Playing Catch-Up

By CIOinsight  |  Posted 01-10-2007
In some ways, midsize businesses will be dealing with the same general IT issues in 2007 as their large corporate cousins. They'll be trying to help the business grow; watching the bottom line; worrying about security; and consolidating infrastructure. A Gartner Inc. survey of top IT initiatives in small and medium-size businesses for the coming year reveals a priority list that would not be foreign to a Fortune 500 company: security, disaster recovery, Web development, mobility, business intelligence and so forth.

But smaller businesses prioritize these to-do lists differently than big companies do, and because they are limited by budget and staffing constraints, they take vastly different approaches to achieving their goals. With that in mind, 2007 promises to be a busy year for mid-market businesses, many of which are playing catch-up and employing creative IT workarounds that bolster their systems without breaking the bank.

Take disaster recovery, for example, which just popped up on the mid-market radar this past year. The need for foolproof backup is a given in major corporations, which have legal and fiduciary responsibilities to demonstrate ironclad data-recovery practices. But for smaller companies, disaster recovery has been a luxury that many could not afford. Not anymore: On average, midsize companies expect to increase their spending on disaster recovery next year by more than 9 percent.

"The mid-market has horrible backup practices," says Jim Browning, vice president of the small and medium business practice at Gartner. Fortunately, the adoption of virtualization technology is driving a new "poor man's disaster recovery," as Browning puts it. Though the move to virtualization is intended to save money and computing resources by consolidating servers, savvy business owners are realizing the fringe benefits. Many are taking the servers that were freed up through the virtualization process and creating mini-disaster recovery sites.

That's exactly what George Neill did as director of IT at Organic Valley, a $340 million organic-farming cooperative based in LaFarge, Wis. "The threats change from year to year, but the thing that really keeps me up at night is disaster recovery," Neill says. Organic Valley's headquarters is a two-hour drive from Madison, the closest tech center where Neill could get help if he needed it. So Neill took matters into his own hands. He says virtualizing his server infrastructure has given him the ability to leverage his hardware for disaster recovery and improve the company's ability to recover. "If one of our servers went down, we literally could bring up our virtualized app servers on a PC," says Neill. Outsourcing is another tactic that midsize businesses are expected to begin embracing in the coming year. Midsize businesses have been slower than big businesses to move IT services outside the company. But there is anecdotal evidence that mid-market companies are coming around on this issue. Already 39 percent of midsize companies say they are willing to outsource strategic functions.

"A lot of these guys have been kicking the tires, but signing very few actual contracts," says Gartner's Browning. "They're going to have no choice but to outsource eventually, especially infrastructure and security." Count Al Garcia among the early converts. Garcia is vice president of IT at Comac Inc., a $35 million marketing fulfillment services provider in Milpitas, Calif. The company, a division of Iron Mountain Inc., has been growing rapidly over the past few years, and Garcia needed to offload some of the more basic IT work so his team could concentrate on supporting the growth. Two years ago he outsourced his "back end and warehouse management system, stuff that no one else wants to do," says Garcia.

In making the decision, Garcia had the same concerns that most mid-market companies have when they look at outsourcing. He was concerned that his company would be too small to be important to a big service provider, and he would get substandard service. "We wanted their A-team," he says. He ruled out offshoring early, because the overseas providers were too difficult to manage and, the way he saw it, would end up costing just as much as a local provider. And he needed a team he could meet with regularly to engage in "agile programming," a method of software development that involves many iterations and constant reevaluating of a project.

Ultimately, Garcia went with a small Chicago outfit called The Refactory, a group of five software development specialists. Through the contract, Garcia feels as if he added five people to his IT staff of nine. "We're working on the guts of the warehouse management system and we need to have these guys close at hand," says Garcia. "I fly them in at least once a month, sometimes more." Garcia's other big concern is data security, a growing problem that is starting to affect businesses of all sizes. In the past, smaller companies didn't have to worry as much about being attacked by hackers, who were more interested in taking down large corporate networks for bragging rights. But today the schemes are more organized and sophisticated, and the bad guys are looking to steal personal data wherever they can find it. Everyone is a target.

Garcia says his clients—in industries as varied as pharmaceuticals, automotive supplies and corporate staffing—are increasingly concerned about the security of customer data which they must turn over to Comac as part of doing business. And Comac is responding with increased protection. Among other things, the company is bolstering physical security around its facilities, and spending time training employees on policies and procedures. Another technology that is slowly making its way into the mid-market is business intelligence. While larger companies have been implementing BI software for years, reaping the benefits of targeted data mining and analysis, the big corporate software suites were just too expensive for more modest businesses. But Microsoft Corp. is changing all that.

"The small and medium-size businesses are realizing they have pockets of data and they want something that can discover it, clean it up, and create reports and dashboards," says Gartner's Browning. "And Microsoft is driving the awareness around this, coming out with good enough and affordable BI products." Microsoft sells a BI product called ProClarity, which it acquired in April 2006. Cognos Inc., Hyperion Solutions Corp. and SAS Institute Inc. all compete with Microsoft in the mid-market.

Indeed, 2007 will be a busy year for midsize companies. It's an uphill climb, but for those businesses that achieve the summit, the reward is a whole new set of concerns: those of a billiondollar business.