There are few bona fide analysts of the analysts. Outsell has figured prominently in this small group for many years. What gives Outsell its chops? The company has published a landmark report on the industry analyst business for many years. The report has become a valuable resource for those in the analyst business as well as those who partner with analyst firms, purchase content from the analyst firms or manage influencer relations with the top analyst firms.
The 2012 edition of “Watching the IT Watchers” was released a few months ago. The report, authored by Perry Gartner, covers top analyst firms by revenue, highlights notable contenders and analyzes the business of the industry analysts at large, including key trends, drivers, threats and opportunities.
Give me a shout if you’ve read the report. I’ll be digging into it over the next few weeks.
In the first part of this post, we challenged an urban myth that small analyst firms are threatening the Gartner and Forrester Research business models. We as yet see no compelling evidence. What we do see is many small advisory firms performing vital roles in the IT ecosystem, a few experimenting with business models, and many preferring their small businesses to the bureaucratic ways of large organizations. More than 25 analyst entrepreneurs shared insights on their businesses and philosophies, plus a handful of analyst clients shared their views — creating an unparalleled conversation! You can read the discussion here.
We’re picking up with the question, is it possible for small/new firms to shake up the Advisory industry? We think so. We’re not ready to concede the future of the advisory market to the current Gartner and Forrester business models. The question is, how?
In our view, firms wishing to disrupt the Gartner and Forrester models must have two particular attributes. First, they need a significant differentiator. It can be in specialization, the business model, service delivery or other areas. Equally importantly, they must be able to scale. That means substantial funding, an effective sales operation, well-honed M&A skills, or a combination of all three.
One of the potential differentiators getting attention lately is “open source research.” In theory, it follows the open source software model: research is developed openly and collaboratively with a marketplace and published under a Creative Commons license. Benefits include lowering research costs while driving consulting and other revenues. Challenges include quality control and the prerequisite of building a large and engaged community of collaborators that will be equally accessible to competing Advisory firms.
We see several other possible examples of disruptive behavior. In a recent conversation with Louise Garnett from Outsell, we came up with a short list of firms, past and present, innovating at least one aspect of the Advisory business model. Highlights, in no particular order:
1. Springboard Research: It claims to have a low-cost/high-quality reputation using low-cost research from China and India. Plus, Springboard built leadership in Asia Pacific markets while U.S. firms were reducing international presence. It’s a good example of specialization.
2. Altimeter Group: This small but growing top-rated analyst group seems to some as more a consultancy than an Advisory firm. Its analysts retain personal branding and independence while obtaining generous splits from their loyal clients from past relationships. The tactics are paying off, generating momentum. Founder Charlene Li’s increasing number of innovative ideas have been well recognized but to become a true disruptor to G&F the firm must (and might well) find a way to scale, and to accelerate its introduction of deliverables.
3. GigaOM Pro: Disruptors can emerge from outside the Advisory industry. Om Malik is incubating this research startup within his media network. This means ongoing exposure to 5 million unique visitors each month — far outpacing any Advisory today. It achieves low-cost/high-quality by using a network of on-demand subject matter experts (38 currently, all in emerging tech) and enforcing quality standards, from vetting experts to producing research. The experts negotiate and retain all Advisory fees resulting from participation in GigaOM Pro.
4. Giga Information Group (background): Funded as it grew, Giga’s model included innovations such as a single service priced by the seat and an expert network backing up its strong staff of analysts. It also made significant ongoing investments in building a salesforce and creating a brand. As with Altimeter and GigaOM Pro, it benefited out of the gate from the strong reputation of its founder. All of this resulted in annual revenues of over $70 million in annual contract value in less than 5 years.
5. Spiceworks: Another disruptor from outside the Advisory industry, Spiceworks is a systems and network management software vendor with an active community of 1 million users, all in IT management jobs in small- and medium-sized businesses. Spiceworks gives away its software to qualified users in exchange for real-time insights into their product deployments and participation in the online community. Sponsoring vendors conduct research and communicate directly with the community. Currently, its equivalent of “Advisory” is a simple question/answer service leveraging peer-to-peer and vendor evangelist interactions.
Firms that want to catapult to the top need to use innovation to their best advantage. Say for example, a smaller Advisory wants to specialize and provide research advice which exceeds Forrester’s in quality. The firm needs to find a way to actually demonstrate that it has a higher ratio or a larger magnitude of knowledge/information in at least one very specific market segment in order to improve its market share in the appropriate space. Invoking the idea that it exceeds Forrester in its specialty areas is one thing, but proving such specialization is something else again.
