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.

Popularity: 24%

12 Tweets

44 Responses to “Advisory Industry Competition: Pushing Past ‘Business as Usual’”

  1. New post: Advisory Industry Competition: Pushing Past ‘Business as Usual’ http://bit.ly/91tWrJ

    This comment was originally posted on Twitter

  2. interesting RT @bfr3nch: New post: Advisory Industry Competition: Pushing Past ‘Business as Usual’ http://bit.ly/91tWrJ

    This comment was originally posted on Twitter

  3. Always a good read! RT @BFr3nch Advisory Industry Competition: Pushing Past ‘Business as Usual’ http://bit.ly/ajfrBV

    This comment was originally posted on Twitter

  4. As a small firm we’re doing extremely well, but almost none of our business comes at the expense of Gartner (either on the end user or vendor side).

    The opportunity for independent firms isn’t to compete with the big boys, but to fulfill needs they don’t meet. If you *really* understand the analyst ecosystem, and why people buy research, you know that it will be a heck of a long time before small firms eat into Gartner spend in any meaningful way. Quality has nothing to do with it.

    Small firms who try to directly compete with Gartner are doomed; but there are many more opportunities out there, and to be honest most are a heck of a lot more interesting.

    It’s a great situation. I already worked at Gartner, why would I want to try and build a new one?

  5. Oh- almost forgot, obviously that comment is meant to support your article… and debunk the idea that small firms are eating away at the larger ones.

  6. Thanks Rich. Gideon and I both agree there are many benefits to running a small successful Advisory firm. Likewise, there are many benefits to doing business with a small Advisory firm. It can be a win-win all around.

    Great to see you, Mike and Adrian doing so well.

  7. There is a quote popularly attributed to Albert Einstein. “Insanity is doing the same thing over and over and expecting a different result.” That is precisely what the vendor community has done for years and continues to do it. For nearly two decades, I have listened to the laments of vendor executives about how badly they are treated by the major analyst firms (i.e., Gartner and Forrester). However, what have they done about it? Nothing. The bottom line is that they continue to reinforce bad behavior by spending fortunes with both firms every year.

  8. Gideon, Barbara:

    It’s about time someone started paying attention to the disruptive forces that are impacting the research industry (and for that matter other markets where business/technology expertise is created and consumed). There has certainly been a proliferation of small firms/independents in recent years, but for me, there is a more seminal trend that Gartner, Forrester, and everyone else should make note of…

    The market research industry is quickly going from closed to open.

    What does that mean? The Gartners of the world thrive in a closed environment – what I call the world of “few to few”. Few to few means there are few analysts creating a small amount of content that very few people can afford to consume. One could argue that Gartner’s core competency is creating the perception of scarcity around technology expertise. This way they can charge lot of money for that expertise. And they do – Gartner is a $1.3B year business with fewer than 8,000 customers with no effective means to grow the business save for pricing tweaks. Their revenue per customer numbers are exceptional.

    Where the legacy firms fail and, for that matter, many of the small independents, is in an open environment. Open is the world of “many to many” – many experts (not analysts) creating a lot of highly relevant content that is consumable by many businesses. Don’t believe it? Over 80% of professionals cite their peers as the best source of business and technology expertise (don’t even ask how they rate traditional analysts). They rank use case specific content as the form of research they covet the most – something that’s hard to get when there’s only a single analyst, as opposed to a crowd of experts. And lots of professionals want this information. There are about 30M businesses in the United States alone and 99.9% of them have fewer than 500 employees. And they need just as much help as the Fortune 500. As an example, there are over 1M searches on Google each month for the KW “virtualization”. It’s not the Fortune 500 who are searching for virtualization expertise – it’s the Fortune 50M.

    Of course it’s the internet that powers the move to open. But for companies like Gartner, Forrester, and every other market participant saying “oh no, it’s the internet bogeyman who has come to wreak havoc on my business” is not good enough. It’s all about the specific tactics we will use (or not use) to source expertise, create media forms around that expertise, distribute that expertise, and ultimately monetize that expertise. You either understand these things and thrive or you don’t.

    But this comment’s already too long!

  9. Our firm (owned by myself and Kneko Burney), Compass Intelligence (www.compassintelligence.com) has maintained significant growth over the past five years. We have averaged 43% growth in revenues the past 4 years and even last year when everyone got hit hard, we had annual growth of 27% in revenues. Smaller firms are able to leverage much lower capital and operating expenses, especially our firm which operates virtually, meaning all our employees work from home and thus we have virtual/hosted/cloud environments we work in. In addition, we have been told by our clients (Many Fortune 50 companies) that they have decreased their total dollar spend with the larger MR firms and have pushed that money onto smaller, boutique firms such as ourselves. I do believe we are putting a dent in the overall MR and consulting business as a whole, but we are still are relatively super small compared to the likes of F&G. We also do not look to compete directly with the likes of F&G. We have many speciality focus areas in both our MR and consulting services.

    The smaller firms also have the flexibility to change services and add new offerings on the fly. It is very easy for my firm to offer new services, make it available through all our marketing mediums, and officially launch within a few days. Specialities are also important for smaller firms. For example, our firm specializes in deep level Business segmentation by size and vertical market to the degree that our competitors do not offer, and thus making our services unique and making them more attractive…this helps us compete with larger firms. And when I say compete, I mean competing for overall marketing and consulting dollars, not necessarily competing with the same offerings.

    Regards,
    Stephanie Atkinson
    Managing Partner

  10. Good article Gideon and Barbara.

    I do think that many of the same technologies that have allowed new media companies to scale quickly and affordably are now begin to roll-through the analyst business. In the same way you’ve seen once-great media brands like Business Week, Newsweek and others lose traffic and, in the form of advertisers, to the likes of Huffington Post, GigaOM and TechCrunch, you’re now seeing some bleed of dollars from big-research to independents as they are able to quickly start-up and scale the syndicated side of their business.

    That doesn’t mean the bigs won’t prosper. After all, we still have the Wall Street Journal and NY Times doing fairly well in a open/push-publishing world. That’s because there is something to be said for brand, as well as having an army of research/consultants. Now, syndicated research services from those providers will likely see the biggest overall impact, IMO, because even with independent analysts the progression path is often to consulting, and I think part of the challenge for independents is the lack of scalability to provide personalized advisory to corporate clients. That’s what a Forrester and/or Gartner can do, but they do so with a very high cost-base. There are only a few companies that can maintain that type of cost base, and ultimately these companies will see more head-to-head with more classic consultancies in the likes of Accenture, etc.

