Mid-market “Innovator’s Dilemma”

Before we begin, a word of “big thanks!” to Ivan, who has recently plugged my blog on his most excellent site ipSpace (not that it needs any introduction). I guess I should try to turn “occasionally” into a more “regularly”. Time will tell.

But let’s get to it.

Today I would like to talk about something different: innovation. In particular, how badly it sucks when it comes to the needs of IT houses of mid-market companies, and why.

What is “mid-market”, anyway? For the purpose of this post I would like to define it as “anything with more than a couple hundred employees, but with less than a handful of thousands”. Industry doesn’t make much difference – just the size. Yes, it is a fairly simplistic view, but for the purpose of this post it will have to do.

What makes this mid-market “special”?

In short – difficulty of going after it that it presents to large Telco Service Providers (the very same ones that are now pushing heavily into the “cloudy” space). I’ll talk about why this is important in a minute.

Why is it so difficult? Because large SPs are in may cases really good at two things: either big accounts which justify heavily customised, complex solutions (with associated huge margins); or “the long tail”, which fits well with the “sausage factory” consumer-grade offerings, where the money is made on the volume.

Mid-market is neither – its needs are more advanced than those of the consumers; yet the amounts of money they spend on IT solutions aren’t big enough to justify dedicated solutions. To make matters worse, needs of these customers are fragmented, making them even less attractive to those large Telcos, as it is much easier to justify work on either your top spenders or on the huge volumes of the long tail.

As the result, level of understanding of mid-market’s “hot buttons” by those Telcos is often somewhere between “low” and “pathetic”. Don’t believe me? Why would there be so much telco hate around these guys, I would like to know. Maybe I’m wrong, but this is the impression I get from what I’m reading and hearing.

What has it to do with innovation?

Quite a lot, in fact. Many telecommunications Vendors follow the same trail (in fact, many follow only the first half of it – the top spenders), and base their roadmaps on the needs of those large Telcos, leaving unmet the needs of mid-market and those Service Providers who are trying to serve those needs.

And so the vicious circle completes – Vendors listen to their largest customers, who willonly talk about the needs of their top-end or “the long tail”. Just look what is happening with OpenFlow. Recognise the pattern?

And those mid-size Telcos who target the needs of mid-market? They are left with the technology that’s been developed based on largest Telco’s requirements, which are often differ drastically from what mid-market needs. More than that. They are subjected to heavy marketing pressure by these same Vendors, who try (and often succeed) to convince mid-size Telcos that the wares they have developed for “the big guys” would work for them and their customers “just fine”. Trust us, they say, we’re talking to *everybody* around the world. You’ll be totally fine with our kit. I mean, the big boys are doing it. How are you going to compete with them? And those pesky finicky requirements you think you and your customers have? Foggedaboutit. You just don’t have the purchase volumes we need to even start considering to move our R&D fingers.

Open Source to the rescue? I doubt it. Not many of these mid-size telco houses have the skill or the will to develop at the necessary scale. And those who do, can get “locked in” dead-tight into what they have developed, to the point where even when something new appears on the market that now meets the needs that have initially pushed them to develop something, they can’t easily transition.

So what?

Money is being left on the table. A lot of it. Mid-market enterprises are cashed-up and a legion, and mid-size Telcos targeting them are numerous. Talking to these mid-size Telcos about “millions of VMs” and “hundreds of thousands of servers”, for example, does not even start to address their problem, when a cloud platform solution is pitched to them.

Yes, it isn’t an easy money and a lot of careful insight is required to map out and understand the needs of the ultimate consumers – mid-market Enterprises in this case. But it can be done, and it can be done predictably and reliably.

More on the last point in the next post.

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About Dmitri Kalintsev

Some dude with a blog and opinions ;) View all posts by Dmitri Kalintsev

3 responses to “Mid-market “Innovator’s Dilemma”

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