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The answer, according to Dwight Klappich, an analyst with IT market research company Meta Group, is that they do an adequate job given the modest ambitions of mid-size companies, but there is a widening technology gap between large and medium-sized companies. "Large companies are affected less by failure when testing new applications; however, this can be a recipe for disaster for mid-market companies." Mid-market companies should not attempt to keep up with larger competitors with deeper pockets, he advises, but they should start to think about evaluating the strategic implications of new technologies and be selective in targeting critical areas for technology expansion.

Key to that evaluation will be a close scrutiny of the architecture underpinning these business applications. "As mid-market firms expand their apps portfolios, application vendors must compete on integration and customisation options, as well as lowest total cost of ownership," says Liz Herbert, an analyst with Forrester Research.

Architectural flexibility - meaning open platforms, fully exposed application programming interfaces (APIs) and support for multiple client types - is key to winning this race, says Herbert. This is where the larger companies such as SAP and PeopleSoft excel: "SAP's All-in-One and PeopleSoft's EnterpriseOne offer the most flexible deployment options, including Windows and web clients and support for a wide range of operating systems and databases, with SAP even supporting open source." Both vendors, she says, provide a comprehensive set of APIs and web services to facilitate custom development and integration. However, both use proprietary code that requires specific developer skills and training. These associated costs may put them beyond the range of many medium-sized companies.

Microsoft, meanwhile, faces huge challenges in migrating its sprawling range of acquired business application suites on to a unified, open platform. The Great Plains product, for example, still has a client/server architecture, forcing many of its larger deployments to use middleware from Citrix to open up applications to employees over the Internet. The Axapta and Great Plains product lines also pose integration challenges for users because API exposure is limited, as is support for web services.

That is where the company's Project Green initiative comes in. This ambitious project aims to create a new generation of component-based applications based on an open, service-oriented architecture (SOA) and a new process-centric design. However, it is some way off. In particular, it is dependent on Longhorn, a major forthcoming release of Windows that will impact user interfaces, security and interoperability. But Longhorn is not expected to ship until 2006 at the earliest and has already been delayed twice.

"The direction in which we're heading is entirely clear: system-to-system communication without human intervention. The timescale is not," says Simon Edwards, general manager of Microsoft Business Solutions in the UK & Ireland. But, he says, Microsoft is committed to investing in existing application product lines and supporting all of them until 2013.

The mid-market specialists, meanwhile, have concentrated their efforts on web standards. Epicor, for example, is migrating its product suite to an SOA model. It has started the process with core components of its application suite, including its manufacturing and customer relationship management modules.

Others, such as Lawson Software and Intentia have been offering browser-accessible applications for several years. "These vendors lead with support for standards that promote developer skill reusability such as Java as a development language (not a problem for providers like Intentia whose codebase is in Java to begin with) and compliance with J2EE and .NET," says Herbert.

That kind of standards-based architecture enables companies to open up corporate systems to suppliers and customers. It also enables vendors to tie in more easily specialist applications from third-party suppliers - either through acquisition or partnership - in areas such as mobility and RFID. But given their limited resources, these suppliers tend to do so on a piecemeal basis, targeting specific customer demands.

Epicor's mobile applications for field services, for example, are used by InVision, a manufacturer of security systems used for scanning luggage at major international airports, including Heathrow. These enable InVision field service engineers to file reports directly into the company's Epicor system via two-way pagers.

RFID capabilities, by contrast, are largely provided by third-party partners: specialist provider Loftware, for example, partners with both Oracle and Epicor. "There's not much demand among SMEs for RFID capability in Europe right now, but we're starting to see it in the US as big companies like WalMart start insisting that all their suppliers use RFID," says Matt Muldoon, director of product marketing in Europe, the Middle East and Africa at Epicor.

That piecemeal approach among mid-market vendors forces customers into a complex product selection process, says Meta Group's Klappich. With no obvious sign about which elements will form the core components of future systems, betting IT budget dollars on emerging technologies can be tricky. "Mid-market companies need to develop strong hype barometers and focus their limited resources instead on areas of reasonable risk and high added value."