  11. Thanks for this post, Gideon and Barbara – thoughtful and well reasoned, which is no surprise, of course. As one of those “departed big firm independents”, I have a somewhat prejudiced point of view, but I also have direct experience of the growth we assert out here. The two are not mutually exclusive, of course – I and my indie colleagues can succeed without the Big Guns failing. And their numbers do indicate they are continuing to do just fine, thank you very much.

    That said, independents and Big Guns alike can remind ourselves that past success is not a perfect indicator of future results. Indies’ ability to draw off some revenue based on the ability to use social media – like this blog! – to burnish our brands and visibility has had a very positive effect, especially with our vendor clients. Our visibility and perceived influence is a key marketing attribute, and I’ve been told by a number of AR professionals that they are explicitly moving a portion of their spend to independents for their visibility as well as for their input and guidance, which tend to be driven by personal relationships and history of prior engagement. I’m encouraged by the successes of my peers and my own first year or so, but “what have you got for me today” is a much more pointed question when pointed at smaller players with less of a portfolio to base our value proposition on. So I’ll have to keep on my toes.

    Should the big guys be worried? Hardly – unless the ranks of the independents grow substantially, and AR organizations decide to distribute a good deal more of their spend. The likelihood of the latter will also depend on AR getting a lot more staff and budget to manage a larger number of influencers. And that I am absolutely not hearing – AR is as strapped for budget as ever, and I see no evidence that will change soon.

    On the user side, it’s harder for independents – the brand names will be very difficult to displace, since independents tend to be very narrowly focused. Only a very small number are likely to be able to be visible enough in a specific discipline to get sufficient mindshare to drive significant revenue. Balancing consulting, education/training and publishing will be the only way to go for independent analysts focusing on user business. Not surprisingly, that mix looks a lot like the big firms’ – and without scale, much harder to sustain.

  12. Great post and I would agree with much of what Stephanie, Merv, Michael and Scott have said above. Sanjeev Aggarwal and I launched the SMB Group this year. We focus exclusively on the SMB market, and have a different model than traditional analyst firms. We use social media extensively and publish a lot of articles, blogs, videos, podcasts publicly.

    Most SMBs don’t buy market research and analysis, but they can come to our site for information about SMB trends, vendors and solutions. In addition, we often partner with other SMB influencers to disseminate research and perspectives. This also helps us get great input back from SMB customers about what they’re interested in and thinking.

    Much of the work we do for our vendor clients is custom consulting work, but we also conduct syndicated SMB end-user surveys and developing vendor/industry trend studies. For instance, we just wrapped fielding for a study that looks at how the ways in which SMBs discover, learn about, evaluate and purchase technology solutions is changing.

    Like the other small firms and independents, we can be very flexible and creative in how we approach a custom project, which is a big plus for us in terms of winning projects. Because we’ve both been industry analysts for many years, clients and prospects know that we come with a “body of work” and offer solid expertise and thought leadership in the SMB technology area.

    I don’t view SMB Group as competing with Gartner and Forrester, but instead supplying a different more tailored focus and personalized services. I think there is room for both Davids and Goliaths to do what they each do best and be successful.

  13. Comment by Dan Mahoney, cross-posted from Gideon's blog
    July 1st, 2010 at 5:00 pm

    I think there is room for both types of offerings, but I think that the segmentation of the dollars will be based on both the type of client and the type of research.

    Like Gideon and Barbara point out in their piece, vendor clients are a huge piece of the MR market. They have the need for specific types of research. The quantitative research is (and I believe will be) best served by the large firms that have the ability and scale to dedicate resources toward creating the types of number that the vendors need to run their businesses. Having the quantitative research also allows those big guys’ (F&G) analysts to provide advice based on those numbers and that advice is sometimes valuable to their clients, and will continue to be. I don’t see that changing. In fact I think that the continued success of F&G is based largely on that.

    To confuse the issue, however, the vendor community is more often inclined to do business with small independent firms. I feel that this is true because 1. they have a relationship with one of the key analysts, and 2. as was mentioned by Stephanie, the smaller firm can shift their focus to what the vendor needs more quickly and easily.

    The “user” community, by and large, still looks at technology as a method to reach their corporate goals, in whatever industry they are in. Those clients are going to look for the safety net that the F&G’s provide in their advice (whether we from the MR industry believe that they really provide that or not). That will continue into the future and will continue to be a significant piece of F&G’s revenues. The “user” clients will work with smaller firms as well, but at a smaller rate. They will look for individuals that they trust, or specialties that they need on an occasional basis. I really don’t see those relationships as being long term.

    So, as I said, there is room for both. F&G will continue to grow. Smaller advisories will grow as well, depending on their offerings’ matching to the needs of specific clients.

    My $0.02

  14. Interesting timing for this discussion! Hypatia Research, LLC a ten-person boutique industry analyst & market research firm offers three main products to the vendor-side and client-side communities:

    @ Syndicated Research Studies
    @ Custom Research
    @ Advisory & Consulting

    Will we displace the new trilogy of Gartner/AMR Research/BurtonGroup, or Forrester, IDC, and Yankee Group? Absolutely not. Will we provide unique, in-depth, objective and independent assessments of technology-enabled solutions to our client base? Absolutely!

    As a boutique analyst firm, our operational expenses are lower than mid-sized and larger firms. This allows us the freedom to refuse “pay for play” relationships in which vendors expect positive write-ups in return for annual contracts.

    At the end of a hot day….when folks want a frozen treat…a percentage will select frozen yogurt, some will choose Hagen-Daz, and others will try sorbet. Bottom-line: Very few companies will want to eat the same frozen desert every night. Independents such as Hypatia Research, LLC provide the market with another premium choice.

  15. The IT research business grew up on innovation – IT was new, it was sexy, and people needed experts who had research and opinions where it was all headed. Analysts actually knew a lot about shiny new things that got everyone excited. Analyst opinion really mattered, and analyst rock stars evolved.

    The reality today is that Gartner, Forrester, IDC and others are maximizing their brands and commodotizing their analyst assets for maximum scale across as many clients as possible. They never want to go back to the days of analysts gaining “disruptive influence” over their clients and having them build strong personal brands. Those days are over. The new rules of the game are set, and it’s nigh-on impossible for the teeny little boutiques to ever get near the big guys (as you quite correctly point out, Gideon).

    However. the new boutiques popping up, a la Altimeter, Redmonk, Horses for Sources, are developing nice little business streams for themselves because of the commodity attitude of the large analyst firms. There really is room for both now, and those analysts who want to be edgy, write personal blogs, call blunt truths where they see them, and avoid the muzzle of their paying vendor clients, can forge a pretty decent living by joining the boutiques.

