Mid-Market Spending Is Hot

Survey says 93 percent of respondents anticipate midmarket spending will improve this year, compared with 2003.

August 23, 2004

3 Min Read
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Midmarket spending is hot, according to our exclusive VARBusiness 500 survey, a proprietary quarterly survey of the 500 top solution providers in North America.

Our survey defines midmarket businesses as those employing between 100 and 999. For the second quarter, from April 30 to June 30, nearly nine out of 10 (89 percent) respondents told our researchers that spending at their midmarket companies was higher than last year. What's more, fully 93 percent say they anticipate midmarket spending will improve this year, compared with 2003.

Solution providers said that average sales cycles in the midmarket remained relatively stable, with 54 percent of the 74 solution providers surveyed reporting no change in length of time it took to close a sale. On either end of the spectrum, however, one out of four (25 percent) said their sales cycles have increased, while 20 percent said midmarket customers are buying and closing more quickly. The hottest deal: A very strong 64 percent of these VARBusiness 500 solution providers experienced an uptick in security-solution spending among midmarket customers.

Among other pressing VAR500 issues, while more than one-third of those surveyed (34 percent) said their 2Q '04 gross profit margins were ahead of expectations, though that percentage is down slightly from the end-of-the-year's expectations. A year ago, 41 percent reported gross profits to be ahead of expectations in 4Q '03.

Additionally, nearly four in 10 respondents (39 percent) said company revenues were ahead of expectations for the second quarter. That's up from last year when less than one-third (31 percent) reported a similar "ahead of expectations trend" for their revenue for 2Q '03.Amazingly, despite industry caution and economic soft pockets, more than four-fifths (81 percent) told us they plan to hire during the Q3 '04. That number is up substantially from only six months ago when just two-thirds (66 percent) told our survey they expected to hire in the coming quarter.

Concurrently, employee-utilization rates among VARs surveyed continued to climb with 55 percent saying they used all employees at least 75 percent of the time or more. That's a solid increase from only six months ago when slightly more than half (51 percent) said they were using all their workforce 75 percent of the time or more.

Looking ahead, when solution providers were asked which product segments they believe will exceed sales expectations in the third quarter of 2004, only a few categories showed greater than a 20 percent response rate. Among them, consulting services was the strongest, with more than one-third (34 percent) of the polled solution providers expecting revenue generated from consulting and integrated services to be ahead of expectations. Fully 27 percent believe security and privacy sales will exceed their expectations next quarter. And one out of four top VARS, or 26 percent, said voice and data networking sales will exceed their third quarter revenue expectations.

The health-care and banking/finance verticals finished first and second, respectively, in terms of perceived growth opportunities. Sixty percent of the solution providers contacted for the survey believe their greatest IT revenue gains will come from health care, while 43 percent point to banking and finance. Following these two leaders are the manufacturing, education, federal dovernment, retail and state/local government industries.

It's good to know that positive thinking continues among the VAR500 solution-provider community. More than eight out of 10 (82 percent) say their Q3 revenue will be ahead of expectations. That is quite a bit higher than what they reported during the same timeframe last year when only 69 percent thought Q3 revenue would be ahead of expectations. And more than half of those surveyed, 54 percent, expect their Net profits to improve in the third quarter, as well.0

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