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Business - Written by on Friday, June 13, 2008 18:34 - 38 Comments

Naumi Haque
Who needs analyst firms anyways?

Like the music industry and the publishing industry, the writing on the wall is bold, capitalized, and neon for yet another industry reluctant to change in the face of Web 2.0 forces far too powerful to ignore.

Officially, IT analyst firms are a $2.5 billion dollar business, of which about $1 billion belongs to the industry behemoth Gartner. As impressive as this number might seem, it represents only a fraction of the total IT analysis actually being traded. There is a social media undercurrent running just below the surface of the IT analysis industry—call it “IT Analysis 2.0” or “Open Source Analysis,”—where insightful content is not bought and sold, but rather offered up for free. Examples include enterprises like RedMonk, Freeform Dynamics, MWD, and Enterprise Irregulars, as well as community-driven sites such as IT Toolbox and Wikibon (IT analysis a la Wikipedia).

Like MySpace and YouTube in the entertainment industry, the social media undercurrent in the IT analysis industry is threatening to build up to tsunami proportions. Witness the most recent Institute of Industry Analyst Relations poll results below. While the top three analyst firms are predictable, open source analyst firms RedMonk and Freeform Dynamics are making significant gains. Notably, two of the top five individual analysts are from RedMonk.

top-analysts.jpg
Source: Institute of Industry Analyst Relations

This is not surprising. Traditional IT analyst firms are supported by a faltering business model characterized by low net margins (in the 5% to 10% range), a high cost of sales (~30%), and a sticker price in the $100,000 range for access to research and analysis. In contrast, RedMonk’s research is free and clients pay only for advisory and consulting as needed. Blogging and providing free content lets individual analysts build credibility that they can then use to market their services. This allows individuals such as Tim O’Reilly, Robert Scoble, Om Malik, and Jakob Nielsen to generate more traffic than established companies like Gartner (see below).

it-analysis-1a.jpg

Sites like IT Toolbox (with over 1.3 million members) offer community support and peer-to-peer advice at no cost. Even forward-thinking trade sites like CIO.com have developed strong expert-moderated communities that act as trusted sources of advice. It isn’t happening yet, but I think there’s also an opportunity for the vendor community to get involved at a more intimate level in the open source analyst push. By participating in, and contributing to these shared online spaces vendors can offer advice, gain credibility among users, and learn about customer preferences (think Sermo’s or PatientsLikeMe’s business model).

it-analysis-2a.jpg

What’s the greatest service analyst firms provide? They help you arrive at a decision. In fact, the ability to arrive at a decision—any decision—is often more important than the quality of the decision itself or the process used to arrive at the decision. As I’ve learned from first-hand experience, oftentimes companies use analyst firms as therapists that help them justify decisions they need to make so they can get on with the day-to-day affair of executing on projects and fighting fires. Glossy reports with “magic” geometric shapes are certainly visually appealing and help when justifying decision-making to superiors, but there’s an argument to be made that a Magic 8-Ball might work just as well when selecting a vendor from a shortlist. As Gartner itself so eloquently put it, “To Save Time on Product Selection, Flip a Coin.”

Ok, so I’m being a purposely irreverent, but my point is that online research reports and white papers – like a great deal of other digital content – are becoming commoditized. Open source analyst firms understand this and are disrupting the market by offering basic content for free and shifting revenue models to value-added services. It’s essentially the same model used by Linux (free software, pay for services) and cell phone companies (free phones, pay for services). Let’s fee if the rest of the analyst community catches on.



38 Comments

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Duncan Chapple
Jun 14, 2008 15:04

I think you have missed a point. The free ly available analyst research you are discussing is not open source (nor is it really free – the analysts are overwhelmingly funded by technology vendors to resarch specific research themes). Open source is collectively made, open to free modification, and allows free distribution in altered forms. Freely available analyst research typically shows the analysts conclusions but not their source – the base information and methods are typically not open to collective inspection and modification, either during the research process or after publication.

Much freely-available research is funded by vendors, and it tends to support vendors in their marketing efforts. While some vendors do support open source projects, it would be quite mistaken to think that the method used by these analysts is an open source methodology. Lots of things are free to use, but not all of them are open source.

Is free analyst research really “open source”? : Analyst Equity - Lighthouse Analyst Relations
Jun 14, 2008 15:29

[...] IIAR survey has prompted the Wikinomics blog to ask “who needs analyst firms anyway“? The article echos some of the themes in Jonny’s article, In praise of open source [...]