    Many of the analysts in the tradiitional firms would love to join the boutiques (the CVs flying around are quite numerous), but if they do not have the self-confidence, or the risk-appetite to take a cut in their $175K base pay for a leveraged commission model with equity, then they will stay where they are and continue to be “non-disruptive” analysts, just the way their firms want them to be.

    So we’ll operate in this status quo for a while yet. Gartner is the industry standard “big brand” and will continue to prosper. I fear for the “second tier” analysts if another recession hits and vendor marketing budgets are pulled, but the little boutiques have a nice control over their costs, are savvy at driving the thought leadership, and are INFLUENCING their markets well. They may not get that big in size, but their influence will continue to grow as long as they stay close to the users and use social media smartly.

    Without the new boutiques, the analyst industy as we know it will become even more jaded than it already is – we NEED these little guys to survive and keep everyone honest.

    Phil Fersht

  16. Hard to top what has already beeen said, but let me offer a few insights from my perspective as an independent analyst in a boutique firm.

    First, I think the key difference between us and G/F is that we have a personal relationship with clients. That is to say, they know they can call me on the phone and get through to me in a timely fashion and discuss things one on one, without having to go through some bureacratic system and wait days or weeks to get through the queue. That is of high value to many vendors.

    Second, is clients know that my opinion is based on my perceptions and knowledge, and not regulated by a “consensus” opinion formulated via group-think in a large committee, as is often the case in a big firm. They also know becasue of this, they can discuss and even influence my opinion, and maybe even change my mind about things. At the very least they get feedback on why I think a certain way, which in itself is of value.

    Finally, I will work with clients in ways that the big firms won’t. That’s not to say they can pay me to do anything they want. But they know that if they have a need, we can work together to try and find a way to solve that need, and not be bound by corporate dictate as to what is appropriate. That’s not to say I don’t have boundaries I won’t cross and things I don’t do so I can keep my professionalism and independence. But flexibility is something customers like

    I think at the end of the day, many cleints like the boutiques because they offer better service and customer support than the big guys do, and often better analysis as well. G/F won’t be going away anytime soon, but us little guys are here to stay as well, as long as we differentiate and offer good customer service.

  17. I enjoyed reading both your post and the comments from other independent firms. While I agree that the big analyst firms are likely to remain large and reasonably prosperous indefinitely, I do think that the key issue that needs to be considered is the value of an analyst firm brand and how it’s leveraged in the marketplace. There has been a self-perpetuating value for analyst brands based on a) vendors’ willingness to “play the game” of getting marketing exposure by paying a fee (yes, it’s not explicit, but we all know that that’s the game) and b) purchasers’ willingness to play the game by using analyst reports from well-known brands to justify major purchasing decisions that keep them in jobs. This fundamental relationship is the primary fuel for most analyst firm subscription revenues. As long as there are major technology companies selling expensive and/or high-volume products and services that are bought by major companies, this game will continue.

    The most disruptive trend that may alter this landscape is cloud computing. As more major enterprises opt for cloud computing resources, budgets are shifting away from capital expenses for I.T. expenditures and the support staffs needed to support the equipment purchased via these budgets. I.T. will not disappear from enterprises by a long shot, but it will be applied to increasingly specialized functions that may not be particularly well-suited to the expertise focused on broadly based technologies that have been the forte of large I.T. analyst firms so far.

    This may be one of the prime factors that give smaller, more focused analyst firms some particular advantages in some instances. At the same time, analysis of cloud computing services will certainly pick up some of this gap for larger analyst firms, but it’s not likely to be as easy to justify spending on analysis of online services using standardized Web infrastructure as it has been for capital expenses. It’s a foot race at this point to see whether the reputations of many analyst firms can manage to keep their brand value ahead of this curve.

    In the meantime, I agree that it’s far easier today for independents to establish highly influential boutique brands via social media, books and speaking engagements, but only a handful of independents will have the cachet, market insights and management skills that are necessary to convert their personal brands into growing businesses. We analysts, as a rule, are allowed to think big thoughts; not all big thinkers, though, have the willingness to do the everyday work needed to staff and maintain a scalable business model.

    For many independent analysts, they won’t have to scale very far, though, to cover the minimal operating costs required to maintain a small information-oriented business using cloud technologies and outsourced support services. At the same time, much of our own business comes from companies that use or have used major analyst services who have become less satisfied with the increasingly generic insights offered by these firms. Many enterprises would rather pay a little extra for engagements with highly experienced independents when they know that their management has lost faith in the established analyst brands.

    Small firms may never rise to threaten large firms individually, but as the best thinking available from analysts comes increasingly from independents and becomes ever easier to locate via social media analysis tools, large analyst firms will continue to experience a “death by a thousand cuts”. Since smaller private firms are much harder to factor into market sizings, it’s likely that the impact of these firms will be consistently underestimated and will be reflected mostly in flattening revenues at larger firms.

    Until the larger firms give up the “churn and burn” habit of disposing of established analysts who may have become too high-maintenance for their tastes, they will continue to be a training bed for new generations of independents willing to compete with them for profitable niche work and, increasingly, mainstream work for which the majors’ brands are no longer trusted for leading insights. It’s a problem that crosses into many areas of the content industry – one that will continue to be fueled by Content Nation, the millions of self-empowered publishers using social media to influence markets, politics and everyday people. Put simply, small is the new big.

    Best Regards,

    John Blossom
    President
    Shore Communications Inc.
    http://shore.com
    Author
    “Content Nation: Surviving and Thriving as Social Media Changes Our Work, Our Lives and Our Future” (Wiley, 2009)

  18. From our perspective, the small analyst firm sector is healthy and growing especially for individual analysts who understand how to leverage relationships and build their brand. Without a doubt, new firms will emerge from this sector to challenge and ultimately surpass the current market leaders.

    Valuable content (analyst insight) continues as the key business driver. But the evolution of digital communications, which has dramatically lowered the costs of reaching broadly dispersed, yet targeted audiences (like IT decision makers), seems like a core driver underlying our analyst clients’ (small analyst firms) success.

    In other words, building a closed subscription list, be it a paid newsletter or continuous information/advisory service, is no longer the competitive differentiator that it once was when the major analyst firms were founded. To illustrate this point, 30 years ago smart analysts included client lists in their sales presentations. Today, prospects ask about the analyst’s information channel visibility (e.g. media quotes, blog visitors, Twitter followers, etc.) before they decide to buy analyst services.

    V3 acts as an incubator for analysts who lead their own firms and as a marketplace to assist large companies who want to engage with smaller analyst firms. We began in 2002 and have averaged 50% annual growth rate. Last year V3 grew 70%. For background, please see Evan Quinn’s discussion of our business: http://analystnews.tekrati.com/firmnews/11003/ .

