Traditional IT models under pressure as UK mid-market seeks growth

As small and mid-market businesses drive the UK’s economic recovery, new research of 200 UK organisations commissioned by Scale Computing, the leading vendor of hyperconverged solutions, points to a profound shift in attitudes around corporate IT in favour of non-licence-based software and infrastructure systems.

The study of senior IT personnel, conducted by leading market research specialist Vanson Bourne, found that the mid-market is frugal by nature ? 48 per cent say their budget is not enough ? meaning they have to spend wisely. With smaller organisations generally having less scope for cost cutting, almost half (48 per cent) has unsurprisingly had to focus on incremental IT system improvements to support their growth as the UK economy slowly recovers.

“The major IT vendors have for a long time forced enterprise solutions on small and mid-market firms and made them pay through the nose for software for too long,” says Jeff Ready, CEO, Scale Computing. “Today, small and mid-market businesses realise there’s an alternative, and they no longer have to pay for expensive infrastructure systems.’

The long recession saw most UK small and medium size firms take far more interest in open source and licence-free software and infrastructure but non-traditional approaches to IT have been growing for many years anyway: survey interviewees estimate that in 2005, before the financial crisis, around 16 per cent of their applications were non-licence-based offerings, compared to 31 per cent now. The trend to open source and other non-traditional models is clear, as senior IT decision-makers also predict that 36 per cent of their applications will be based on such software products by 2015.

Achievement not accreditation
A clear majority - 57 per cent - feel that they specifically choose IT solutions that best suit the current and future business and technical requirements.
“IT heads in small and medium size companies want to get the job done quickly and efficiently, without paying for big brand names. They always push for the most appropriate solution, and at the best overall value,” says Jeff Ready. “That usually means alternative IT suppliers and an increasing amount of licence-free software.”

This hard-headed approach contrasts sharply with that taken by large organisations; almost all (99 per cent) of respondents agree to some extent (60 per cent agree outright) that large organisations have a reputation for buying ‘big name’ brands, as their IT decision-makers believe that by doing so, they will become more employable.

Jeff Ready comments: “Traditional IT has been brainwashed into thinking that paying more money for big brand names is value for their business. The reality is that there is a new breed of IT emerging, which is savvy enough to understand that the alternatives are good enough, and they no longer have to pay for licences”.

Multi-vendor management
Heads of IT at the UK’s smaller firms and mid-size organisations are well aware of their key role in keeping control of suppliers and the majority (69 per cent) consider their skill set more ‘multi-vendor management’ and navigating through all the complexity, than ‘IT guy.’

The majority (57 per cent) believe that their level of IT knowledge is more than adequate and believe it’s actually the lack of IT department resources that prevents their team from driving new developments or special projects. This frustration is undoubtedly part of the reason for most organisations (79 per cent) having examined open source or non-licence fee software options over the last 12 months. While a purpose-built, non-licence software and infrastructure systems approach for SMBs is favoured by 34 per cent of interviewees, their most popular choice is open source software (36 per cent).

Competitive parity or competitive advantage
Most mid-market IT decision-makers distinctly feel that IT is run for the benefit of the business, as opposed to the business having to conform to the limitations of IT (64 per cent) but they want more from it.

The vast majority of their IT estate within small and midmarket is seen as a commodity that enables the business and just has to deliver ‘competitive parity’ (80 per cent of private sector respondents) with an average of only 40 per cent of the IT system is seen as delivering competitive advantage for the business. Typically, this part of the IT system is nearly always based on flexible, non-licenced-based software – but most interviewees nevertheless admitted that over half of their current IT estate was still based on traditional licence taxing software and infrastructure systems.

On average 38 per cent of all surveyed respondents’ IT estates deliver a competitive advantage but in 93% of organisations non-proprietary software is used to make up the parts of the IT estate that offers this market edge in some way - typically, 31 per cent of the IT estate that provides a competitive advantage consists of non-licence-based software options.

Over nine out of ten (97 per cent) agree to some extent that mid-market users can’t get a competitive edge from licence-based software and systems. “You can’t get a competitive advantage from products rooted in ‘old-style’ complicated licenced models,” says Jeff Ready.

The vast majority (76 per cent) of the survey say that the aim with most of their IT system is to have a robust, scalable infrastructure that achieves competitive parity at minimum cost. It’s no surprise therefore, that 69 per cent of IT heads say some form of licence-free IT is their preferred option.
Jeff Ready emphasises the mid-market’s changing needs – and its new suppliers: “The organisations need highly available, scalable and flexible IT at a low price. There is a new breed of IT vendors that are supporting the mid-market with exactly what they need by avoiding the old model with their excessive licence fees.”