David Tebbutt
Jun 15, 2008 3:04

Well, what an interesting discussion. As a relative newcomer to the analyst world, I felt a bit irritated by Duncan Chapple’s assertions.

Then I read them again and realised that he’d qualified his remarks with an ‘overwhelmingly’ a couple of ‘typically’s, a ‘much’ and a ‘some’.

One of my first jobs at Freeform Dynamics was to investigate how companies are using IT to support their environmental initiatives. The research was planned internally and the results analysed with no external influence, even though the work was sponsored (remotely) by some vendors.

No doubt it suited them to be seen to be supporting a piece of work that was ‘doing the right thing at the right time’, even if it didn’t do them any favours. Anyone can download the report from the Freeform site and judge for themselves. http://www.freeformdynamics.com – it was published last week.

Maybe others from the firm would care to comment. They, after all, know the minutiae of how the business is run. What I know is that the research and analysis was done independently and the final word was ours, and ours alone. And I believe that this is what gives it value.

In truth, I think that readers are not fools. They will always spot a vendor shill disguised as a research report and filter their thinking accordingly.

Dale Vile
Jun 15, 2008 8:44

Firstly, thanks for mention Naumi. We are please that the work we do here at Freeform Dynamics and the activities of our friends at Redmonk and MWD are receiving some recognition.

Regarding Duncan’s comment above, I think it is easy to read a negative message into what he has said, but please see here for a more complete view from him (and some comments from me) in this general area.

On a specific point, Duncan is right to highlight that what we and similar firms do cannot be described as open source. While our research is conducted in a community oriented spirit and the patronage funding model is similar, the mechanics are not the same.

We still think we are making a very valuable contribution to the community though, especially for those without access to expensive commercial research services or want an alternative view to the ‘big analyst’ perspective on what everyone should be doing.

Carter Lusher
Jun 15, 2008 12:00

Hi Naumi,

Your post is pretty typical in its supposition that technology industry analyst firms have a less than rosy future due to the growth of social media like blogs. I completely disagree. Here are some comments:

Focusing on written research – The research notes and so on are only a part of how a major end-user advisory firm (e.g., AMR, Forrester and Gartner) delivers its research and recommendations to clients. A huge portion is done via phone-based inquiries, more than 300,000 per year, and firm conference, over 50,000 attendees. While published research can be commoditized, personalized advice cannot (see Context, advice, reputation and time: How analysts can thrive in the social media age). The major advisory firms have always been in the advice game and not relied on published research as the sole mean of business value delivery.

Assuming that influence is a zero-sum game – A common thread in blog postings is that because bloggers are becoming more influential, analysts have to becoming less influential. Note your usage of blog traffic statistics as “proof.” The underlying idea is that influence must be a zero-sum game where there is a finite and fixed amount of influence in the universe. If one group increases their influence then other influencers have to see their influence decrease. Nonsense. Influence is elastic (see Influence is not a zero-sum game so analyst influence is not necessarily diminished by the rise of bloggers). In the case of IT executives and managers, they are increasing their reading of blogs and leveraging other forms of social media… at the same time they are increasing their purchases of analyst services.

Ignoring why enterprise IT managers use analysts – There are a number of reasons why IT advisory analysts exist and are an influence in technology purchasing decisions. Certainly any enterprise IT department could expend enough time and energy to research their purchase and strategic decision issues, but analysts are a resource to quickly and cost effectively solve a number of tactical and strategic issues (see Why technology buyers use the IT industry analysts).

Disregarding the financial data from publicly traded analyst firms – You statement “…faltering business model characterized by low net margins (in the 5% to 10% range) …” does not match the facts. Let’s use Gartner as an example because it is publicly traded (NYSE:IT) so data is available. Since Gene Hall took over as CEO in August 2004, Gartner has seen revenue grow at a strong pace (05:11%, 06: 7%, 07: 12%, 08e: 8%). Because of its business model, a better indicator is research contract value growth which has been faster (05:17%, 06: 8%, 07: 18%, 08e: 17%). Margins have consistently improved over the same period, for example Research going from 60% gross margin contribution to 64% with a long range target of 70%. Another indicator of margin improvement is cash flow, which went from $27m in 05 to $148m in 07 with 08e of $163m. A $1.2bn firm that averages 10% growth, improves margins consistently and generates that much cash does not sound like it has a “faltering business model.”

