By Gideon Gartner (@gideongartner, www.gideongartner.com) and Barbara French (@bfr3nch, www.barbarafrench.net)

There’s a good deal of speculation on whether the research and advisory business is entering a new phase — one in which small Advisory firms may be thriving at the expense of the large firms. David Hatch summed up this point of view in a comment to “Advisory Industry, a future redesign: the ‘Payment’ Model”:

“Independents are growing in number while research firm-employed analysts are shrinking… This shift is likely going to be the genesis of the new business model…”.

Is there in fact a groundswell favoring the smaller firms? Cutting to the chase, we beg to disagree, but we should be able to find hard evidence as well as qualitative assumptions and begin to see possible implications for the analyst business at large.

As David implies, counting heads is one way to measure sea change. But even when cutting its claimed analyst force down, Gartner generally has had a greater than 50:1 edge in research personnel vs. the any of the small Advisories. What is not clear is whether manpower size alone is more important than some combination of factors such as:

  • Depth of coverage in specific areas
  • Average analyst quality
  • Breadth of deliverables (content types, events, etc.)
  • Frequency, depth and and quality of personal interactions
  • Length of contract “lock-in” ( Gartner has been pushing 2- and 3-year contracts)
  • Reputation
  • Broad spread of client seats (difficult to displace)
  • Clients being change-averse to replacing Advisories of long standing
  • Selling to multiple constituencies rather than to vendors only (which improves an Advisory’s understanding of the overall territory)
  • Cornering the CIOs and other senior positions when selling to large non-vendor enterprises

Quantity does not equal quality. Yet, there is no realistic method to measure the average quality of different Advisory firms in their sphere of activity, and it must be acknowledged that G&F both score relatively high on most of the 10 points above.

What about the David vs. Goliath buzz? Private conversations with appropriate contacts follow the usual recessionary story-lines and seem to favor the small firms:

  • Vendors and their analyst relations (AR) departments are doing new advisory deals with small firms and even with individual analysts laid off by IDC, Forrester and Gartner. Those are generally recognized for unique skills and the stand-alone analysts are expected to continue in this role. Even as vendors allocate budget to smaller firms, they are invariably renewing Forrester and Gartner contracts, as usual.
  • Other analysts who have stayed put during the recession may be heard murmuring that they’re ready to jump to something new, indicating they see opportunity in the wings.
  • Several small firms and solo advisors are compensating for the poor economy by doing an excellent job of public relations, thus garnering disproportionate attention and hopefully monetizing their efforts through social media.

There may be some truth above, but insufficient to prove material penetration of the small firms’ client bases. Other initiatives exist, but none seem to offer evidence on the extent to which relative market shares might evolve during the next few years. Only the two large leaders provide solid financials and shareholder discussions, therefore we know that Gartner and Forrester enjoyed good quarters recently which were however influenced by both their publicly divulged future 5%-7% annual price increases (regardless of the economy) and with no more price negotiating going forward. If such reported pricing inflexibility by G&F can be maintained, that might help the strongest of the small competitors to slowly penetrate the fortresses. Then again, G&F’s CEOs are committed to win and if necessary may reverse field on their pricing strategies and hold their own.

Mathematically, even with accelerating business volumes, we’d bet that it would take small Advisories ages to make significant inroads on G&F. Outsell’s Louise Garnett estimates average growth in the overall information industry at around 10% per year. That means small firms need to grow faster than the industry average for 15 to 30 years to reach the size of an AMR Research or Burton Group! Do today’s young analyst companies have to face that long a runway before reaching what might be called “critical mass”? Or are these firms satisfied — even desirous — in remaining small and independent, without needing to worry about large staffs and investors? Either way, G&F likely do not have much to worry about.

That’s not to say that there will be zero competitive inroads against G&F. Opportunities exist to mount significant competitive inroads. We think the most important could emerge from meaningful innovations, preferably true game-changers requiring specific assets which the established competitors have been unable to muster thus far.