  19. Discussing analyst business w @gideongartner @rmogull @rick345 @stephatkins @LindaAtV3 at http://bit.ly/ajfrBV & http://bit.ly/dAQZjk

    This comment was originally posted on Twitter

  20. Barbara, Gideon,

    Thoughtful and insightful post.

    The attention and positive word of mouth earned by independents and smaller boutique will cause the big guns to innovate.

    Those big firms can’t/won’t stop on a dime and turn everything from “closed” to the new “open” model. They can find a competitive middle ground where they are more open a year from now compared with today.

    Phil F. raises a good point on risk. There is likely a finite number of analysts with the risk tolerance to leave the stability of a big firm.

  21. I do not believe that Gartner and Forrester have anything to worry about near term.

    While it seems that these firms have been heavily influencing the rather dramatic disinvestment in client-facing (that is to say, client services) function that I have seen over the past 10 years, I am continually amazed by the apparent indifference by clients to the attention given to the level of client service committed to them.

    Until clients tire of the ‘big firm’ approach to providing more written research than many clients can consume, providing relatively general research and analysis, and providing relatively undifferentiated client service, the big firms will continue to do well.

    Having worked client-facing at AMR Research for more than 12 years (a partner and I have since launched SMB Research), I have seen an increasing number of clients who have little or no time to read all of the written research produced for them, and who do not have the $40K-$50K that the big firms are often looking for.

    Typically, this article’s list of factors that might account for any shift in business from one analyst sector to the other makes no mention of client service.

    Focusing on this for the better part of my 12+ years at AMR Research, we found it possible time after time to build great client value – taking clients from small or dormant to being strategic clients. I saw tremendous resources and focus on client service. Eventually however, competitive pressures resulted in AMR (now Gartner) increasingly following the more commoditized approach to client services of competitors.

    SMB Research (www.smbresearch.net) therefore – not to be confused with SMB Group – is growing a nice little practice focusing on research and inquiry capabilities (and client service) that we see no one else focusing on, including research and inquiry augmentation as well as direct research support of the small-to-medium enterprise.

    I believe that this discussion hinges on what question is being asked. If the question is ‘Are Gartner and Forrester here to stay?’ The answer is ‘Sure’. If the question is ‘Where’s the action today?’, the answer is, unquestionably, with emerging analyst firms like SMB Research and the other firms, several of whom have commented here.

  22. Dear Barbara and Gideon, Thank you very much for the continuing dialog around the evolution of analyst relations. As many of the other commentators have stated the larger firms such as Gartner and Forrester need not feel threated by smaller advisory firms, their size and international reach make them formidable giants.

    However, they serve a limited market and expansion of the internet has shown that smaller more nibble firms can develop their own niche practices and solutions. From an economic stand point, I believe smaller firms should stop trying to compete on a daily basis with the larger firms in the enterprise space and should take their offerings and advisory to the channel partners of big IT vendors and the suppliers and service companies of large enterprises.

    This is a highly underserved market and there is significant revenue to be gained in this segment of the market. An example of the types of offering these firms could offer would be on-premise to cloud business modeling for IT ISVs, VARs and SIs, or on-demand video blogs for customers and channel partners on key technologies of interest. The larger firms offer these services but at price points far beyond what the SMB customers wishs to pay, and technologies the enable translated subtext could help even a small advisory reach a broad global audience.

  23. There is no question that vendors and users of IT are seeking help from a broader array of consulting firms to help them make better strategic and procurement decisions. Just as the traditional media industry has given way to an infinite number of specialized companies focused on specific topics, the IT consulting industry is experiencing a similar fragmentation process. This is opening the door to a growing number of niche firms, like THINKstrategies, who can provide greater insight and more personalized services. This will not lead to the demise of the major players. But, it will undercut some of their power.

  24. Hi Barbara and Gideon:

    I would like to offer a few things to consider…

    In many ways, the established players in the IT advisory industry are facing issues similar to companies in other mature industries: disruption from agile and smaller competitors with an ability to innovate (faster) based on new business and ‘value delivery’ models; AND managing the adverse affects of social media on business.

    Specifically:

    - The traditional advisory business model has seen little innovation over the last two decades. The model (in large part) is very restrictive and is measured/limited by subscription (primarily). Many firms have certainly developed a number of unique and customized service offerings over the years (to sell more) but the model is still tied to subscription which inherently limits the ability to dramatically grow and scale. In a services industry where the core assets are research, education, and advice…this is a challenge.

    - Access to information as a result of all things social (social media, social networks and social influence) has given IT and business decision makers instant access to increasingly high quality information, best practices and insight on a global basis. This has and will continue to change how decision makers account for and assess the quality/value offered through restrictive subscription-based models (that many advisory firms employ).

    - Our research (at SAP) has shown that above all else ‘peer influence’ has the highest impact or level of influence on the decision to purchase business software (our core market). Where a decision maker does not have experience, they seek out and are heavily influenced by the experience of others. As a result, we are seeing an increasing number of very high quality peer networks (by role, industry, geography, and vendor affiliation - such as user groups) and social media peer groups form to offer great depth in facilitating exchange of insight, best practice and peer advice.

    In fact, our research shows that peer or ‘social influence’ has significantly increased over the last four years (reliance/trust/value) at nearly all stages of the decision process - from awareness of industry trends, short listing of vendors, and vendor selection. The areas where social influence does not factor high is in contract negotiation and implementation services (where services/advisory firms still add greatest value).

    The social influence model increasingly allows ‘end-users’ of IT to be better informed, connected and quite frankly more advanced in thought and experience than they were several years ago. This challenges the traditional advisory firm business model which was created during a time of information sacristy (to support informed IT decision making).

    - An advantage that many small boutique firms or independent analysts have in this scenario is flexibility of their business model that is much less restrictive to information access. In many ways, boutique firms and independent analysts are able to offer analysis, high-level insight or ’sense making’ as a free resource - syndicated via blogs, Twitter, webinars, etc. The social web gives the independents and boutique firms an instant global publishing and syndication platform with infinite reach. This is a threat to the constraint-based model that many larger firms rely on via subscriptions.

    - The explosion of business and need for IT insight on a global level is amazing - in all market segments and geographies. There are an estimated 50m+ small business, 1.5m+ mid-sized companies and 90k+ large companies around the world. Many of these companies are ripe to realize value from business and/or IT services. This is a huge opportunity for any advisory firm, individual, or boutique to make a very good living if the value they offer is solid and flexible.

    How many customers do Gartner, Forrester and IDC (as an example) have combined? Less that 35k is my guess. Millions of companies around the world are getting their insight and advice from somewhere. Where?

