4 Trends That Impact How Midsize Enterprises Deal With IT Vendors

Having the right fit is important — be it a shoe, machine part or enterprisewide IT solution. It is also a constant struggle for some CIOs of midsize companies who, as a result, are disenchanted with their technology providers and sourcing arrangements. With the emergence of several disruptive trends in the IT vendor market, these CIOs now have more choice. They no longer have to purchase ill-fitting technologies or settle for unfavorable terms and agreements.

“On the positive side, there are more vendors that have solutions that align to their scale, technical requirements and budgets,” says James A. Browning, vice president and distinguished analyst at Gartner. “On the challenging side, there are more providers, approaches and pricing differences that complicate vendor selection.”

Because the IT vendor market will continue to change at an accelerated pace, midmarket CIOs need to make finding rightsized solutions a priority. Browning recommends they start by understanding the following four market trends.

Small, niche vendor market disruption

The growing number of small niche vendors has changed the IT landscape. This is a plus for midmarket CIOs. Many small providers work directly with the organizations they serve, an option not usually offered to midsize enterprises by larger vendors. Small vendors are also known to provide exceptional customer service, flexible pricing and access to their best resources.

Going small should not be a deterrent. Instead, CIOs should focus on how to best mitigate risks by, for example, developing in-house vendor management competencies specific to working with small vendors. CIOs should also:  

• Seek small vendors with innovative technologies and approaches that can deliver the fit, functionality and scale needed
• Evaluate small vendors thoroughly, e.g., financial viability, product strengths, customer support and ability to affordably integrate with existing systems

Churn in the value-added reseller (VAR) market

The traditional VAR business model is going through changes. Many VARs are moving away from the resale product purchases on which they relied toward cloud and managed services. This leads to some uncharacteristic behaviors by many resellers that do not always result in the best deals for midsize enterprises.

When working with VARs:

• Get quotes from multiple VARs to make bids competitive. VARs have a wide range of vendor partnerships and flexibility with solution pricing, so push them for the best deal.
• Build relationships with VARs that partner with new niche vendors, especially those driving change and innovation

Easy-to-manage IT solutions

Solutions that are easy to use and implement are more prevalent. This is good news for midsize companies, which have limited resources for deployment, training and maintenance. As such, they use operational simplicity as key criteria for vendor selection.

Says Browning, when all is else is equal, CIOs should choose the solution that leads in operational effectiveness and has the lowest total cost of ownership.

Other recommendations include:

• Prepare to deviate from legacy vendors, products and delivery methods when the alternatives demonstrate reduced complexity
• Challenge all IT vendors that require significant training or professional services
• Request a purchase discount to offset training and consulting costs

Try before you buy options

An increasing number of vendors are offering “freemium” versions of their self-service solutions. “Not surprisingly, the try-before-you-buy approach has changed the way midsize CIOs use and purchase technology,” Browning points out. “It has become a part of the vendor evaluation process.”

Conferencing technology is a prime example. Many midsize companies find it cost-prohibitive. But providers such as Google and Zoom offer a free web conferencing version frequently used by midsize organizations for daily intracompany conferencing and collaboration. This enables CIOs to effectively measure a solution’s value before an investment is made.

Before investing, CIOs should:

• Negotiate deals with IT vendors that begin with a proof of concept
• Use the proof of concept to ensure solution capabilities fit the company’s scale and requirements
• Apply the proof-of-concept process to the evaluation of interoperability with existing systems