We’ll discuss some noteworthy innovators and our ideas on seizing the competitive opportunity in the Advisory Industry in Part 2.

Editor’s Note: This has been cross-posted at Gideon’s blog, www.gideongartner.com. Comments are welcome at both.

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Editor’s Note: Republishing this post I wrote today for Tekrati. It ties into several of my themes here, and to my July webinar with Jeremiah Owyang.

GigaOM today celebrates the first anniversary of its GigaOM Pro research division. GigaOM Pro is one of the more interesting of the recent entrants to high tech industry analyst business. Mike Wolf (@michaelwolf), vice president of research, sat down with Tekrati and spoke about the first year: the formative decisions early on, recent progress and a few immediate changes as the venture begins Year 2. Plus, a Cisco subscriber weighed in on her experience with this innovative industry research service.

First, let’s catch up with what’s new as announced yesterday by GigaOM founder Om Malik. GigaOM Pro officially emerges from beta today. The online retail price rises from $79 to $249 per year, with discounting down to $199. That’s a fraction of the cost of comparative services. Since its launch, the service has published more than 500 research items, including in-depth reports on the app economy, e-books and cloud computing and more than 100 company profiles. Plus, subscribers can contact analysts privately or discuss findings openly through the community features of the site.

Further sweetening the deal, the 6,000 beta subscribers can renew at the $99 beta price. According to Wolf, the 2010 renewal rate looks good. The subscriber base is large enough now to create its own momentum in new sales.

The company will now provide research buyers a corporate purchase option in addition to online sales. The new Corporate Edition makes it simple to buy a quantity of seats at a volume discount. Wolf said that the Corporate Edition builds on the innate appeal to GigaOM readership and is garnering interest from a broad base of small to large companies, market research buyers and intel centers. The first corporate clients to sign include Microsoft, Adobe, Rovi, Juniper Networks, Peer1, RRE Ventures, Norwest Ventures, Hill & Knowlton, LewisPR and Accenture.

The 1-year anniversary coincides with GigaOm’s third annual Structure conference, taking place today and tomorrow in San Francisco. Celebratory perks at the sold-out cloud computing event include:

  • Conference attendees receive a comp copy of the in-depth report, ”Defining Internal Cloud Options: From Appistry to VMware” by Derrick Harris
  • Attending GigaOM Pro subscribers (and those who buy a subscription onsite) can enter a drawing to win an iPad (Wi-Fi)
  • Wolf will lead a rapid-fire panel on where cloud computing is headed over the next 3 to 5 years. The questions were submitted by GigaOM Pro subscribers and Twitter fans. The panelists, selected from the virtual GigaOM Pro Analyst Network, are Derrick Harris with GigaOm PRO, Phil Hendrix with immr, and John du Pre Gauntt with Media Dojo.
  • Members of the GigaOM Pro Analyst Network are in attendance throughout the event.

In its first year, GigaOM Pro has proven that it can stand apart from the majority of industry research firms on price, coverage, quality, speed and customer experience. The affordable price is certainly an important part of the equation. However, that would mean nothing without the rest.

Early on, Malik, Wolf and CEO Paul Walborsky made several decisions that set GigaOM Pro on this unique path. “We knew we had to do something different,” said Wolf. “We didn’t want to do a Gartner or a Heavy Reading. We didn’t want to be consultants. We focused on innovating the research business model with price, community and a virtual network of domain expertise.”

Thus, they sidestepped the trappings of traditional research firms: high overhead, exclusionary pricing, long lead times and a finite pool of analyst experts on any given topic.

The GigaOM media network is able to subsidize its research start-up and provide immediate brand recognition. Further, GigaOM editorial standards and cradle-to-grave project support ensure that research coverage leads or closely tracks hot trending topics while adhering to quality standards. The strength of the brand — combined with the management team and editorial support — has enabled the research start-up to recruit close to 40 high caliber experts to its virtual Analyst Network and produce an impressive body of written and rich media research deliverables on 5 emerging tech domains, from green tech to Google and Apple to cloud:

  • Mobile
  • Infrastructure
  • Connected Consumer
  • NewNet
  • Green IT

GigaOM’s grounding in Web 2.0 also translates into differentiation in the customer experience: subscribers can network with each other and the experts, and discuss every piece of research published, no holds barred.