Using a statistically invalid poll – The IIAR poll, while fun (I helped promote it on the SageCircle blog), is not a serious piece of research on what is happening in the industry because only a small number of vendor analyst relations (AR) professionals responded. And only those AR pros that are social media savvy and aware of the IIAR participated. Not exactly a representative sample of the tens of thousands of enterprise IT executives and managers who are the primary buyers of AMR, Forrester and Gartner research services.

Not talking to enterprise IT managers who buy technology products and services – There have been a number of studies since 1999 by a variety organizations that actually survey and interview large enterprise IT executives and managers. All the studies have shown a consistent and growing use of IT industry analysts for small and large decisions. Early in 2007 at my last employer, one of the largest global tech vendors, I commissioned a statistically valid – and expensive – study of our customers on what influenced their tech purchasing decisions. Right after price/total cost of ownership and personal networks, the IT industry analysts once again ended up more influential than a number of other influencers. My former colleagues repeated the commissioned study in early 2008 with a different set of customers and found the same results.

This comment is already quite long so I won’t go into detail about the daily impact industry analysts have on vendor sales deals. But if you talk to vendor sales reps – as I have do – that sell to large enterprises, you will hear tales of woe about sales deals derailed by analyst commentary. As vendors become more savvy and form AR-Sales partnerships, the woe will turn to joy as sales reps learn how to leverage positive analyst commentary to close deals.

Bottom line: While not all firms will do well, in general the major analyst firms are not just surviving in the age of social media, but growing and prospering. Understanding why requires work, but the facts are out there.

Dale Vile
Jun 15, 2008 14:51

Great post Carter – and great insights as usual.

There is just one fact that I think it is important to add, and that is that the overwhelming majority of people involved in IT decision making and unlocking business value from IT do not have access to commercially available research. You have seen figures from me in the past, but I think even Gartner is very clear that it is only focused on a relatively small number of very large accounts, and the number of seats in in those accounts (i.e. people that have access to the research) is limited (quite a bit so in many cases).

Now of course there is bleed-over over of opinion from those that do have access to commercial research and those that don’t, but while the market is healthy and the big players are doing well, let’s not run away with the notion that the traditional analyst firms have the needs of the buying and using community anywhere near covered – they don’t.

Carter Lusher
Jun 15, 2008 16:07

Hi Dale, Good comments.

In this context, I was addressing specifically whether the major firms are “doomed” economically because of social media as Naumi was implying. I was not addressing the broader influencer landscape.

I completely agree with the comment that the penetration of the major firms into even their primary market (i.e., large enterprise with $1bn and above revenue) is low. At its annual Financial Analyst Day, Gartner said of the 4,547 $1bn+ enterprises, it had only fully penetrated 405 (9%) and partially penetrated 938 (21%). This is after spending the last three years doubling the size of the direct sales force. So obviously there is great opportunity for all firms, large and small, to flourish economically because of the many green fields.

As to the larger influence question, you know from reading http://www.sagecircle.wordpress.com, I have an inclusive view of all the influencers (e.g., see SageCircle’s Fog of Influence and Avoid emotion when building the analyst list for emerging tech markets ) in the technology market, from blogger to social networks to Twitters to consultants to boutique firms like yours and the large firms. At no point have I ever said or implied that the “…the traditional analyst firms have the needs of the buying and using community … covered …”. Rather I have made and will continue to make the argument that anybody who thinks the Gartners and Forresters of the world are going to collapse because of the alternative sources of free information like blogs have not done their homework, do not know how end users work, have drank too much kool-aid, or have a agenda they are pushing. I don’t believe that you fall into any of those categories.

Dale Vile
Jun 15, 2008 17:39

I think we are agreeing as usual Carter :-)

As you have read from me before, I see firms like us complementing the work done by Gartner et al, whether it is gap filling or providing an alternative ‘non-establishment’ way of looking at things. I wouldn’t even dream of positioning us as Gartner competitors.

Given that this is not a specialist AR blog, however, I was just making sure the whole picture had been presented for readers who might not have been through all of the analysis and arguments before.

Ludovic
Jun 16, 2008 4:58

Carter,
The IIAR survey’s sample is we think large enough to be representative, but this said the survey itself was not designed to measure anything with a robust methodology: it’s just a poll to ask opinions on who’s a good analyst, in the spirit of promoting people who are recognised in the industry. Period.

