However, the midmarket is also a segment that appears to be adding to its IT budgets as enterprise allocations dwindle.

Click here to read about Business Objects' struggles in the second quarter of 2006.

"According to our sources, the midmarket is growing at 12.5 percent [annually] while the enterprise market is growing at 8 percent," said Tod Rowe, vice president of Business Objects' worldwide midmarket business, in San Jose, Calif. "What that means is that midmarket BI [business intelligence] is growing 50 percent faster than enterprise. Because [midmarket sales] are primarily channel-based, there is a lower cost of sales, and higher margins. It's the most profitable part of our business—that's why we focus on the midmarket and why [we are coming to market] now."

To bolster sales, Business Objects created a separate platform, Business Objects Crystal Decisions, which is the company's first offering from a new line of products geared toward the midmarket. The Standard Edition was unveiled Feb. 5. Professional and premium editions will follow.

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In addition, Business Objects implemented a new internal business division focused on the sector.

"Midmarket is a fair part of our business now, but we've sold primarily our enterprise product and discounted it to hit midmarket price points," Rowe said.

Prior to the announcement Feb. 5, there were three areas of BI that the company focused on selling to the midmarket: Core BI, which includes reporting and query analyses; enterprise information management, which covers areas like data cleansing, data quality and integration; and enterprise performance management, handling such functions as planning, budgeting and predictive modeling. With the Crystal Decisions platform, Business Objects is delivering a single platform that integrates the core elements of each category, the company said.

To read about search features added to Business Objects' BI suite, click here.

Business Objects defines the midmarket as those companies with less than $1 billion in annual revenues, or fewer than 2,500 employees. Rowe said that of the company's 39,000 customers, about 30,000 of those fall into their midmarket definition. And the company expects that number to only increase, relative to enterprise sales.

Rowe said he believes that Business Objects will increase its market share through different channel initiatives. While it traditionally sold software to the midmarket through pre-sales, the company will now run a complete midmarket division that manages the whole life cycle of the customer. "We have engineers dedicated to building and developing for the midmarket [as well as] product management, product marketing and field marketing, salespeople, people in customer support, finance and legal all dedicated to the midmarket," Rowe said. "It really shows we're putting our financial money where our mouth is."

Business Objects joins a cadre of primarily ERP (enterprise resource planning) software vendors that are increasingly offering BI and analytics products and aiming their wares at the midmarket. At Oracle's Applications Unlimited event in New York the week of Jan. 22, Oracle Co-president Charles Phillips said the company is working on bringing a midmarket solution to fruition.

"We have a strong midmarket offering on the way," Phillips said. "We have established a midmarket business. The next investment is going to be around distribution. This is IT we created for ourselves over the years. It's done now. We've opened it up to partners for free and provided access anywhere in the world. We've shown it to partners—they're super-excited. The only thing we're missing now is distribution."

Oracle has developed something it calls flows—predefined, industry-specific business process templates culled from its E-Business Suite that companies can implement quickly.

SAP is also making a big play in the midmarket. The company announced during its fourth-quarter and full-year earnings call in January that it will invest between $300 and $500 million in building a product for the midmarket.

Microsoft as well is building out its Dynamics suite of products, bringing together the code base of four separate ERP packages and adding capabilities like BI and analytics.

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