    Will large firms become irrelevant? It is to be determined. The larger firms certainly need to re-evaluate their business models; understand how decisions in IT and business are being made and influenced (in this new era of social business); redesign the services and value delivery system; adjust metrics to support a new value delivery model; etc. There is definitely room to grow. Small firms and independents have enormous opportunity to do well for themselves - just the same. The ocean of opportunity for all is VERY big.

    Don

  25. All:

    Interesting discussion. For what it’s worth, I’ll just chip in a few grizzled opinions based on the perspective that my idiosyncratic career trajectory has given me.

    I’m with an analyst big-brand firm now, and it certainly has its advantages (more sales/marketing/account mgt people pitch me to more customers; more people/companies read my stuff; more users/vendors want to engage me in inquiry/consulting; more vendors want to brief me on their innovative technologies; more reporters want my expert commentary for their next story; more of what I say is heeded simply because “that’s their analyst saying that”; and so forth).

    Cool. What professional analyst wouldn’t want the sorts of in-built advantages that a big brand provides?

    But I’ve been in the biz for a while, and I had previously been with a few mid-tier analyst firms. I’m not so full of myself as to think what I put out there has any more merit now than before a big-brand firm made me an acceptable offer. Much as I appreciate the depth and range of analyst talent of my current employer, I’m also a big fan, and a fond friend, of many “competing” analysts with other firms–as well as those who are doing quite fine as solo artistes.

    I considered myself a solo analyst for the first decade-plus of my IT career, from the mid-80s to late-90s, with most of my work published freelance by trade papers (and one book publisher). Nobody else considered me anything but a glorified reporter until an honest-to-gosh analyst firm made me a job offer a few years before the turn of millennium.

    It’s with that dues-paying background–my self-identity as an analyst long preceded others anointing me one–that I must absolutely respect every smart person I encounter in the “blogosphere” (or “twittersphere” or what have you) who self-publishes an interesting/informed opinion or two. They’re all commentators. I’m a commentators. We’re all, essentially, at same place in the industry foodchain: providing commentary as perishable fodder for decisions and evaluations being made continuously by vendors and users everywhere.

    It’s a noble enough calling. I consider the IT analyst industry an exciting, dynamic space where many brilliant people with diverse backgrounds, skills, and personalities do superb work of different sorts under different business models for different clients. Every sustainable analyst business model is equally valid.

    Are the small players gaining ground on the analyst big brands? The smaller firms are just as entrenched and vibrant now as they’ve ever been, but I doubt that the IT industry would welcome an industry order without at least a handful of major “banner” brands that, regardless of the merit of this or that opinion, people habitually turn to for “official” or “summary” comment. If nothing else, notice how reporters tend to gravitate to commentary from the big brands before wrapping their stories? Among other forces, that press-anointed ecosystem of expert commentary that tends to keep the analyst space sorted into big vs. mid-tier vs. boutique brands.

    But let’s try to retain a modicum of humility here. Nothing any analyst firm of any size says is ever the final word on any IT industry topic. There’s always the potential for some new super-smart nobody to rise to salience based on the power of their brilliance and eclipse the bigger guys on this or that hot new topic.

    That’s an opportunity that a steady stream of up-and-comers can and will always seize–if the circumstances are right.

    Jim

  26. All good comments. One other thing to consider. Indies may not rise up to challenge the business models of the large firms, but they may beat them anyway. I’m reminded of General Motors in the early 80′s. Behind to sets of huge, locked oak doors high above 5th Avenue in New York (as Ross Perot described it during his time on the Board), the finance guys were content to point out that their mediocre cars had an almost 60% monopoly of the North American passenger car market. Now any fool could go out on the street and see the rising tide of Japanese imports, but GM considered North American passenger cars to be a category they defined as their cars, MANUFACTURED in North America.

    G & F et al may not lose their franchise to indies, but indies may be the early phase of a whole new market, based on a more transparent model. At that point, the flow of AR money may shift. I am what I like to call a diffident analyst – I don’t do what analysts are expected do, just a part of it. My service could never be confused with the services of biggie analyst. It’s more of a consultative than a research role. As Merv suggested, we cultivate a little cult of personality (my words, not his) and pick ‘em off one at a time. One of these days, indies are going to find a way to stay indie but combine their expertise and offer a very different service.

    Incidentally, most of my clients over the years have hired me or my firm precisely because they DO NOT take the opinions of the G & F’s as useful because they see them tainted. Personal opinion, not based on fact: big firms prospered because they were aggregators of information and analysis. In 1990, e.g., where would a CIO find research and opinion anywhere else? Today, they’re swimming it. I find myself doing a sort of meta-analysis for clients, reviewing the research from a wide source and offering some guidance. This is just one area where indie’s can trump the large firms, thanks to the Internet.

    Jim: “new super-smart nobody?” Be careful. After authenticiy, one thing clients detest is arrogance.

    Neil Raden
    Hired Brains

  27. Question arises regarding the relevancy of large market research firms. It must be said that such firms will remain and provide value to their clients. These firms will continue to grow at the same rate as of the IT industry for the next several years. Clients, in many cases are unwilling to change research firms as they are used to the “data-drug” provided by many of these large research firms.

    From my vantage point, someone who has worked in a few of these large research firms and now has a small (Techaisle, http://www.techaisle.com) but growing research firm I am very much preview to the trials and tribulations for both.

    Let us keep aside the advisory service for a while and think about how many of these firms create either a euphoric market forecast or a doom and gloom. And that is where I personally think that the relevancy of such large firms quickly erodes. There are many recent examples, one such is netbooks.

    When netbooks came into the market, each and everyone research firm forecast a tremendous market growth for years to come. A few called it the beginning of an era. And only last week the same firms called it the end. Techaisle was one of a few firms that forecast the netbook market to be short-lived, transient not lasting more than a year or so. We were shunned. But now each and every client that was hesitant to purchase our forecast model has come back to us. It will behove us well if someone in the research industry were to follow how many times a larg research firm changes its market sizing and forecast in a year. While their analysts are excellent they do not tend to build their data from “ground up” but by heresay.

    And the problem is that vendors buy into those datasets, plan accordingly and then have missteps. Our strength has been the depth of information that we provide and the actionability of the data. And we are thriving on it.

  28. A Blessing on Both Their Houses

    Not too many repeat commentators here yet, but I’m glad Neil reinforced a meme I see emerging: we need to define “success.” Gideon is an entrepreneur whose vision has resulted in businesses that grew to hundreds – or even thousands – of employees and hundreds of $millions in revenue. Some of the new firms have similar ambitions, and much of this discussion has been about whether we believe any of them can get there.

