midsize companies are proceeding with IT plans that range from information management to social media and cloud computing.

Moreover, the survey conducted in April and May of 2009 shows that midsize companies are aware that they need to work smarter and leaner, but overall appear undaunted by the recession. The “Inside the Midmarket: A 2009 Perspective” study surveyed 1,879 business and IT decision makers in 17 countries to get insights into their business plans and challenges, growth and innovation strategies, IT purchasing trends, and industry-specific pain points, IBM officials said.

IBM officials said the study reveals five key trends:

1. The highest-priority technology solution, chosen by 75 percent of respondents, is Information Management, which turns mountains of data into meaningful insights.

Resource Library:

2. The most pressing business challenges include increasing efficiency and productivity (80 percent), improving customer care (74 percent) and better use of information (72 percent).

3. The impact of the economy on IT budgets has caused 53 percent to actually increase or re-prioritize their spending, with 37 percent reporting a decrease.

4. Despite the economy, more than two-thirds of those surveyed are planning or currently implementing their top IT priorities.

5. A majority of firms view their primary IT provider as a technology adviser or IT and business consultant, with 25 percent seeing the relationship as purely transactional.

Information management was ranked as the most critical IT priority for improving business performance by the largest majority of participants. At a time when digital information is growing every day at a rate eight times the volume housed in all U.S. libraries, organizations need smarter ways to cope with the increasing information overload by turning this data into real intelligence, IBM said

One such IBM customer is doing just that. Delta Natural Gas Company is a midsize company based in Winchester, Ky., that sells and transports natural gas to 38,000 customers in central and southeastern Kentucky.

“Turning data into information we can use to make better decisions is critical to the success of Delta Natural Gas Company,” said manager – Accounting & IT, Matthew Wesolosky, in a statement. “We’ve been using IBM Cognos products for more than 10 years. It’s at the core of our financial reporting process and we are constantly pushing the limits of the software. We use the products to continually improve our management reporting and strengthen our internal controls.”

“Midmarket organizations openly acknowledge the challenges posed by the current economy, but they aren’t paralyzed into inaction," said Marc Dupaquier, general manager, IBM Global Midmarket, in a statement. "In spite of tough economic conditions and concerns about lack of implementation skills, they are continuing to spend and plan against their key IT projects to support their business goals. This study clearly shows that midsize companies, which we believe will be the engines that lead us back to economic growth, are being cautiously optimistic and proactive.”

Indeed, 53 percent of the survey respondents said their IT budgets are either increasing or remaining the same but with shifting priorities. Of that 53 percent figure, 39 percent said they are maintaining current IT spending levels and 14 percent said they are increasing their IT budgets. Meanwhile, 10 percent report no change, while 37 percent are reducing their budget. According to study data, most are holding or increasing their budgets to use IT to help drive efficiencies or reduce costs in other areas of the business or better connect with customers.

The survey also illustrates the growing role of emerging technologies, such as cloud computing, green IT, and social media, which are areas that were not included in a similar IBM study conducted in 2007. Although these areas showed up lower on the scale of critical priorities, midmarket companies are actively pursuing several emerging technology areas to improve performance, IBM said. The survey shows that 79 percent intend to implement or have established goals to implement Green IT solutions, while 71 percent said they have plans to implement Web2.0/social media solutions and 69 percent said the same for cloud computing solutions.

The midmarket could potentially play a key role in re-energizing the economy. Indeed, according to IBM's study, with companies of 500 or fewer employees generating about 60 percent to 80 percent of net new jobs annually over the last decade, these small and medium businesses could help pave the way back to economic growth for the IT industry.