How AI can boost the growth engine of our economy: Mid-market companies

Across the U.S. economy, one segment of business consistently outperforms on growth, shows more resilience during crises, yet often remains in the shadows of dominant brands.

Mid-market companies, roughly defined as those with $10 million to $1 billion in revenue, represent just 1% of all businesses, yet they account for one-third of the nation’s private-sector employment and GDP. They saw revenue growth of 12% in 2023, according to research from the National Center for the Middle Market (NCMM), while the S&P 500’s stayed flat. These performance characteristics aren’t anomalies; they reflect the special dynamism of the mid-market segment.

Arguably, these organizations represent the growth engine of our economy. They’re also extremely durable: Most have been in business for at least 30 years. And they’re expanding: 60% of mid-market firms project workforce expansion year over year. Lastly, these companies are diverse: They operate in every sector as private, public, and family-owned entities, and make huge contributions to their state and local economies and communities.

Doug Farren, managing director of NCMM, has tracked these trends for over a decade through his organization’s research and constant interaction with 200,000 member businesses. “There's a recognition today that these companies are special,” Farren says. “They run a lot of our economy, and they have been around a long time.” 

Yet mid-market organizations face challenges that threaten their growth potential. As Farren says, “These are companies with big-company problems but with small-company resources.” Unlike larger firms, they are more vulnerable to workforce shortages and supply-chain disruptions that stymie growth.

More urgently, they lack the same level of investment in and access to technology—in particular, artificial intelligence. Advanced automation and generative AI don’t just serve basic operational needs. These tools directly support the two most critical differentiators of business success today: superior employee and customer experience. 

Given the transformative potential of AI, these marketplace challenges don’t just put some of our best companies at a disadvantage—they threaten to stall the engine of our economy.

The underserved and overlooked

Here’s the problem: Mid-market companies are underserved by a technology marketplace that favors oversized platforms that are designed and priced more for blue-chip giants. These tools often come with complexities that make customization and deployment a costly, lengthy undertaking.

Even large enterprise companies confront these problems. As many have shared with me, they often feel constrained by vendors who force-fit them into oversized solutions and platforms. Those products may work well for companies like Walmart or Bank of America with mature technology infrastructures and budgets, but for the other 99%, they can be an expensive misfit. 

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As we have called out in multiple global IT studies, legacy software offerings have become a financial and productivity drain on organizations they are designed to help. Nearly all (94%) IT pros say that their organizations would benefit from reducing overall software contracts, while a clear majority (71%) agree they would benefit from simpler software.

The irony is that simplicity was one of the big promises of cloud technology when it emerged more than 20 years ago. A handful of disruptor companies introduced SaaS tools that promised to forever simplify the way businesses operate. Salesforce even promoted the idea as “the end of software,” but for many customers, it was just the beginning.

From simplicity to duplicity 

Once nimble and customer-centric, yesterday’s disruptors have become today’s lumbering incumbents. In the race to win bigger and bigger deals, they have left many mid-market customers looking for alternatives. Their products have become endlessly complex, often requiring large teams of consultants to integrate and use, while their contracting and pricing policies wring every last dollar from customers’ budgets. 

That leaves the mid-market segment especially vulnerable at a time when being an early adopter of AI is becoming a critical differentiator in serving customers and employees.  Eight in 10 mid-market executives today say they plan to use AI, according to another NCMM survey, yet only 34% are doing so. What’s holding them back? The challenges they face with integrating AI into their existing tech stack rank as a top factor slowing progress.

That needs to change. From my experience, software companies must learn from their predecessors when developing innovative products—especially those in IT and customer support. By creating people-first, right-sized solutions that are easy to implement and deliver rapid time to value, they can better serve the needs of mid-market companies that have shown they can outpace larger and smaller firms when given the right technology and opportunity. 

Mid-market companies face three major challenges when it comes to technology investment, says NCMM’s Farren: Budget constraints, sufficient talent to integrate AI and other tech, and competing priorities. “Members will tell me, ‘you can sell me on all the benefits and the ROI [of AI], but these are three very real challenges that'll prevent me from doing anything.’”

Companies like Freshworks—along with a number of other software innovators such as Zoom, Databricks, and Cloudera—understand the needs of the mid-market and have built solutions that help companies use AI to rapidly improve experiences for customers and employees.

At Freshworks, that includes customers like TaylorMade, the sports-equipment innovator that recently completed an AI-driven makeover of its global IT operations; Hinge Health, a startup helping hundreds of thousands of patients with relief from chronic pain; and steel production leader Nucor, which centralized IT services to support 12 new acquisitions in five years.

Software companies that take the specific needs of these mid-market customers seriously—and understand their constraints and objectives—can build large, fast-growing businesses. They are the future trend-setters that are disrupting the status quo by serving the growth engine of our economy in a way the incumbents no longer can.