“Our subscribers like the style of service,” said Wolf. “They like the model — access to any research at any time.” He said the rapid turn-around on hot topics and ability to bring in deep-dive contributing experts from the industry at large make GigaOM Pro a great add-on to advisory services from the established analyst houses. “We’re not displacing other services. We’re complementary to traditional firms.”

Lisa Soto, an analyst relations manager with Cisco based in Irvine, Calif., who’s been using the service for about a year, concurs. She works in one of Cisco’s consumer divisions and said, “The PRO service is how we keep our ear to the ground about what is happening in the industry. We can always count on GigaOM PRO to give us an in-depth evaluation and realistic perspective of the impact many new technologies, key announcements have on the industry. As soon as we hear about a trend or a new movement, we know GigaOM PRO will provide a deep and rich perspective of what is happening and the value to the industry and most importantly the consumer.”

Two things she likes most about the service are its responsiveness to the market, and the social aspects of the research delivery. She finds GigaOM Pro is one of the first research resources to provide information on a new trend. “The timing is unbelievably fast.” She also likes the ability to interact with the experts and content — it’s designed from the ground up with community features of a full-fledged social network — and likes the option of being alerted to new research via “the most current social media tools.”

The GigaOM Pro social experience goes beyond written word. A series of “Bunker” events brings together select subscribers by invitation only at a physical location. The rest of the community shares the event via streaming. Looking ahead, these types of events will likely play a larger part in the corporate edition.

Finally, there is one more aspect to the GigaOM Pro social design: an Analyst Relations network within the Pro community. This professional network is open to any analyst relations practitioner actively working with clients — not just those affiliated with Pro subscribers. Members can network with each other and with the virtual GigaOM Pro Analyst Network. Soto said she has taken advantage of the network to expand her division’s relationships with influencers in adjacent markets.

In a busy year of beta — during one of the worst recessions in tech market history — GigaOM Pro succeeded in putting a fresh face on the high tech research business. Prospects for Year 2 look good. Research buyers, analysts and analyst relations teams should take note.

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Do you have some opinions on how social media is changing the analyst business? Or how it could be changing the analyst game? If so, I’d love to hear from you. Your points may well end up on my July roundtable, ”The Impact of Social on the Analyst Industry“,  with Jonny Bentwood of Edelman, Carter Lusher of SageCircle, and our roundtable producer and host, Jeremiah Owyang of Altimeter Group. The Twitter hashtag is #socialanalyst.

We’ll be discussing — and debating — the impact of social on analysts and analyst firms, and resulting changes in the analyst experience for IT decision makers, tech providers and their analyst relations representatives.

Some changes are taking place behind the scenes, in business, research and sales operations. Some changes are clearly visible at events and online through blogs, communities, media sites and Twitter. Other changes are being forced on the analyst business by IT decision makers and tech providers, as social media redefines approaches to decision making and influencer relations.

Social is not just another hammer in the tech toolbox. It’s also a set of behaviors. We expect analysts to adopt these new behaviors. So far, some are, some are not.

As with all Altimeter Group webinars, this one is free to attend and space is limited! Register at your earliest if you’d like to participate in the live conversation.

  • What: The Impact of Social on the Analyst Industry: A Roundtable with Jonny Bentwood, Barbara French, Carter Lusher, and Jeremiah Owyang
  • When: Wed, Jul 21, 2010 from 9:00 AM - 10:00 AM PDT
  • Info, Register: https://www2.gotomeeting.com/register/823666435

Special thanks to Jeremiah for organizing this event!

Editor’s update, June 29th: Post your suggestions on topics & points of view you think we should cover during the roundtable at Jeremiah’s blog.

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