Lessons for middle market tech executives to consider from their fast-growing peers
Surveyed tech executives are optimistic about near-term industry growth, but large and mid-market tech companies grow in different ways. What lessons could mid-size tech executives learn from their fast-growing peers?
Andy Daecher
Susanne Hupfer
Michael Steinhart
Paul H. Silverglate
As the tech industry enters the summer of 2024, a tale of two strategies emerges between middle sized and large tech enterprises. Whereas executives at both types of companies are mostly optimistic about the future, those at mid-size tech companies (those with annual revenue of US$100 million to US$5 billion) tend to worry more about the competitive landscape and are prioritizing investments in their infrastructure and operational efficiency. That’s in contrast to leaders at large tech companies (annual revenue of US$5 billion and up), who, less burdened by immediate operational considerations and concerns about competition, could focus more on driving innovation and navigating macroeconomic and regulatory uncertainties.1
As they strive to compete, what can executives at mid-size tech companies learn from peers that report fast growth? Two separate Deloitte surveys2 revealed several ideas to consider.
Deloitte conducted one survey of mid-size and large tech companies to better understand their growth prospects, investment priorities, and challenges. A second survey examined what fast-growing, mid-size tech companies are doing differently from their peers, and the steps other mid-size tech companies may consider to replicate their success. These companies can act as a beacon for the rest of the mid-size cohort: Invest in your tech and talent, and you’ll likely be better prepared for an evolving market.
Market sentiment: Mid-size vs. large enterprises
Despite facing many challenges over the last two years, analysts anticipated that the tech sector could look forward to a modest recovery in 2024.3 Recent research bore this out: Deloitte’s 2024 Technology Outlook signaled that tech sector leaders are optimistic about the health of the industry and their companies.4 In a survey of 122 tech leaders conducted in the last quarter of 2023, a majority (55%) of respondents felt the industry was currently “healthy” or “very healthy,” and even more (62%) expected they’d feel that way six months later.5
To explore whether mid-size companies have different experiences, outlooks, and plans, we analyzed these tech leader responses and compared 86 from mid-size respondent companies to 36 from large enterprises.
Forty-seven percent of mid-size tech enterprise leaders surveyed indicated the current health of the tech industry is “healthy” or “very healthy”—and another 41% view it as “somewhat healthy.” When asked what they anticipate six months out, 58% of these leaders said that the tech industry would be “healthy” or “very healthy,” while 3% had a neutral or negative outlook. The US$5 billion-plus cohort has an even rosier view, with 75% of leaders regarding the tech industry as currently “healthy” or “very healthy.”
Mid-market tech leaders seem more likely to feel change in the air: When asked to choose the single best descriptor for the tech industry today, respondents from mid-size enterprises were more likely to select evolving (34%) and innovative (33%), perhaps indicating a sense of rapid change and increased competitive pressure. For executives at large companies, 28% chose innovative, but only 17% selected evolving—they may feel surer of their incumbent positions in the market. When asked to think about their company specifically, 59% of mid-market leaders indicated their organization’s health is “healthy” or “very healthy” (versus 78% of large-company leaders), and 58% think it’s a good time for their company to take greater risks.
Mid-market tech companies prioritize cybersecurity; large organizations bet on generative AI
Both mid-size and large enterprise leaders surveyed think the biggest growth drivers for the tech industry over the next 12 months will come from artificial intelligence and cloud (figure 1).6 The third-biggest driver is where the leaders differ: For the mid-size respondents, cybersecurity is at No. 3, followed by advanced connectivity, whereas for leaders of large companies, generative AI is third, followed by cybersecurity. Given their greater resources, larger players appear more bullish about their ability to capitalize on gen AI in the near term, while growing, mid-size enterprises seem to remain more focused on the short-term growth potential of networking and security.
Mid-market tech companies balance short-term efficiency with long-term growth goals
For internal initiatives, mid-size company respondents appeared focused on efficiency in the form of infrastructure investment (figure 2).7 When asked about their company’s primary goals, “efficiency” and “productivity” were selected by more than half of mid-size tech company leaders, while 34% selected “innovation” and “growth.” In contrast, for large tech company leaders, “innovation” and “growth” were at the top (56%), while “efficiency” and “productivity” garnered 28%. It seems that the mid-size players are still working to rightsize their infrastructure and operations in the immediate term, catching up to large organizations and setting the stage for growth and innovation in 2025 and beyond.
Indeed, leaders surveyed at mid-size tech enterprises highlighted investing in tech infrastructure, scaling the company, enhancing customer experience, integrating AI across their company, and optimizing their current business as the top 5 strategic initiatives in play today (figure 2). These leaders say they are looking to cloud computing for modernization and scale, and to AI tools for help in streamlining day-to-day activities.
