Economy Drives Midsize Companies to Work Smarter, Leaner: IBM Study Reveals Top 5 Trends

07/06/2009

A new study by IBM (NYSE: IBM) of midsize organizations in 17 countries shows that companies have not been deterred from their plans for strategic IT initiatives, which range from information management and security management to social media and cloud computing – despite a clear recognition of the need to cut costs in a difficult economy.

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Conducted in April - May 2009, IBM’s “Inside the Midmarket: A 2009 Perspective” 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

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 advisor or IT and business consultant, with 25 percent seeing the relationship as purely transactional

Coping with Information Overload

Information management was ranked as the most critical IT priority for improving business performance by the largest majority of participants (75 percent). 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 today’s increasing information overload by turning this data into real intelligence.

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. “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. 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,” said Marc Dupaquier, general manager, IBM Global Midmarket. “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.”

More Efficient, informed and Customer-Centric

Not surprisingly, 83 percent of midsize companies say improving efficiency is a key priority. Enhancing customer service and prospecting for new customers are also high on the priority list, however (74 percent). A third set business priorities center around improving business agility and decision making, with close to three out of four study participants giving high priority to improving their ability to predict market trends.

Headquartered in Camarillo, CA, Golden State Medical Supply (GSMS) is a midsize pharmaceuticals manufacturer and specialty packaging manufacturer that serves city, state and federal pharmaceutical needs in hospitals and mail-order pharmacies.

"Product safety is a business imperative for us," said Jim Stroud, chief executive officer, GSMS. "When faced with new regulations around pharmaceutical drug tracking, we saw an opportunity to innovate. IBM helped us develop a system for pharmaceutical tracing that serializes products at the saleable unit and deploys RFID tagging for case shipments. This has helped us enhance customer service, differentiate our services from the competition, and strengthen the security of our processes."

Holding the Line on IT Budgets

Despite the current economic environment, an unexpectedly large percentage of organizations are rethinking, not reducing, when it comes to budget. A total of 53 percent report that their IT budgets are actually increasing (14 percent) or remaining the same but with changing priorities (39 percent). Ten 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.

Moving Ahead with IT Initiatives

In spite of the current economic climate and concerns about barriers to successful implementation of IT projects, more than two-thirds are planning or currently implementing their top IT priorities, led by Infrastructure Reliability (75 percent), Disaster Recovery (72 percent), Information Management (71 percent) and Security Management (68 percent).

This year’s survey also illustrates the growing role of emerging technologies, such as cloud computing, green IT, and social media – areas that were not even included in a similar IBM study conducted in 2007. While lower on the scale of critical priorities, midmarket companies are actively pursuing several emerging technology areas to improve performance. The survey shows that 79 percent intend to implement or have established goals / started to implement Green IT solutions, followed closely by Social

Partners as Advisors, not Order Takers

The relationship that midmarket organizations have with their IT providers reflects an increasingly strategic view of IT’s role in supporting business objectives. According to the study, only one in four organizations view the relationship as transactional, with the remaining respondents seeing their IT provider as a technology advisor or IT and business consultant. The highest rated criteria when choosing an IT provider to partner with was having the expertise to help them work smarter, chosen by 70 percent of respondents.

The study also looked at the perceived impact of economic stimulus spending programs. Approximately 50 percent of organizations worldwide expect to benefit from these programs.

About the Inside the Midmarket Study: A 2009 Perspective

The Inside the Midmarket study, based on an online survey of 1,879 respondents in 17 countries, is designed to gain insight into the business plans and challenges, growth/innovation strategies, IT purchasing trends, and industry-specific pain points of midmarket companies (100 – 999 employees). The study was conducted by Opinion Research Corporation for IBM General Business. Countries in the study include the US, UK, Germany, France, China, India, Brazil, Japan, Canada, Italy, Russia, Malaysia, Australia, Mexico, and Belgium, The Netherlands and Luxembourg (Benelux). To download the study, visit http://www.ibm.com/press/attachments/ibm_midmarket_trend_study.pdf

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