Gartner, being one of the few publicly traded industry analyst firms, notified the SEC that it was reducing headcount by 117 this week. This was followed by SageCircle reports of a reduction at AMR Research. Not surprisingly, the double-serving of downsizing news sent murmurs through the analyst relations and analyst watchers communities. Dennis Howlett, an Enterprise Irregulars and ZDNet blogger, posted a thoughtful perspective, well worth reading.
From my ongoing conversations with AR people over the last few months, I know there’s an assumption that the smaller (and thus ostensibly “more agile”) analyst firms will weather the 2009 economy better than the sector behemoths Gartner, Forrester Research and IDC. I don’t quite share that optimism, based on my conversations with analysts. One of the challenges is that there are so many small analyst shops vying for shrinking budgets.
And that drives me crazy.
The high number of small analyst businesses is a direct result of excessive fracturing within the analyst business. Fracturing has become a chronic problem within the analyst business. It’s epic. The entire sector is out of balance.
The fracturing is compounded by too many small firms staying small, not even attempting to grow into mid-sized firms.
If you’ve followed me even casually, you know that I’m supportive of 1-person and small-team analyst businesses in the world today. For the last 9 years, I’ve been one of the go-to people to validate them and raise their market visibility.
Many small analysts produce research and advice on par with Gartner. I just wish their business vision and execution was on a par with Gartner too.
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January 10th, 2009 at 9:33 am
Hi Barbara, Thanks for the link and the interesting post.
Fracturing has always been a problem because there are no barriers to entry into the analyst industry. In the 90’s Gartner made 65 acquisitions (I was a Research Fellow there helping integrating the newly acquired firms), Forrester and META also made acquisitions with the result that there were more tiny analysts firms than before when the acquisition orgy started.
You are right that boutique’s problems are lack of or inadequate business vision and execution, especially when it comes to marketing and selling.
BTW, readers should check the SageCircle posts about the AMR and Gartner layoffs periodically over the next week as we will be adding new information as we get it. For instance, this morning (Saturday) I added two additional - and very senior - analysts to the Gartner layoff list.
http://sagecircle.wordpress.co.....ported-10/
http://sagecircle.wordpress.co.....yoffs-117/
January 10th, 2009 at 11:25 pm
Thanks for the props Barbara - the firms I speak with have a strong niche focus rather than trying to be Gartner 2.0. In fairness to all the minnows, it is far from easy pitching when the 800lb gorilla is in the room.
January 11th, 2009 at 10:41 am
Hi Barbara,
Excellent perspective. There is at least one market more fragmented/fractured than the analysts space–the sales training industry. That’s what my small R&A firm covers. (www.ESResearch.com)
U.S. corporations spend about $6 billion on sales training each year. The largest player is about $100 million, next is $60, and before you’ve hit number 10 on the list you’re down to less than $10 million in sales. Then there are hundreds and hundreds of players, each with their own claim to fame and Fortune 500 clients.
By the way, the sales training industry is a mess, for a lot of reasons. But that’s a story for another day.
Analysts are clearly well-established in some industries. Nearly unheard of in others.
Such an interesting business! Thanks again for your wise words.
January 12th, 2009 at 7:56 am
Hey Barb how are you? Happy New Year.
I have a question: What does your headline mean?
How do the layoffs highlight fracturing? You highlight fragmentation, which is very much your right, but i don’t see the connection from the headline to the argument.
Small firms create more jobs than big firms - that’s economics we should probably celebrate. Should we have pursued growth for its own sake. Many companies fueled growth based on credit, and are now paying the piper?
Since RedMonk’s inception our ambition was always to be a *good* and sustainable business. We never wanted to be BIG.
Without independents there would arguably be no AR watcher business. We may drive you nuts, but we also provide a raison d’etre, a factor you identify above.
Long may the “fracture” continue- I like to think of it as diversity, and perhaps even a show of strength.
I am intrigued by the idea “the entire sector is out of balance”. Arguably the business is finally *maturing* - with a trio of marquee firms at the top Gartner, Forrester, and IDC, and a host of smaller players out there. Mid-sized firms are the ones that get acquired.
Today most industries seem to hourglass - with lots of small firms at the bottom, a few major ones at the top, and an M&A field in the middle-tier. Why should we be any different?
All I know is I will maintain a commitment to innovation, and companies that innovate.
January 12th, 2009 at 2:45 pm
Let me echo James’s point about industry maturity. There are several characteristics of a maturing industry. Growth slows. Consolidation occurs. These are the predictable and obvious events, and we can point to a bunch of those events having happened.
What we’ve largely ignored in this discussion is that with industry maturity often comes stagnation and loss of innovation at the top. New business and client engagement models being driven by a new series of disruptive players. Over 10 years ago, when I was still at Gartner, I was involved in an internal project called “Big Fish,” which started with the premise that the Internet had made the big fish/little pond world of the industry analysts ultimately unsustainable. If you look at growth metrics and financial performance since I left Gartner (the stock was at $42/share that day), you can only conclude that something has made those big businesses less interesting than what they were a decade ago.
I think we’ll see several players emerge, or a collaborative group of players, who use the Internet, social technologies and other forms of collaborative and client engagement to redefine the way “industry analysts” behave and provide value to their clients. Now that I’m newly unemployed from one of the old-line companies, I’m thinking about how I engage in those new opportunities. While the economy is clearly a scary proposition, that perhaps creates strong opportunities to redefine the way the industry is going to change going forward. I remain, as always, excited by the future.
January 12th, 2009 at 2:52 pm
Carter, Thanks. Look forward to seeing you tonight at your AR Social. You make an interesting point on low/no barrier to entry. I think the only barriers that matter are the barriers to success. They seem firmly in place.
Dennis, You are on (pragmatic) point as always. You’re right of course, the minnows often have to wait for the fail whale to score a little lunch. I’m with you, as in any business, differentiation and reputation trump trying to be G2.0.
Hey James, I’m still amazed and relieved that it’s 2009. Let’s clear this up right now: RedMonk is not my idea of an average analyst firm. You’re founded on experimenting with new analyst business models. I’m not advocating that everybody strive to be big — that’s as whack as everyone settling for being tiny. Likewise, not everybody needs to dance on the bleeding edge.
If the industry analyst industry were healthy, it wouldn’t be so hard to find willing investors, attractive new business cases, and/or healthy company valuations. There’s very little investment, very little risk, very little new blood, very little innovation. Individual companies may stand-out as healthy, but that doesn’t add up to a healthy, maturing industry.
As to associating the Gartner and AMR reductions with the fracturing: the vast majority of the SOHO analyst businesses are formed due to workforce reductions, retirements, etc. Analyst firms hire people during boom times, and let them go during soft quarters. One thing highlights the other. Not much of a logical leap there — ?
It’d be great to catch up on your latest innovations. I’m sure I’m out of touch with where your philosophies and technologies have landed you lately.
Thanks all!
January 12th, 2009 at 2:59 pm
Hi Dave,
Thanks for weighing in on this. You know the tech analyst community quite well, so when you say the sales training industry is more fragmented, I believe it.
I’m pleased that we’ve connected here and at The Customer Collective. Look forward to carrying on offline as well.