Marching to the Middle

How do you define the mid-market? .

by Lisa Rowan

Ask five different people how they define the mid-market and you’ll get maybe six different answers. Truth is there isn’t any consensus definition. Every conversation regarding the mid-market begins with the question, “how do you define it?” There is some agreement on what the mid-market isn’t.

We all pretty much agree that it’s not firms with fewer than 500 employees, but some say not fewer than 1,000. The upper limit is even less clear. Some define it at 7,500 employees; others go as high as 15,000. But the needs of a company with 501 employees may differ greatly from a firm with 14,999. Perhaps it’s time to delineate the market a bit more finely. I suggest we need to carve this large swathe into two different market definitions.

All of this is to set the context for a lot of recent market activity and the apparent focus on this thing we’re calling mid-market. With almost 8,000 firms in the U.S. alone with between 1,000 and 10,000 employees, there is ample open space in which to gain traction in HR BPO and other HR areas. Several notable vendor moves included:

  • In January 2005, Aon HRO, a division of Aon Consulting Inc., formed a strategic alliance with Ultimate Software to offer an HR BPO alternative for mid-market firms. Prior to this, Aon had been focusing exclusively on the large market through its alliance with CSC.
  • In the same month, Advantec named Pat Goepel as new CEO. He is previously the head of large business services at Ceridian, and the development may indicate up-market movement by the firm.
  • In April 2005, Taleo acquired and launched its Business Edition for expansion into the small- and mid-markets.
  • In December, Gevity—previously focused largely on PEO services for small employers—announced the launch of its mid-market division to lead an expansion into the segment for HR BPO.
  • This past March, Accenture acquired certain assets of Savista to gain a multi-tenant platform and mid-market BPO market share.
  • The murkiness in defining mid-market becomes apparent when you compare the end of the market that an Accenture will likely focus on, with that of a Gevity, based on the target with which it has the most experience.

The vendor drive to serve the mid-market is based on several factors. In part, it’s the size and apparent lack of competition drawing competitors. Also, it’s the allure of not having to manage the ERP or HRMS in place and the economies of scale of a single, multi-tenant platform. There is a perception that the mid-market is less tied to a customized HRMS and, therefore, will be more willing to move to a standard platform offered by the vendor. This might not be true at both ends of the mid-market. In a recent IDC study of firms with 500 to 10,000 employees, we asked about HR BPO and desired platform support. The results are revealed in Figure 1 and are somewhat surprising, leading us to conclude that not all mid-market firms are willing to give up what they have today. Those looking to make hay in the mid-market, especially at the higher end, will need to keep this in mind.

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