Why Mid-Market Companies Will Move to the Cloud

Cloud computing is now firmly established in the enterprise computing landscape. IDC the analyst firm says that public IT cloud services spending will grow to more than $127 billion in 2018, representing a compound annual growth rate of 22.8%, which is about six times the rate of growth for the overall IT market. But many companies find themselves excluded from the cloud revolution because they are economically, operationally, and technically shackled to inflexible and highly customized legacy systems.

Interestingly, small companies (500 or fewer employees) and large enterprises (5,001 or more employees) have the highest adoption rate of cloud strategies at 40% and 35% respectively1. Of course, smaller enterprises are less encumbered by legacy technology, rigid and unyielding processes and layers of management that make decision-making cumbersome, slow and unwieldy. For them, a shift to the cloud represents relatively few barriers. And although large enterprises generally have complex systems architectures it seems that they have sufficient financial clout and skills to devote to a cloud migration. But all of this begs the question, what is happening in the mid-market?

Mid-sized businesses, especially those enjoying rapid growth are in a more testing environment. Management and other resources are stretched, they may not have breadth and depth of IT skills in-house and their processes are likely to be under pressure and not completely evolved. Yet the mid-market has many unique strengths. Quite often the business is still driven by the energy, vision and entrepreneurial skills of the founders and their decision-making is more responsive than their larger contemporaries. In other words, they are imbued with an agility that larger businesses find difficult to emulate. And ironically it is the preservation of this agility that makes the move to the cloud so compelling. If mid-sized companies are to maintain their upward trajectory they need the flexibility and scalability that the cloud confers.

In an effort to accelerate their move to the cloud and side-step the limitations of the on-premise world many organizations are looking to so-called ‘Hybrid Solutions’ that enable them to build a bridgehead in the cloud while phasing out their dependency on legacy systems. This halfway house is proving extremely popular and is driving a renaissance in the ‘Best of Breed’ approach where companies choose cloud-based solutions to fill in the gaps where traditional on-premise systems such as ERP and performance management have failed to deliver. Applications such as reconciliation, intercompany processing, and compliance quickly spring to mind.

Furthermore, the SaaS (Software as a Service) model confers many financial, technical and operational advantages, such as, the supplier taking on responsibility for maintaining, operating and upgrading software, license fees that are on a subscription basis and the relative ease of migration. And although it is larger, well-resourced enterprises that are paving the way to the hybrid approach (IDC says that more than 65% of enterprise IT organizations are set to commit to hybrid IT before the end of 2015) mid-market companies are sure to follow hard on their heels. That’s because a hybrid approach based on a Best of Breed ideology allows mid-market companies to transition to the cloud in a purposeful and low risk way while allowing them to retain the agility that makes them successful.

Note1 How Cloud is Being Used in the Financial Sector: Survey Report February 2015

Cloud computing is now firmly established in the enterprise computing landscape. IDC the analyst firm says that public IT cloud services spending will grow to more than $127 billion in 2018, representing a compound annual growth rate of 22.8%, which is about six times the rate of growth for the overall IT market. But many companies find themselves excluded from the cloud revolution because they are economically, operationally, and technically shackled to inflexible and highly customized legacy systems.

Interestingly, small companies (500 or fewer employees) and large enterprises (5,001 or more employees) have the highest adoption rate of cloud strategies at 40% and 35% respectively1. Of course, smaller enterprises are less encumbered by legacy technology, rigid and unyielding processes and layers of management that make decision-making cumbersome, slow and unwieldy. For them, a shift to the cloud represents relatively few barriers. And although large enterprises generally have complex systems architectures it seems that they have sufficient financial clout and skills to devote to a cloud migration. But all of this begs the question, what is happening in the mid-market?

Mid-sized businesses, especially those enjoying rapid growth are in a more testing environment. Management and other resources are stretched, they may not have breadth and depth of IT skills in-house and their processes are likely to be under pressure and not completely evolved. Yet the mid-market has many unique strengths. Quite often the business is still driven by the energy, vision and entrepreneurial skills of the founders and their decision-making is more responsive than their larger contemporaries. In other words, they are imbued with an agility that larger businesses find difficult to emulate. And ironically it is the preservation of this agility that makes the move to the cloud so compelling. If mid-sized companies are to maintain their upward trajectory they need the flexibility and scalability that the cloud confers.

In an effort to accelerate their move to the cloud and side-step the limitations of the on-premise world many organizations are looking to so-called ‘Hybrid Solutions’ that enable them to build a bridgehead in the cloud while phasing out their dependency on legacy systems. This halfway house is proving extremely popular and is driving a renaissance in the ‘Best of Breed’ approach where companies choose cloud-based solutions to fill in the gaps where traditional on-premise systems such as ERP and performance management have failed to deliver. Applications such as reconciliation, intercompany processing, and compliance quickly spring to mind.

Furthermore, the SaaS (Software as a Service) model confers many financial, technical and operational advantages, such as, the supplier taking on responsibility for maintaining, operating and upgrading software, license fees that are on a subscription basis and the relative ease of migration. And although it is larger, well-resourced enterprises that are paving the way to the hybrid approach (IDC says that more than 65% of enterprise IT organizations are set to commit to hybrid IT before the end of 2015) mid-market companies are sure to follow hard on their heels. That’s because a hybrid approach based on a Best of Breed ideology allows mid-market companies to transition to the cloud in a purposeful and low risk way while allowing them to retain the agility that makes them successful.

Note1 How Cloud is Being Used in the Financial Sector: Survey Report February 2015