Guest
Jun 16, 2008 11:39

I’d just like to point out that Redmonk and others refer to themselves with the term “open source.” Thus, Duncan’s objection to your use of the term would be better logged with the firms who have initiated the misnomer.

Still, the idea is intriguing. A truly open-source analysis model would expose the criteria, weighting, and inputs to the community – not just the output.

You might find Ideas International’s Collaborative Evaluation model (http://ideasint.eval.com/) an example of something that could be evolved into a truer open-source analysis experience.

Naumi Haque
Jun 16, 2008 13:36

Wow, this seems to have spurred a really lively discussion. Thanks everyone for the comments. Without addressing every issue that was brought up here, I just thought it might be valuable to highlight a couple of points that I think might have been lost in the discussion.

As Carter points out, there are two aspects to analyst firms: research and advice. These are generally distinct deliverables, and although it is a bit alarmist of me to say that the industry is crumbling, new models are putting significant pressure on both aspects of the business.

1) Research: Research reports and whitepapers, like a lot of other information online is becoming commoditized because there are a lot of free and low-cost alternatives. There are the “open source/2.0” analyst firms that offer this up for free, there are blogs and wikis, there are vendor-sponsored reports, and there are smaller advisory shops like Info-Tech Research Group (full disclosure: I am a former ITRG employee) that are disrupting the industry by offering basic research at a price point that amounts to pennies a report. Somehow, I find it hard to believe that the large firms can support a model where access to these reports is worth thousands and thousands of dollars.

2) Advice: This is the value-add in the IT analyst industry. As Carter points out in his article, there are many types of scarcity that make it infeasible for CIOs and IT managers to conjure up the advice themselves (i.e. an abundance of information can create a scarcity of context; an abundance of choice can create a scarcity of advice; an abundance of content can create a scarcity of time; an abundance of people competing for your attention can create a scarcity of reputational ways to choose among them). When you’re a busy IT professional you want someone who is trusted to boil it all down for you and tell you what to do (or tell you that what you’re doing is okay). The new angle on advice is that there are new influencers. Although influence may be elastic (as Carter notes), budgets are not, and only certain experts (presumably those deemed most trustworthy) will get hired to provide their analysis. The thing with the new model is that anyone can become a trusted influencer by posting free insights and advice. Companies don’t have to go to the big firms to meet their needs, they can contract with any number of “open source” IT analysts or join a community of practice where advice is free-flowing. Witness communities like SAP’s Developer network where users gain reputation by posting valuable insights. We’ve interviewed some of the top contributors and they use their online reputation to drive significant analyst revenue – this is the “2.0” part of the model that big firms are missing. Interestingly, media companies like CIO.com that are feeling similar pressures have figured this out.

So, while industry behemoths like Gartner may still be doing well supporting the “old model,” I believe they will have to adapt if they want to take advantage of the new opportunities that are becoming available. Simply being big doesn’t guarantee continued domination as the model evolves (e.g. Britannica vs. Wikipedia, MTV.com vs. YouTube, the RIAA vs. MySpace, Barnes & Noble vs. Amazon, etc.). Carter’s rising contract values mean more money from the same large clients – i.e. not taking advantage of the long tail (as Dale also mentions).

As a former analyst in the IT advisory industry, I think it’s also a common misconception that analyst firms are “in vendors’ pockets.” When I worked at ITRG, we attended vendor briefing to learn about products, but the vast majority of research was based on client surveys and advisory calls; at no time did we ever receive funding from vendors for research. Vendor sponsored whitepapers are different from the type of free community-based research I am speaking of, and as David pointed out, even sponsored research can maintain an impartial eye if done properly.

As for the notion that this new model is “open source,” I agree that the term a bit of a misnomer (as Duncan points out in his article). I prefer the term “IT Analysis 2.0” since it better represents the community (i.e. 2.0) aspect of sites like Wikibon, CIO.com, SDN, IT toolbox, and the like. What’s going on at RedMonk and Freeform Dynamics, albeit is a bit different, but as with any new business model, there are always multiple variations as companies try to figure out what works. Still, “open source analysis” seems to be the common vernacular for describing this entire disruption to the industry.

