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Summary
Midsize companies have been slow to adopt the information technology (IT) capabilities that could enable them to gain ground on larger competitors and to regain the agility they had when they were smaller, according to a recent study conducted by Ventana Research. The research found that while all businesses face many of the same challenges, large corporations have far more resources (that is, people and money) than midsize companies, while small businesses can be more nimble. Despite the fact that IT can be a great leveler, helping midsize companies to extend the capabilities of their more limited staffs and to regain some of the flexibility that often is lost once a company grows past a certain size, midsize companies have lagged in their investments in IT.

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Midsize companies face different challenges than both large corporations and small businesses. These issues were addressed in a recent study by Ventana Research, sponsored by Lawson Software and Prophix and supported by media sponsors Business Finance, IMA, Intelligent Enterprise and Montgomery Research. the research analysis highlighted some of the more important ones – particularly differences in information, process and technology – that may be preventing their finance organizations from playing a more strategic role in their company’s operations and, by extension, improving the effectiveness of both finance and other parts of the business. Let’s look at each of these aspects in turn.
 
Information
Ventana Research believes that the quality, quantity, timeliness and relevance of information determines the depth of insight that companies have into how their businesses are operating and, therefore, determines their ability to react intelligently to changing conditions. In our research, we found that midsize companies have a more limited view of their how well business units and people are performing than the participating large companies. Midsize companies also have limited data on the basis of which to assess their performance, take much longer than average to produce management reports and end up with only average or below average accuracy. It takes midsize companies longer to deliver monthly management reports, and research participants from midsize corporations rated those reports as less accurate than respondents from larger ones. Midsize organizations also are less able to track the performance of business units and individuals, even though our survey respondents said that measuring performance has a positive impact. The main reason they gave for not tracking performance is lack of access to information.

Process
A higher proportion of respondents from midsize companies than larger ones say they spend too little time planning and budgeting. Midsize company respondents also were substantially more inclined to say better software would help them improve their human resources (HR) function, performance management and cash management. Compared to global corporations, midsize companies are far less likely to use enterprise resource planning (ERP) software to improve their operations. Proportionately fewer midsize company respondents than those at large companies said ERP can drive and support process innovation, particularly in accounting, HR and performance management. Moreover, they were less apt to say ERP systems can help their company manage a range of processes – notably setting practical targets for individuals and managing performance, the workforce and production resources.

Technology
Research participants from midsize companies say they have substantially less well developed IT environments. They are more likely to use spreadsheets for important enterprise tasks and less likely to use dedicated applications or ERP systems. They also are far less likely to have automated HR or supply chain management. Predictably, midsize companies have less complex IT environments and, for those that use ERP, support ERP systems from fewer vendors. While their ERP systems are about the same age as those in large companies, midsize companies update them less frequently. Midsize companies rely more on consultants to support their IT environment and are less capable of changing their ERP systems.

Assessment
Ventana Research asserts that lagging investment in IT is a major cause of issues midsize companies have with information and processes. Our study found that over the last three years midsize companies have grown their IT budgets at slower rates than large ones. We believe midsize companies are less willing to invest in IT because they are not aware they could gain important new capabilities by updating and upgrading their software. Over the past decade software packages aimed at midsize companies (that is, those that reflect the cost and IT infrastructure constraints of these organizations) have narrowed the gap with high-end packaged applications. We advise CFOs and other senior executives of midsize companies that want to enhance company performance and to increase their competitiveness to focus on what is now possible with up-to-date software systems.