The Big Midsize Challenge

For years, midsize companies have had to make do with far less capable IT systems than large corporations, but technology advances have narrowed this gap over the past decade. The plummeting costs of both processing power and data storage have increased the capabilities of software and decreased the resources needed to support it. Software features that once commanded a yacht-size budget and a crew to match now are affordable for companies that can afford only a modest runabout.

Nonetheless, our benchmark re-search shows that midsize companies lag larger ones significantly in their use of important (but hardly leading-edge) software categories such as enterprise resource planning (ERP), analytics, reporting, budgeting and planning, and human resources management. Why? We believe that a primary reason is that most executives (particularly CFOs and controllers) in midsize companies are not aware that their organizations can afford IT solutions that could address the business issues that they face and help to improve their performance. Another, similar reason is that midsize companies often underutilize the IT capabilities they already have.

At the same time that midsize companies lack the resources enjoyed by larger ones, they have lost the nimbleness that they had when they were smaller. Our research confirms that executives in midsize companies feel that they do not have enough time (or people) to compete optimally and improve employee effectiveness. Yet the quality, quantity, timeliness, and relevance of the information that companies have available determine how much they know about how the business is operating -- and therefore their ability to react intelligently to changing conditions.

Our research shows that compared to larger companies, midsize ones have limited views of how well their business units and people are operating, have limited data on which to assess their performance, take much longer to produce management reports, and end up with only average or below-average accuracy. It takes midsize companies longer to deliver monthly management reports, and research participants from midsize corporations judge that these reports are generally less accurate than those from larger firms. These organizations also are less able to track the performance of business units and individuals, even though their employees say that measuring performance has a positive impact.

Both the enterprise software midsize organizations use and their understanding of how best to use it contribute to these difficulties. Unfortunately, business software doesn't have a gauge that shows when it is not being used effectively or that it has become functionally obsolete.

Ventana Research believes that finding the right information technology and using its full capabilities can address many of the business issues that midsize companies face. For example, many replaced their ERP packages eight years ago because of Y2K concerns. While those packages continue to balance debits and credits flawlessly, they may lack other useful capabilities, may not have been kept up-to-date, or, in the rush to meet the implementation deadline, may have skipped useful process changes.

Our research also shows most midsize companies rely largely on desktop spreadsheets to support business processes and to collect and analyze financial and operating data and report results. When used inappropriately in enterprise tasks, spreadsheets waste considerable amounts of time and can deliver inaccurate information. They also make it difficult to manage by exception, something that allows executives to be more effective.