Naumi Haque
Jun 16, 2008 16:34

Interesting sidebar: I was just looking through some old notes and came across an interesting set of data that suggests relationships and community recommendations hold significant weight in vendor selection, especially along the long tail. The results from an (independent, large sample) ITRG survey of SME’s identifies analyst firms and IT services firms as fourth and fifth in terms of influencing decision-making; behind personal relationships, individuals with a previous company relationship, and recommendations from peers and colleagues. The data is a couple of years old now, but suggests that developing a relationship with users (i.e. via social networks, blogs, or other online communities) could hold significant weight in terms of becoming and establishing source of trusted information and influence.

While many readers might discount this as only relevant to small- and mid-sized enterprises (SME), it’s worth noting that SME purchasing trends are surprisingly similar to purchasing trends exhibited by the individual departments of larger enterprises. These departments and business units often act somewhat autonomously from the corporate IT group. As Dale mentioned, “Gartner is very clear that it is only focused on a relatively small number of very large accounts, and the number of seats in those accounts (i.e. people that have access to the research) is limited (quite a bit so in many cases).” This means that a number of IT-decision makers at even the largest enterprises are left to fend for themselves; much in the same way that SME IT shops function.

stephen o'grady
Jun 16, 2008 20:19

While Duncan makes some excellent points in his response, and given past discussions it’s not likely that we’ll agree on the nature and quality of “freely available analyst research,” a few comments:

1. “Nor is [freely available analyst research] really free – the analysts are overwhelmingly funded by technology vendors to resarch specific research themes”

I cannot speak for my colleagues, of course, but at RedMonk our research themes and directions are not directed by vendors, it’s actually the reverse. We determine independently our research agenda based on interests, trends, and the like, and clients engage with us with after the fact. It’s very uncommon, in fact, for RedMonk not to be further ahead of the curve in terms of research relative to our vendor clients.

2. “Open source is collectively made”

This is a popular misconception. It certainly can be, but this is by no means a defining characteristic of what is or is not open source. There are a great many projects, MySQL being perhaps the most notable example, that are not collectively authored but rather the product of a single entity or individual.

That said, we do view much of our content as a collective product, relying on and incorporating as it does other similarly public works and permitting public commentary in the fashion of this very dialog.

3. “Open source is collectively made, open to free modification, and allows free distribution in altered forms.”

It is true that the bulk of our content, at present, does not permit free modification and free distribution for commercial purposes. Which frankly is something we’ll be changing.

But according to the terms of our license, we do in fact permit the very activities Duncan is referring to:

# to Share — to copy, distribute and transmit the work
# to Remix — to adapt the work

Requiring only that it be used non-commerically, attributed to us, and that the resulting work is released under the same terms.

That’s not perfect, but in our experience our content tends to be far more widely distributed than for-pay only content alternatives.

4. “Freely available analyst research typically shows the analysts conclusions but not their source – the base information and methods are typically not open to collective inspection and modification, either during the research process or after publication.”

While it’s certainly true that there are exceptions, the overwhelming majority of our “source,” as Duncan terms it, is in fact available. Our content is marked by a high volume of links, quotes and other citations such that readers have the ability to consume the original source material that we’re drawing from wherever possible.

5. “Much freely-available research is funded by vendors, and it tends to support vendors in their marketing efforts.”

Again, I cannot speak for my analyst colleagues, but the overwhelming majority of our research is never used by vendors for their marketing efforts. And none of it is commissioned, with the exception of multimedia podcasts and screencasts.

What’s more, in our experience few if any customers have difficulty distinguishing between free research that is commissioned by vendors and that that is not.

6. “It would be quite mistaken to think that the method used by these analysts is an open source methodology.”

There are, of necessity, differences between the methodology that’s applied to research and that that is applied to source code. But in reviewing the principles articulated by the Open Source Institute, our methodology measures well IMO.

The primary exception being the commercial distinction that we’re drawing, and as noted above that will be addressed shortly.

Barbara French
Jun 16, 2008 23:35

Naumi,

You started this thread with the position that the industry analyst business is about to follow the fate of the music and publishing business. It’s worth noting that in the analyst business, this parallel would require a massive amount of Gartner, Forrester and IDC content being copied and shared freely as unlicensed content among research consumers – thus undermining the financial stablity and licensing policies of these giant firms.

That’s not happening. Unauthorized file sharing is not on a notable uptick in the analyst business.

You can discuss ideas for a reinvention of the “analyst business” without contriving pending doom as the impetus. Innovation is a good thing in any business. In its own right. Just to make the world a better place.