    I submit that there’s another definition of success that has to do with individuals (humbly, myself included) and boutiques of a few analysts, who are content to have an adequate and stable revenue stream, a fascinating market of ideas to play in, and colleagues willing to operate in a loosely collaborative fashion.

    It’s fair to say we can see them already – and they have always been there. Do they matter? Don and others have highlighted that they serve another part of the market. I believe that market will not be served by a “let’s go downmarket with a publish-only strategy” by the big firms. Nor will it participate in expensive communities they build. It’s more like a “guided crowdsourcing” play, I believe – loosely coupled communities of interest that include a place for the publication and discussion of ideas, where some participants have established the kind of individual brand and reputation for expertise Jim describes.

    Is there a big rollup business opportunity there? Can someone make money on the infrastructure, the way LinkedIn or Facebook want to? It’s being tried. What about a loose community of contract researchers, analysts and consultants? That’s being tried too. I see no evidence either model will spawn a major player.

    At Giga, and for a while at Forrester, we had the notion of Orbits – think of them as intellectual gravity wells. They were grouped around an idea, a market, a product category – today Forrester is doing it with Roles. All these are subject to centrifugal force – at the edge some of the analysts sustain escape velocity and see it as an opportunity to be seized. For them, “success” is as I’ve described above. This is a process that will always exist, and G & F know it and will keep hiring newbies to fill the gaps, amid grumbling from clients paying a lot to help dry the backs of their ears.

    Both models (big and small) can succeed, and when one does well, it’s not at the expense of the other. A big new research firm? Maybe. If so, will the small players lose? I doubt it.

  29. First, I want to say that there have been many excellent posts in this thread. I would like to add another thought to the discussion.

    This comes from an economic perspective. The analyst environment resembles software companies in various sectors – it is an oligopoly. If a small firm is able to be successful, while it is still in the small – medium size range, it will be purchased by one of the dominant firms. The purchase could be to take out a competitor or to acquire new technology. Regardless of the reason, rising software (and analyst) companies get acquired.

    To illustrate this point, let’s assume that a small analyst firm could somehow miraculously grow to annual revenues of $50 million. Furthermore, let’s assume that this growth happened overnight, so that it could the growth could proceed without interference by F & G or other external forces.

    What would happen next? Someone would approach the formerly small firm and propose to buy the business (F or G would be likely, but not exclusive, candidates for this). In the real world, this would probably happen long before revenue of $50 million, but remember this scenario involves a miracle that somehow fast forwards over that intervening period – mainly to avoid a debate of how big is big enough to be attractive.

    How would the owner(s) respond to the offer? In part it will depend upon who owns the analyst firm. If the primary owners are external investors (e.g., private equity) – they are going to haggle over the price, but in the end, assuming that the offer is reasonable or even generous, they are going to take the money and run.

    If the owner(s) are principals in the firm, the alternatives are more varied. The price of such a transaction would be chump change for a company like G, F or a host of other large potential buyers. On the other hand, the size of the transaction would be a fortune to most individual owner(s). Indeed some might say, “No thanks, I’m having way too much fun and making more money than I can spend.” However, I believe that nearly all will look at the money and contrast it with the risks entailed in trying to continue to sustain and grow the business. Indeed, they might not accept the first offer that came their way. However, in the end, nearly all will conclude that accepting the offer is the best strategy.

    Therefore, it seems to me that there are few ways in which another firm can arise to rival F & G. I can think of two principal scenarios that could potentially support such a development. (1) The first would entail blasting through the size range in which the firm would be an attractive acquisition target (becoming too large to be acquired), before a buyout offer could be tendered. The only way that I can conceive of this happening would be through a rollup of several analyst firms. However, given the consolidation of the past few years, this would be very challenging in today’s environment – (ignoring practical matters like funding, etc.). (2) The second situation that I can envision is if the analyst firm is already owned by a much larger company that views ownership of the analyst firm as strategic to their overall business. This could create a situation in which even an attractive offer might be declined and the analyst firm allowed to continue to grow. There are variations on these scenarios, but I think that this post is getting too long and they represent the basic idea.

  30. Fascinating to read all the different perspectives of others in the industry with whom we would rarely, if ever, have contact. Absolutely love this thread.

    We’ve always been small (for years we were just three full time members). Four years ago I took DMG in a different direction with the introduction of a few “analyst practitioners”…long-time professionals with “day jobs” in sales, marketing and IT, who contribute expertise to DMG projects on the side. As far as I am aware there’s still nothing like it in the industry.

    Highly experienced people have an opportunity to make contributions outside of their normal roles, and earn extra income on the side, without diving head first into the analyst industry. They benefit from working under our established brand and we benefit from their ongoing real-world expertise.

    Frankly, I’ve been hoping more analysts firms would adopt the model given the number of highly experienced IT professionals currently out of work or in need of part-time work. I’m sure they’d appreciate the opportunity to work on a few projects.

  31. Joseph,

    Ferris Research has long had a model like yours.

    As for the rest — well, I’m independent, and like it that way. In some niches, I think I compete extremely effectively w/ the big firms, namely medium-small vendors and non-traditional-enterprise users. Other niches — huge vendors, traditional Fortune N enterprises look harder to crack.

    My business model is pretty individualistic — I give lots of research away online, then literally wait for prospective customers to send email and ask if they can do business with me. That kind of thing only works if one is perceived as being a “star” or having the research “axe” in some area(s), and each person’s way of accomplishing that is different. I have advantages Merv doesn’t have and never will, and the same is just as true the other way around. And of my various subgroups of readers, only a couple provide the revenue — vendor marketing execs, particularly techie users, and a few investors do, while vendor engineers, computer scientists, other users, and general influencers don’t.

    One place where small analyst firms lose out is in revenue areas that are driven by customer list, such as conferences. If I wanted to organize a conference, I’d need the execution infrastructure AND I’d need a sales/marketing machine. The former can probably be partnered/outsourced on reasonable business terms. The latter would be harder. Long ago, people sold subscription (paper) newsletters and added conferences to them (e.g. Ben Rosen, who then sold that business to Esther Dyson). Especially in a world of tight travel budgets, it seems more daunting to do that now.

    Or is it? Techcrunch et al. seem to have entered the conference business pretty recently, and it would seem they’re being successful. On the other hand, they get vastly more site visitors and page views than any enterprise IT kind of blog ever would, so they are way ahead of the curve in their marketing challenges.

    CAM

  32. Gideon, Barbara,

    Great post. Lots of great discussion! I’ve got little to add but a point of view and a potential call to action.

    During the many travels on the Spring 2010 analyst tours, it became very obvious to about 50 of us that there is a significant need to build a professional trade association for industry analysts. To date, there’s been no formal way to pass a craft skill from one generation to the next.

