Midsize companies may be experiencing strong momentum but they face a complex set of business challenges in the areas of international competition, accessing money from the capital markets, regulatory compliance and the cost of compliance, a recent study found.
“The senior managers of the participating middle market organizations expressed a lot of optimism of their firms going forward but, of course, also noted some challenges as well,” said Anil Makhija, professor of finance in the Fisher College of Business at OSU and the academic director of the National Center for the Middle Market Center. In conjunction with GE Capital, OSU’s Fisher College surveyed nearly 1,500 middle market C-level executives on a wide range of business issues to help define the middle market.
Fisher College’s Middle Market Center is showcasing the results of the initial survey and its ongoing research.
Some of the most interesting survey results focusing on the challenges are:
- Seventy-one percent are challenged by regulatory compliance.
- Seventy-five percent are challenged by cost of compliance.
- More than half (55 percent) of midmarket businesses say they face challenges when it comes to accessing money from capital markets.
- Forty-five percent of middle market organizations are challenged by international competition.
So, how does this affect the CIOs and IT leaders of those middle market organizations? Some of these challenges obviously will have to be addressed by IT leaders who are already struggling to finance existing projects. Regulatory compliance is perhaps the thorniest issue because IT must manage, secure and provide access to mountains of data housed either in an on-site data center, a remote data center or even in the cloud.
“In regard to compliance, the biggest IT challenge is to make sure that you work with a vendor that is compliant with SAS 70 and Finra [the largest independent regulator for all securities firms doing business in the U.S]. CIOs must make sure that the company is reputable and secure in that sense—it is important that the vendor has been around for a while and is not on the bleeding edge because, if compliance issues arise, the challenges will grow even greater,” said Tony Diaz, the director of information technology at Montgomery & Co.
Being that Montgomery & Co. is an investment-banking firm, Diaz has higher compliance costs than most. He shared a specific example in which he had some challenges with the costs of compliance within his IT budget. “Recently, surrounding Box.net, we found that people within our organization were bringing consumerization into the firm and we had to spend a lot of money on licensing for compliant service.”
In regard to accessing money from capital markets and international business competition, middle market IT departments need to learn how to do more with less. When the business itself struggles, it is safe to say that IT departments aren’t going to be getting any extra money for technology growth any time soon. CIOs are increasingly learning how to innovate their IT infrastructures with limited costs to the business, and it is this type of cost innovation that is keeping CIOs in the technology game without emptying the organizations’ pockets.
“These challenges have involved working more efficiently with the money that we have. And, in some cases, it has allowed us to get larger budgets by reutilizing and retooling some of the pieces of software that we already purchased or some of the hardware that we already had in place. This has allowed a lot of the business users to work more efficiently with less,” said Shawn Michael, CIO and senior vice president of operations at Wine Warehouse.