One example of a way to develop and demonstrate the above thesis qualitatively might be to assume the number of Forrester analysts (excluding consultants, juniors, management, etc.) and remind the reader of some claims that the old 80/20 rule still prevails (80% of analysts providing 20% of the value), perhaps reducing the ratio to 75/25. There’s no reason small competitors cannot focus on recruiting more senior and recently specialized people-power to build a claimable ratio of 70/30 or even 60/40.
Scale is perhaps the greatest challenge facing would-be disruptors. Sound growth strategies and financial management are vital. M&A can play a key role, as proven by Gartner and Forrester. Recent activity among smaller firms runs the gamut, from iSuppli acquiring Screen Digest to Datamonitor expanding its portfolio.
Bottom line however is that incremental change might be “too little too late”. What’s required to succeed (and arguably needed by the industry) is use of an old trick: taking a large clean sheet of paper, and imagining an Advisory model which will clearly represent a breakthrough that will attract investors (because significant capital will likely be required to realistically challenge the current status).
A conceivable alternative might be to consolidate a significant number of strong analysts and/or small firms, with a management team working together to implement what was suggested in the paragraph above. And then the outcome will still hang on the solidity of the financials.
Small firms and new entrants can disrupt the Advisory industry. Note that IBM once virtually controlled the entire computer hardware market, until innovative firms around the edges changed the ground rules, which challenged customer reliance upon Big Blue. But these outlying firms succeeded mainly via new functions and better price/performance ratios. So while there are various degrees of freedom in structuring a hypothetical Advisory firm such that an opportunity arises to emulate what once occurred in IT hardware, this would take imagination, time, and perhaps most important, money. It can be done: Giga Information Group showed that the industry leaders were in fact vulnerable and grew from $zero to $70M contract value (not including consulting and events) in less than 5 years.
Finally, more input from Louise (Outsell): Every segment of the information industry looks the same. In each segment, a few big players represent at least 50% of revenues. Smaller companies make up the rest, carving out various niches. The IT research market follows the norm: it covers many segments, with a few firms dominating each segment and holding those positions for years on end. Successful contenders will understand this market structure before attacking it.
Editor’s Note: This has been cross-posted at Gideon’s blog, www.gideongartner.com. We’ll cross-posts your comments to both blogs.
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)
- 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.
If you’ve been following my blogs or are a client, you’re familiar with my position on alternatives to the tech industry analysts for research and advisory.Â With this post, I’m bringing these conversations about alternatives to the industry analysts online. This post introduces some basic ideas and examples.
My position is simple: well-respected alternatives are out there; more sources are popping up all the time; only a fool ignores the good ones. Likewise, only a fool rushes in. The supply ofÂ ersatz research is bountiful as ever. Caveat emptor.
Today, I see very few cases where the alternatives completely displace the industry analysts. Typically, they coexist as vital resources. Often, they’re served up side-by-side in an integrated information portal available to employees. The alternatives tend to be most useful in 3 scenarios:
- Supporting specific decisions in real time
- Delving into topics that don’t attract dedicated industry analyst coverage
- Helping professionals develop broader, deeper or more inclusive perspectives
So where’s the good stuff? That depends on whether you want data-driven intelligence to help you buy and implement tech, or build and sell it. To start, here’s a short list of examples.
Associations: Long a sales and marketing channel for the tech industry analysts, many associations now offer their own research services to members and the public. Â Some groups permit members to conduct custom research and encourage well documented case studies and best practices. Others leverage member-supported research for advocacy and thought leadership. Classic examples include theÂ Consumer Electronics Association, IEEE, NASCIO and Socitm.
Academics: The ongoing disconnect between business and academia, at least here in the U.S., baffles many including me. The mutual disrespect might have been appropriate in years past. It is not today. Here’s the bite: some of the most successful companies in the world know this and fund research. Â Classic examples in this category include MIT Sloan School of Management, Stanford University and Wharton School of the University of Pennsylvania.
Consultants: Management consultants have produced insightful research for decades. This group has the greatest overlap with the industry analysts who advise tech buyers. Classic examples include Booz Allen Hamilton,Â Deloitte and Â PricewaterhouseCoopers.
Smaller associations, universities, and consultancies can produce equally valuable data-driven insight. Plus, there are several other categories. Media and government agencies jump to mind.
Data-driven insight is available from many reputable sources. IT professionals look to them for information, validation and advice. As a result, tech providers need to see them for what they are: influencers.
Advanced registration is required.Â If you’re involved in analyst relations, at an agency or vendor, you can register for the meeting. Likewise, if you’re between AR-focused jobs, you can register.Â You’ll also get complimentary access to the full-day IDC conference.