    Most independents and smaller firms see value in this. One charter of this association might include:

    1. abide by a shared code of ethics;
    2. provide shared services – billing, sales, benefits, HR, etc;
    3. deliver professional development;
    4. create opportunities for collaboration; and
    5. establish a framework for conducting business among members

    With a continuing increase in experienced and seasoned independents, this could be a key enabler in creating a longer term challenger to existing players. What does everyone else think?

  33. Great post and responses.

    This is a perennial discussion, at least for the duration of my 20yr career in the research and advisory services industry. The conversation usually intensifies in times of economic extremes as the industry expands and contracts. Yet the players somehow seem to muddle along and little real threat is posed to the large players, i.e G&F.

    There has always been opportunity for small and medium sized players to branch out into niche areas. We did this very successfully at Delphi in at least a dozen cases. There is still room today for that sort of focused expansion by smaller players. However, smaller players are inevitably drawn into the lucrative advisory and consulting side of the business, where their research takes a back seat.

    There has also been a large under-served market in the SMB segment that Robert talks about in his post. This is opportunity for growth in new markets but it presents little threat to G&F.

    To my mind, Fred’s model is the most interesting disruptor. There is a clear shift in the power exerted by influential individual analysts and very small firms with loyal followings. While I don;t see that tipping the applecart for G&F, I do see it vying for budget in already squeezed corporates and smaller tech firms who might otherwise put their budget entirely into G&F. My clients (both corporates and smaller techs) are looking actively at how they can cut back to the minimum G&F commitment so that they can also invest in these alternatives.

    The real question is what will force the radical innovation needed to change the tech research and analyst model? Every business model ends up being overturned eventually. Will this innovation come from G&F, from smaller startups , or from an entirely unexpected direction? Innovation from inside of the industry is always a possibility but I expect that this will be very incremental innovation. The last attempt at radical innovation was in fact GIGA. I have not seen much since then that promises any significant change. The history of this industry is starting to resemble that of software where large players buy small players and extinguish innovation. Reminds me of a conversation I had with the CEO of one of the worlds largest ERP co’s where he told me point blank, “I Don’t want to innovate. I’ll just wait for someone else to do it and then I’ll buy them.”

    I expect that if radical change, of the sort that threatens G&F, is to occur it will require a substantial investment of the sort that is unlikely to be organic or even internal to the industry.

    Absent that G&F and the ragtag constellation of other small firms will continue to muddle along.

  34. Interesting discussion. Leave it to analysts to analyze their own industry ad infinitum. At Nucleus Research, we’ve been flogging away as one of those small firms for 10+ years and have seen many so-called small firms come and go. The reality is that the market hasn’t changed, just our ability to view it. Smaller firms and laid-off analysts on their own have always been there, they’re just more visible now because blogging, social media, and the pressure on tech journalists to deliver an analyst quote on deadline bring them to a more level virtual playing field.

    This gives both small firms and F+G new challenges. If everyone’s more visible and there are no special or tiered sources of information for a select few, what are the game changers? There are likely a few:

    - First, a scalable, repeatable model for quality research. We all have to be better and faster at delivering insights that clients truly find has value – whether it directly impacts sales on the vendor side or drives decisions that deliver business value on the CIO side.

    - Second, the ability and/or willingness of the small firms to demand value-based pricing and stick to their guns when they negotiate, just like F+G do today.

    - Finally, and perhaps most importantly, brand awareness. Individual analysts at the big firms do well because they promote their own personal brand; individual small firms will be successful if they are clear on their brand and don’t stray from it – or publish a piece of research that casts a shadow on their position as a trusted advisor. For both, one questionable piece will mean lost business – and that business won’t come back.

    The marketplace of ideas is a wonderful thing. But when everyone can see – or read about – everything you’ve ever written, it only takes one bad grape to spoil the bunch.

  35. I think “code of ethics” is a non-starter — tough to define, unenforceable, raises the risk of the minimum becoming viewed as wholly sufficient, etc.

    Some analysts don’t have any vendor business. Some disclose all vendor clients. Some choose not to promptly disclose EVERY customer win and loss. (I am in the latter group.)

    It gets even more confusing when you look at vendor review of independent white papers and the like — unlike the previous example, that’s an area where I’m an ethical extremist, but perhaps not coincidentally, I have almost no new white paper business. these days.

    CAM

  36. As an end-customer who strongly desires becoming an industry analyst (contact me offline if you know of opportunities), I think there are several additional considerations that need to be discussed.

    1. Let’s move the conversation away from revenue and towards other financial considerations such as margin and profitability. A large firm has more overhead and therefore has to charge the players within the ecosystem more. There are dozens of examples where analysts have left analyst firms and became independent where a software vendor may or may not have been able to afford Gartner or Forrester but could afford to hire the analyst in their independent state. This simple aspect of economics says that the value proposition of industry analysts can be spread to more people.

    2. The hiring model for many analyst firms is busted. We know that many software vendors will hire talent from their customer base but analysts do this less frequently. Is the model for talent either you have to be uber-experienced as an analyst and go independent or to be straight out of college and work your way up the ranks? An analyst firm that is either large or small would do well for themselves to consider hiring Enterprise Architects, CIO, CTO, etc from end customers as they tend to know the technology landscape and can bring a level of diverse thinking to the discussion. Customers of analyst firms will benefit by this diversity and appreciate receiving advice from those who have walked in their shoes.

    3. One aspect of written research I haven’t found discussed is the fact that while many end-user customers don’t even bother to read it, it still serves a valuable purpose. As an end-user of analyst services, if I skipped the step of downloading and circulating analyst research regardless of whether anyone actually read it, it would disrupt the apple cart.

    4. Another take on the above is the fact that many analyst firms use metrics to determine research topic popularity. Did you know that before we canceled our subscription with one of the larger analyst firms, we downloaded “all” of the published research to a hard drive just in case we needed it. For firms who use the “seat” model, you may find that your metrics aren’t telling the true story.

  37. James,

    I seem to have missed the essence of your Point #3.

    How does downloading and circulating a proprietary analyst report that people don’t actually read serve a purpose that isn’t met by the alternative strategy of circulating some blog posts people don’t read either?

  38. Comment by David Cherson, cross-posted from Gideon's blog
    July 11th, 2010 at 9:42 am

    Upon the advice of an esteemed colleague I’d like to add my $.02 to this discussion:

    I was at AMR for a short duration in the ’90′s. And I have read some of the analyst reports since then. One habit that I have noticed to persist is in addition to the “wallpapering” of research clients with endless reports, there is still the habit of intellectualizing topics like ERP, PLM, CRM, etc. It seems as though no report is a good report unless it overflows with content.

