How’s that for a ridiculous title? This piece is nowhere near as ambitious as that; it’s a response to some typically provocative comments from Gideon Gartner, a founder and arguably the most iconic figure in our industry. In his blog post Advisory Industry, a future redesign: the Payment Model, Gartner challenges his readers to think again about the business model of technology research and advisory firms. I was moved to comment, as many others have been, and after posting my thoughts, I decided to put them up here as well. But before you read on, I encourage you to read Gideon’s post. Go ahead – I’ll wait here.
Okay – you’re back? Let’s talk about these ideas. There’s no doubt that a good shakeup is always good for the market, and I agree that it’s been in some turmoil for a while as the big analyst firms wrestle with the disruptive power of social media, self-branding by savvy stars, and the growing desire (expressed to me often recently ) of IT vendor clients to move more of their spend to independents.
In part, the latter point is the result of a rather typical dynamic: aggregation at the top and innovation at the edge. Gideon is spot on when he points out that it doesn’t extend to how pricing and payment are done; the abandonment of subscription fees for written research as a basis for a company has worked well for many of the upstarts, but that started years ago. Nonetheless, the growing power at the top has led to price increases, tightened policies, and (some say) increased arrogance by the big firms that reinforces the move of more spend to the boutiques and independents. Oddly, even while subscriptions for content are lagging even for established media brands that struggle to monetize their content on the internet, the largest research firms persist in very high per-document prices for non-clients, and per-seat prices and restrictions (at least on paper) that rival the models they typically criticize software vendors for.
I believe one of the reasons payment innovation lags is the nature of the offering. Unlike the customers of Wall Street firms, IT research buyers (both user and vendor) typically do not have a concrete, granular methodology for evaluating the benefits received. Q. What is a research report “worth”? How about an advisory session? A. What you paid for it.
Arguably, the answer ought to be in the results they generate. But that is not nearly as easy to measure as, say, the financial results one gets from changes to a portfolio based on Wall Street advice, or the outcome one gets on the sell side from an offering she uses a broker for. Those things are under constant, explicit scrutiny. Moreover, following the input buyers get from analysts, they have a time lag till results are achieved, even in the most immediate example: guidance on procurement activity. In the case of guidance about deployment or operation of technology, the effect of their own execution after receiving the guidance complicates value assessment further. So the time lag implicit in your payment model runs squarely up against a number of effects that make “what have you done for me lately?” a difficult question to answer.
It’s no accident that IT analysts spend a lot of time advising on defining and using metrics – for most firms, the careful analysis of value to be received that leads up to signing a contract stops at the moment the signature is obtained; that, after all, is the real objective of the exercise. The actual business results are owned by someone else, not procurement.
And the same applies to IT research – the users are not the buyers, and research firms constantly struggle to demonstrate their value by secondary measures such as the number of hits on their web page, the number of inquiries, press quotes, etc – not the actual value received. To some degree they can sell users and vendors alike on procurements affected, but that remains a tiny slice of the business: notwithstanding the new “Influencer Relations” label, most analysts don’t spend much of their time directly influencing specific purchases.
In the vendor side of the business, a similar model applies: AR typically owns and manages contracts, but doesn’t buy for itself – AR consultancies like Sage Circle, despite its visionary ideas and effective mentoring around the role of social media in AR, are tiny by comparison to the IT research firms themselves, because AR doesn’t spend money on itself, but on behalf of others (as I learned in building Forrester’s practice to serve AR – its monetary value to the analyst firm is more in its indirect contribution via anchoring the relationship.)
“Proving value” to AR is generally about demonstrating reach and clout with buyers (always a challenging proposition) or demonstrating that the firm’s analysts are simpatico with the executives AR works with inside the vendor firm. The “sales-AR linkage” issue has been a meme for the last couple of years within AR as a way to demonstrate AR’s own value within vendor firms – but Sales is not often the majority constituency or funder of AR.
So finally, what is sold most of the time is not research, but access. And implicitly, access is about people – the people that large research firms prefer to anonymize to make their own brand stronger. That motion is evident in their groping for ways to exploit, but not truly participate in, the blogosphere and the twittersphere. I talked about that last year in my posts about analyst bloggers, here, here and here.
The continuing exodus of recognizable names from the big firms is not nearly as dramatic as some believe; every year a few leave, and slowly new names rise to take their place. What is interesting is that despite the difficult financial times we have just gone through, most of those independents did fine. And the newly independent ones seem to have weathered the storm quite well; I count myself fortunate to be among that population. There’s plenty of room out here, and new collaboration models are evolving through social media. Perhaps payment models will see similar changes; perhaps the bloated bureaucracies of big research firms will give way to smaller, nimble, loosely coupled practices that form and dissolve partnerships around opportunities to provide carefully defined value and then move on.
Thanks are due to Gideon for getting this discussion going. I look forward to continuing discussion on the topic, and I hope it focuses on ways to assess (I don’t dare to say prove) value; only a clear picture of that will make a rational selling model work.
5 thoughts on “The State of The Industry Analyst”
“…persist in very high per-document prices for non-clients, and per-seat prices and restrictions (at least on paper) that rival the models they typically criticize software vendors for…”
So true. I’ve often found it frustrating that the very thing I hear analysts advise against ‘don’t sell what you have, determine what the customer needs’ doesn’t reflect at all in the way the firms’ products are structured or priced!
Spot on. But you can’t get specific if you don’t engage. When you move to a consultative model, the ratio of listening to talking must shift. Until subscription-obsessed firms make that change, hire for it, train for it, measure on it, and price around it (not based on time spent but result achieved), the gap will persist.
The challenge isn’t only for the large firms though. Even if there is a shift towards greater spend with independents, my sense is that such spend is fairly low $ for the most part. With exceptions (as is always the case), the vendor-side IT analyst industry seems to have bifurcated into the big guys and low overhead solo practitioners or alliances of same who support each other and co-brand to greater or lesser degrees. This probably reflects to some degree that virtual organizations are both more accepted and more practical than they used to be. However it also IMO reflects that access/retainers/patronage/pick-your-term tends towards the digital dimes order of magnitude relative to the subscription dollars in times past. The reality may have been that vendors were always paying primarily for access but 1.) The subscription models made the deliverables more concrete and 2.) In many areas, there’s been consolidation in the vendor space as well with many of the new big guys (Google, Amazon, etc.) not paying IT analysts at all.
While there is consolidation at the top, Gordon, there’s also (as always) ferment at the edges. Lots of smaller tech firms are always emerging. Many of them have told me they don’t go to the big research companies because of price, but also because they feel they won’t get the attention the more established firms do. And they’re right: absent 1) inquiries about them, 2) substantial success already taking place, or 3) truly innovative ideas that seem to have market potential, they won’t get much attention from the busy analysts at the big firms.
That puts a burden on them to make 3) seem true and thus an effective Marketing Communications effort is still at a premium. And it has new channels because of social media, one of which is – wait for it – the smaller, independent analysts who use those channels to get their thoughts out to the market. I’ve been told “Yes, I know if I put time into my relationships with the big research firms I’ll get benefits, but I don’t have time to be proactive. Smaller players (like you, Merv) can be counted on to be more aggressive at outreach to me if I’ve been quiet.” Those independents who sustain their audience and their reputation for objectivity are a huge asset to those firms, not only as a source of advice, but also as a way to compete for mindshare.