Tom Trainer
Jun 17, 2008 0:13

Naumi,

My firm is new; founded in April by me. The material on the website is freely available & I am not in the pocket of any vendor. Will I offer subscription services for users and vendors? You bet! Why? Primarily becuse of the reason you mention in your original article: Web 2.0…not all things need be free, nor is all free information correct. Having worked in the vendor community for 25 years before becoming an analyst in 2005, I can tell you that many analysts don’t actually understand the technology they cover. Users should trust analysts who have actually worked with products; designed them, installed them, fixed them under great pressure from users. That kind of experience is priceless and valuable to users.

age of conan gold
Jun 17, 2008 2:14

This is a popular misconception. It certainly can be, but this is by no means a defining characteristic of what is or is not open source. There are a great many projects, MySQL being perhaps the most notable example, that are not collectively authored but rather the product of a single entity or individual.

People Over Process » links for 2008-06-17
Jun 17, 2008 3:32

[...] Who needs analyst firms anyways? Nothing like yelling “you’re all dead!” to call in comments from those who’re still (very much) alive. (tags: ego analysts iir redmonk) [...]

Guest
Jun 17, 2008 9:45

Barbara is quite valid when she cautions that one need not paint gloom-and-doom to cheer for reinvention. However, she seems far to confident in her other assertion.

How do we know unauthorized sharing of analyst reports isn’t on the uptick? We live in an age where the consumer’s drive for convenience routinely tramples over intellectual property rights. Can we can safely assume that people infected with this spirit will somehow respect our rights?

Perhaps industry analysis is shared differently (e.g., e-mailed from peer to peer rather than posted on-line) to avoid obvious detection. How do we measure this?

George Goodall
Jun 17, 2008 11:38

Great thread Naumi. The conversation is certainly enlightening. I wanted to make a quick comment on that old ITRG data set that you mentioned. It certainly pointed to the importance of personal relationships. I remember slicing that data based on project success as determined by on-time completion, on-schedule completion, benefits attained, etc. The strongest positive differentiator between successful projects and unsuccessful projects was the influence of IT analyst firms. Enterprises that used analyst firms attained higher project success than those that didn’t. We never published those results because it seemed self-laudatory and our customers already use analysis firms! The finding might, however, inform the current discussion.

Naumi Haque
Jun 17, 2008 12:39

I hear the doom-and-gloom argument. Sure the title of the post is meant to draw readership – I’m a blogger fighting against a deluge of competitive online content. As Michael Coté notes, “Nothing like yelling ‘you’re all dead!’ to call in comments from those who’re still (very much) alive.” But I don’t think the argument is without merit or that the comparison with music and publishing industries is a stretch. Clearly both music and publishing are not “dead” industries, but their business models are being seriously threatened. If you ask me, the same is true for analyst firms.

As for Barbara’s comments, I agree with “Guest,” I’ve never had a Gartner subscription, but I have read many a Gartner report over the past six years. Same for Forrester reports, the McKinsey Quarterly’s Premium content, and many other paid subscriptions. People e-mail me stuff, what can I say. It’s still not YouTube or BitTorrent proportions, but in the end, I don’t think it matters as much as it does in the music or publishing industry because, unlike songs, movies, or books, the content we’re talking about is becoming commoditized. So, in my opinion, it doesn’t matter that if I read a Forrester report or a free report from some other highly regarded “open source” analyst.

Wikinomics » Blog Archive » Join the conversation on ‘Who needs analyst firms anyways?’
Jun 17, 2008 14:10

[...] Who needs analyst firms anyways? Another Smart Response to “The Dumbest Generation”Obama’s YouTube Secret: Longer VideosIf you’re going to be naked, you better be buff – A video diaryMore on Obama and wikinomics [...]

Naumi Haque
Jun 17, 2008 23:30

Thanks for the additional insights George. Nice to hear from you!

Carter Lusher
Jun 19, 2008 22:40

One additional note — there is a significant amount of Gartner and Forrester research available for free on the ‘Net. These are typically Magic Quadrants and Wave research notes, though other types of research notes are also available. However, Gartner and Forrester still got top dollar for these research notes that you and I can read for free, because vendors paid tens of thousands of dollars (depending of the duration and type of reprint) for reprint rights to support marketing and sales efforts.

I did an experiment where I took the most recent 20 MQs and 20 Waves to see if I could find them easily on the Web. It was quite easy. Sometimes one would have to give the vendor your email addresses for marketing purposes, but if you wanted a $1,995 research note (yes, that is what the G-men are charging for a one-off MQ note) for free, then an email address is a small price to pay.