    Constant theorizing and expressing high level opinions on business systems does not add much value for your clients.

    As I have said in the past implementing a system is not a course at MIT or Harvard. Since I come from the PLM area I can give an example.

    About 10-12 years ago there was a debate of which system could best be used for overall product development, PLM or ERP. (In some circles this was known as the “who controls the BOM” debate) Since many vendors of business systems were designing their applications for large enterprises, *enterprise* became the emphasis in scope and design.

    The PLM vendors, whose previous products had been PDM (Data/Document vault, engineering change management) applications, together with integration to related systems, felt the need to expand their products, hence the change to PLM. Add more functions that will reflect product development as opposed to “just” product data management.

    The research analysts had a large hand in this direction with their reports which were based in a lot of theory and personal hopes that their clients will adopt their vision, etc. The real problem with the intellectualization is that it ignores the end users entirely and pushes the vendors into areas of questionable product expansion and viability.

    Recently I have been having discussions with some end users and the conversation has been mostly that application XYZ doesn’t really work or more often that we use a part of it for a repository and data management. Now end users do tend to gripe at times about applications, but I wonder if research analysts are really listening to them or do
    this gets in the way of their ‘research vision’?

    If there will be smaller and more agile research companies out there perhaps they should take some time to come up with a new approach to research that doesn’t inundate their clients with reports, and that the reports that they do write be succinct and take the “situation on the ground” into account as opposed to expounding some vision or another.

  39. Well, again, I am late to the party, but I hope to bring something of value here. With another analyst colleague, I ran the industry’s first ever multimedia subscription service at Dataquest (DQ was bought by Gartner in 1996). It was one of the most successful services at that time. I left to spin PC Meter (you know it has MediaMetrix) out of NPD. I’ve also been on the industry-side managing marketing research spending /investment for clients and advising them on which services (IDC, Forrester, Aberdeen, GG, you name the boutique agency) best suited their needs.

    So having been on both sides of the analyst/research coin, I also think the equation you’re discussing also includes a few other factors (and I agree with many already outlined):

    1. Flexibility. Someone in an earlier post mentioned that the bigger firms are not as flexible as smaller firms. This is true. When your revenue model is based on locking clients into a year of more subscription and their needs change, it has often been hard to re-negotiate with the bigger firms and yes, my former employer, GG, has not always been flexible. Sometimes clients want to swap out reports, and trade-in “consulting” tokens and it hasn’t been easy.

    2. Follow-up from the first point - modularity around client needs. Huge opportunity for innovation here. Silo subscriptions are breaking down at big companies but not quickly enough. For example, a service focusing on emerging tech in BRIC countries could be a module offered for most technology subscriptions looking at BRIC and values could be swapped out on other reports not as valuable to the clients. It gets to the heart of horizontal research that cuts across these pre-packaged, sometimes vertical silos. The world isn’t that neat - that kind on insular subscription view doesn’t work. Clients should simply be able to swap out a report they don’t need in their service for a report in another service for the same pre-paid value.

    I had clients who, before I came on board, were sold tons of tokens for analyst time. They didn’t use nearly enough of it to get their money’s worth - and companies wouldn’t let you easily swap these out for reports. They also expired in the year purchased. Another high-margin reason big firms like to push it on clients. Figure out a report to consulting token exchange ratio. Let clients have that ability - it’s a pre-paid “card” anyway. My experience as an analyst allowed me to get what I needed for clients, but only because I knew this system. The point - modularity and flexibility around client needs is critical. The big firm, sorry to say, aren’t as great in my experience. And I worked for one!

    3. Access to analysts. This is another important point of comparison between big and boutique firms. Access to analysts is important. And this is where getting the market influencers from big companies around the table is a perceived advantage. Obviously, as we all know, this matters when big analyst firms issue press releases and provide quotes (not endorsements!) about companies to the press. Share of voice by big agencies does matter.

    4. Timeliness of the data. Really critical. I remember as an analyst the pressure to close out one year and publish the market share data as quickly as possible. For one client whose market research and usage value/license I calculated, the lateness of the data rendered the GG data useless. It took almost 1 year in one instance to get it. I don’t know if smaller boutiques who focus have a leg up in this area assuming their methodologies and sample sizes are similar in scope to the big firms.

    5. Building on point number 4 - segmentation of the data matters. Smaller boutiques may be more flexible here. I found with the bigger firms that often times the ways in which they segmented the market did not easily map to the user needs-segmentation view that my clients needed. Add on top of the fact that data was very late - it wasn’t useful. Smaller agencies that specialize and go narrow and deep may very well have an advantage.

    6. The ability to re-leverage data purchased. At one client, I created an internal market research portal with data from IDC so that all 5,000 employees around the world could access the information. GG would not let us do this.

    Bottom line - there remains a lot of room for customer-focused innovation in this space (segmentation, flexibility, modularity, etc). There hasn’t been a lot of it here from the perspective of client needs in the last number of years. Big agencies have some advantages but they have a lot of legacy baggage in their revenue models which are sometimes at odds with client needs. Also remember people buy research / analyst advisory services for many reasons - influence, share of voice, advice, and, yes, actionable research. People also buy to validate marketing decisions made and citing a big brand (GG, IDC, you name it) provides a “credibility point” for those decisions.

    My very long 2 cents! Back to the fun marketing stuff……

  40. There are differences between larger and smaller (what I call “boutique”) firms. The larger firms have broad-ranging practices and spend lots of dollars on doing quantitative research – surveys, metrics, forecasts, and the like.

    Smaller firms fall into one of two categories: boutique houses that focus on a very specific area, and really nail it; or firms that have a particularly unique methodology.

    The barriers to being an “analyst” are falling, due to blogs, other social media — the barriers to entry are lower than they have been.

    Those who develop a solid, niche practice area can be good acquisition canidates for the larger firms — look at what has happened in the past year. Other, smaller firms must work hard to develop visibility, and establish/maintain credibility. The good ones end up being trusted advisors, and companies can have relationships with these firms or individuals that they would never get with a larger firm. Think big box vs. local/independent store. They can also get better prices on custom research/advisory services because they do not have to pay for the overhead of the larger firms.

Trackbacks/Pingbacks

  1. Keeping Tabs » Blog Archive » Advisory Industry Competition: Pushing Past ‘Business as Usual’ Part 1
  2. So what is an analyst anyway? | Strategic Messaging
  3. Advisory Industry Competition: Pushing Past ‘Business as Usual’ (Part 2) | Sway
  4. Advisory Industry Competition: Pushing Past ‘Business as Usual’ (Part 2) | gideongartner.com

Leave a Reply

Additional comments powered by BackType