Looking out 12 to 24 months, mid-size company leaders surveyed expect to increase their focus on scaling up, fostering trust, investing in research and development, and growing through mergers and acquisitions, joint ventures, and partnerships, while putting less emphasis on tech infrastructure modernization and customer experience. It may be that respondents feel the urgency to achieve their short-term goals within the year before they shift to more ambitious growth and innovation strategies.
Potential obstacles to achieving these goals include concerns around competitive pressure and ability to innovate, with 27% of mid-market leaders choosing each as a top three challenge (figure 3). “Productivity, efficiency, and cost management” ranks second (22% of mid-market leaders chose it as a top three challenge). Worries about competition may help explain why leaders selected “evolving” to describe the industry; they seem less sure of their market position than leaders of large tech companies. In fact, only 14% and 11% of the latter chose “competitive pressure” and “ability to innovate” as top challenges, respectively. Large tech company leaders surveyed share mid-market leaders’ concerns about productivity, efficiency, and cost management, but they’re equally concerned about macroeconomic and regulatory uncertainty. Responses indicate worry about these external factors, as well as geopolitical uncertainty, to a stronger degree than the mid-size enterprise leaders.
Fast-growing mid-market tech companies share three key traits
Analysis of another study—Deloitte’s 2023 Mid-Market Technology Trends Report—sheds light on factors that may contribute to greater growth for mid-market tech companies.8 The definition of “mid-market” in this particular study included companies with annual revenues of approximately US$250 million to US$1 billion. Looking at the perspectives of these leaders, particularly those whose companies grew their revenue more than 20% over the prior year (“faster-growth”) and those whose companies had static revenue or slower growth (“slower-growth”) revealed some differences:9
- Continual technology investment: To scale and stay competitive, faster-growing tech companies prioritize their investments in infrastructure to be ready when opportunities arise. Indeed, 66% of the faster-growth mid-market tech companies surveyed said they spend over 5% of their annual revenue on technology—versus 46% of their slower-growth counterparts. Further, nearly half (47%) in the faster-growth group reported that their tech spending increased by more than 20% in the past year; only 7% of the slower-growth cohort reported this level of spending. The top technology objective of the faster-growth companies over the past year was to improve cybersecurity (including business resilience and regulatory compliance capabilities), followed by modernizing legacy systems for agility and scale. In third place was a tie between “enabling business growth (expansion into new markets, segments, or geographies)” and “optimizing business operations and processes for cost and efficiency”—suggesting that faster-growing mid-market tech companies place as much emphasis on expansion as they do on optimization.
- Better execution against technology objectives: The faster-growing companies surveyed were more likely to feel their company has been “very successful” at executing against a wide spectrum of technology objectives in the past year (figure 4). Faster-growth mid-market companies were more than twice as likely to report they’d been very successful at using tech to enable business growth (47% versus 23%), and nearly twice as likely to say they’d been very successful at using tech to optimize their business operations. They also reported higher levels of success in attracting and retaining a diverse pool of tech talent.
- Forging ahead with AI: Nearly half (47%) of the faster-growth companies report they already have active AI solutions in a business area versus 28% of their slower-growth counterparts. The faster-growth companies surveyed indicate they’ve prioritized data quality and management in support of AI; 58% of faster-growth respondents “strongly agree” their company’s data management is sufficient for applying AI to their business (versus 36% of the slower-growth respondents), and 30% strongly agree that their data quality is sufficient for applying AI (versus 21% of the slower-growth respondents). From a governance standpoint, a majority (56%) of the faster-growth respondents would like their corporate boards to focus on the potential risks and opportunities of AI (versus 44% of the slower-growth respondents). Doing the necessary foundational work to leverage AI could help with gen AI adoption, as well.10
Considerations for mid-size tech enterprises
According to the first survey, mid-market tech leaders appear optimistic about the future of the tech industry and their own companies, and they view AI, cloud, cybersecurity, and advanced connectivity as key growth drivers. Although they’re primarily focused on efficiency, productivity, and cost management in the near term, innovation and growth are on their minds. As mid-size enterprise leaders shift toward innovation and growth, they may take inspiration from the faster-growing mid-market cohort highlighted in the second survey, and could consider:
- Increasing strategic investments in technology. Is the company recruiting and training the right mix of tech talent to support faster growth? Is technology being maximized to improve customer experience, optimize business operations, and enable expansion into new markets or geographies? Is it time to augment research and development investments?
- Amplifying AI. Is the company devoting enough resources to ensure that data quality and management are adequate for AI adoption across the business? Do leaders have a strategy for how they might use AI, and including generative AI, to enhance operational productivity, and to improve product and service offerings?
- Maximizing the value of partnerships. When reflecting on their organizational, technological, and vendor or partner preparedness to execute an expansion outside their industry or sector, faster-growth mid-market leaders surveyed were more likely than their slower-growing counterparts to say they are “very prepared” in each respect.11 Is the company utilizing its vendor and partner relationships optimally? Can new or augmented partnerships expand technology and talent breadth, aiding the company with its growth ambitions?