Request your invitation via an email toÂ Peggy O’Neill at firstname.lastname@example.org. More at IIAR blog.
Big thanks to IDC, the analyst relations practice at H&K, and the IIAR for their generosity in arranging the private luncheon and the free access to the Directions 2010 conference.
Hyatt Regency - attached to Santa Clara Convention Center
March 10, 2010
12:15 PM - 1:15 PM
12:15PM - 12:30 PM
Crawford Del Prete, Executive Vice President of Worldwide Research, IDC, will provide an overview and highlight the details of IDC’s end user IT research strategy. His presentation will include an update on IDC’s Insights organization, IDC’s MarketScape assessment tool, and the ground breaking IDC Insights Community.
12:30 PM - 1:05 PM
Joshua Reynolds, Senior Vice President, Hill & Knowlton’s global tech practice lead, will present key findings from H&K’s 2009 tech decision maker’s study, the latest insights on the impact of AR on IR and corporate valuation, and the evolving role of AR professionals as they take on Influencer Relations roles in the new social media era.
1:05 PM - 1:15 PM
Peggy O’Neill, Board Member IIAR, will provide a brief update of IIAR initiatives and discuss the benefits of IIAR membership.
If you work in influencer relations in Silicon Valley, you want to be at the Churchill Club this Monday March 1st for an evening event featuring John Byrne, Richard Edelman, Paul Bergevin, Peter Diamandis and Frank Shaw.
The event comes on the heels of the 2010 Edelman Trust Barometer, a global opinion leaders study mentioned in my last post.Â The Trust Barometer is freely available. Bring your toughest questions or just show up for a great evening of discussion, debate and networking.
I’ll be particularly interested to see how this year’s discussion compares with the 2008 event (my comments).
See you there!
What the Public Believes: New Trends in Corporate Reputation Management
Corporations are in the combat zone, struggling to build back trust among all of their stakeholders in the midst of the global economic crisis. Faced with an overall meltdown in confidence, how is corporate leadershipâ€”including marketing, PR, investor relations and public affairsâ€”to respond? How should companies retool their communication strategies and address the right stakeholders with the right issues and strike the right tone? This panel of thought leaders speaks out on the most current trends and strategies for managing corporate reputation and sharpening stakeholder engagement.
Individual Churchill Club event tickets run $58 - $90, and normally it’s a cash bar. Reg, more info.
Hashtag will be #churchillclub.
Ok, I’ve been heads down on projects all week. However, here are a few tidbits worth noting from the influencer relations world.
The 2010 Edelman Trust Barometer has raised all sorts of discussion with its findings like this: Trust in social media and mainstream media has dropped like boat anchors, while trust in CEOs has risen. Tech is the most trusted sector. Trust in financial analysts remains high despite their failure to predict/reveal risks big enough to sink nations. Freely available.
Expect to see this latest Edelman Trust Barometer cited as heavily as usual in analyst relations circles. Once again, it puts industry analyst reports (Gartner et al) and business magazine articles as the top most credible, most trusted source of information about companies.
Social media took another big hit this week with findings from a Pew Internet & American Life study on social media and mobile internet use among teens. Blogging has declined sharply among teens and adults under 30. From the summary, “As the tools and technology embedded in social networking websites change, and use of the sites continues to grow, youth may be exchanging â€˜macro-blogging’ for micro-blogging with status updates.” Freely available.
Davos is a crucible of influence and influencer relations. My favorite quote this year is from Larry Summers, U.S. presidential advisor: the U.S. is experiencing “a statistical recovery and a human recession” (hat tip WSJ).
While tech providers have had formal analyst relations programs for 30-odd years, only Gartner and Forrester Research haveÂ reciprocatedÂ with influencer programs dedicated to vendor AR teams. Â GigaOM Pro, the industry research arm of GigaOM, is about to shake up the status quo with today’s formal debut of their Analyst Relations program.
The GigaOM Pro Analyst Relations program shares some expected similarities with the Gartner and Forrester programs. For example, all three programs require members to be involved in some capacity with analyst relations. All three programs also offer basic benefits to their AR participants, such as more in-depth knowledge about research agendas and decision rationale and special opportunities to get to know analysts and management.
So, what’s different about the GigaOM Pro AR program?
1. AR members receive a free, full access GigaOM Pro account.
2. AR members have full read/write community features. This means that AR members can use the community platform — within reason — to comment on GigaOM Pro research findings and engage with analysts and other subscribers.
3. AR members create a public-facing personal profile page, so that all other community members and analysts can get to know them as well. This is a great opportunity for personal branding and networking as an AR professional - not only with GigaOM Pro analysts but also with GigaOM Pro subscribers. Think about that.
4. AR members can leverage the program to build relations with the pool of GigaOM Pro analysts. It’s a constantly changing group of some of the most influential SOHO tech industry analysts and research-driven thought leaders in North America, handpicked and carefully vetted by the GigaOM Pro team.
You should also consider a few cautionary pointers:
- Sleuth the community before you start commenting, just as you would with any professional network.
- If you misbehave — i.e. post inappropriate comments or inappropriate volume of Â comments — you may suffer more than having your account closed down. GigaOM attracts a sophisticated and knowledgeable readership. Your company reputation is on the line as much as yours whenever you comment.
- Be clear with everyone in your organization that this is a program designed specifically for people who handle analyst relations. It is not a doorway into GigaOM for press relations or press releases or a ticket to hijack research.
I strongly recommend this program to AR professionals. Check out the FAQ and if you like what you see, apply online. Or contact Mike Wolf, vice president of research at GigaOM Pro, for more information.
GiagOM Pro Analyst Relations Program - Info & Online Application
GigaOM Pro Analyst Relations Program - FAQ
Solid research is the only way to cut through the chatter about identifying and prioritizing influencers for word-of-mouth marketing and other forms of influencer marketing. Mike Gotta (Burton Group / Gartner ) points out a just such a study, from the pharma industry. I like this study because it focuses on finding the hidden opinion leaders who drive the first wave of word-of-mouth product referrals.
The study identifies two distinct types of opinion leaders among the target physicians: those who are trusted and respected by peers (called sociometric leaders) and those physicians who think of themselves as well connected and influential (called self-reported opinion leaders).
The opinion leaders identified by their peers are not the traditional targets pursued by marketers. If anything, they contradict current marketing wisdom about influencers and influentials. They are not overtly well connected, outgoing or high profile in terms of being published or public speakers.
Three nuggets to think about:
The study finds little overlap between the two types of influencers. Physicians fell into one group or the other.
The under-the-radar opinion leaders are quicker to use new product and more likely to influencer others to try it. This finding is based on matching network data with perscription records.
The under-the-radar sociometric opinion leaders are more interested in what their peers are doing, and are more open to word-of-mouth or social influence, than the self-reported opinion leaders.
Both types of opinion leaders play important roles in robust influencer marketing programs. One group is not better than the other; they’re just different kinds of people. The best course of action is to identify and address both types of opinion leaders. That means doing more research and more segmentation.
Summary at Knowledge@Wharton (hat tip to Mike Gotta)
I’m pleased to find that a new study validates what I’ve been seeing in client projects and industry conversations: social media is taking on a larger role in business decision-making processes. Social media is enabling decision-makers to reach out to larger numbers of people (the size of their unique influencer ecosystems) and to tap into their influencers through online as well as offline channels. These are among the preliminary findings of a study conducted this summer under the umbrella of the Society of New Communications Research (SNCR). SNCR Research Fellows Don Bulmer, SAP, and Vanessa DiMauro, Leader Networks lead the research and analysis and have begun releasing preliminary findings. Their full report will be released in January.
On the business front, about 4 in 10 respondents incorporate social networks into 4 steps of their decision process:
- seeking peer referral
- reading blogs
- gathering opinions through an online network
- looking the company up on a social network
Other findings relative to social media and influence:
- Information obtained from offline networks still have highest levels of trust with slight advantage over online (offline: 92% - combined strongly/somewhat trust; online: 83% combined strongly/somewhat trust)
- Approximately three quarters of respondents rely on professional networks to support business decisions: 40% gather opinions via their online networks and 39% look up companies on their social networks.
- Reliance on web-based professional networks and online communities has increased significantly over the past 3 years for essentially all respondents
Don has shared one of the interview excerpts, and for me, this comment puts the study results into context:
“I find that I will network offline at events and meetings where I establish connection with many people and I use online tools to follow up and maintain connect. I may meet 20 or so people at an event and then immediately then put them into Plaxo or LinkedIn to keep and maintain connection. I try to maintain my status and activity regularly to keep engaged and keep people informed.”
The methodology for the “New Symbiosis of Professional Networks” study involved a mixed methods approach supported by quantitative data gathered via online survey of 356 professionals to understand their perceptions and experiences with social media in support of their decision-making. Select interviews of 12 professionals were also conducted using a semi-structured interview guide as part of the second phase of the study. All respondents were either the decision makers or influenced the decision process within their company or business unit, and company size ranged from less than 100 to over 50,000 full-time employees.