Paula Thornton
Jun 20, 2008 19:04

All very interesting. Is somewhat related to the true opportunity I saw at FASTforward08. Looking at what major financial content providers could do (e.g. Dow Jones, Thomson Reuters) by simply bypassing IT services by delivering ‘finished’ content/services, made me realize just how easily the entire consulting/service model could be disintermediated.

Anne
Jun 23, 2008 6:14

Most of the revenue going into 2.0 firms is from vendors for commissioning specific research themes. That might mean sponsoring individual papers but it could also mean, for example, saying that a vendor sponsors a stream of research in SOA or some other theme. I realise that there’s a big different between commissioning a specific work and commissioning activities in a wide area. However, patrons are patrons.

As a result, the topics being explored by most vendor-funded firms are on themes of interest to vendors. Some firms have made a conscious choice to balance the users’ and vendors’ interests. Redmonk and Freeform Dynamics should be praised for such choices. However, that is not the case for many, or perhaps most.

David Scott Lewis
Jun 23, 2008 9:45

Disclaimer: I was a former VP, E-Business Strategies at the META Group prior to its acquisition by Gartner.

There are two types of analyst firms: Those with a lot of end user clients and the vendor whores. (I’m being quite blunt about this.) Let’s just say that Gartner and Forrester are in the former category and many/most others are in the, uh, other category. I can even tell you a story of what happened when I was a senior exec at a large vendor (this was prior to joining META; my CV points to either Oracle, Microsoft or Samsung): I wrote a report, one of the larger analyst firms — a typical vendor whore — put it into their format, and then we (at the vendor firm) distributed it as Gospel, citing that it was a report by a third-party analyst firm. This kind of nonsense happens all the time.

I’d also say, anecdotally, that firms will get movement in the right direction on a graphical representation (gee, could this be some sort of 2×2 matrix?) if they spend more $$$ on that particular analyst firm. Sad, but seemingly true.

This being said, those with a lot of end user clients tend to be the better firms. They hear things, things that can help an end user in negotiating a deal. I can cite a deal involving a large indirect procurement software vendor whereby I saved one of our end user clients (a Fortune 500 company) over $1 million during their contract negotiations. Genius? Nope. I simply knew what others had paid for the same system.

Analysts tend to be a relatively smart bunch, but their real value is in seeing product roadmaps … just about ALL pertinent roadmaps. This is invaluable info for end users — end users get marketing fluff and lies from many/most of their software vendors. The analyst firms can assist in making decisions based upon a broader universe of information.

And, of course, there’s another key value in engaging one of the larger analyst firms: A person/firm to blame for an IT procurement decision gone south. CIOs need a scapegoat — and having Gartner or Forrester as a scapegoat doesn’t hurt.

“Open source” firms are not a bad thing, as long as they’re not vendor whores. This is critical. As an end user, NEVER, EVER use a firm that is a vendor whore. OK, there is one firm with mostly vendor clients that I highly recommend: AMR. But they’re the exception to this rule.

So, when evaluating a firm, make sure that they have a lot of end user clients. If they don’t, run as fast as you can from them.

Also, I’d give boutiques a shot, but with the same caveat. Boutiques can dig very deep, not get caught in a service director’s or CEO’s ego trip. Matter of fact, I’d go with boutiques with end user clients, even if they’re small. See Deal Architect, as one example.

BTW, the next great era in analyst firms: Green/clean tech analyst firms. My day job these days is in the solar sector and there’s a huge need for analysts servicing the renewables sector. Lux is the best, but might be even more expensive than Gartner. Anyway, there’s a lot of room in the renewables space, with Lux being the Gartner of green tech — but without a lot of other competitors. There is EER, Greentech Media, NanoMarkets, a few others, but Lux is truly the Gartner of green tech. But keep an eye on EER (especially for wind) and Greentech (across renewables). And NanoMarkets owns the TOP market, too.

Dale Vile
Jun 24, 2008 5:11

Nothing like a good dose of generalisation and dogma to fuel the debate ;-)

links for 2008-06-27 | Daily EM
Jun 27, 2008 0:39

[...] Wikinomics » Blog Archive » Who needs analyst firms anyways? online research reports and white papers – like a great deal of other digital content – are becoming commoditized. Open source analyst firms understand this and are disrupting the market by offering basic content for free and shifting revenue models t (tags: analytics analysts OpenSource technology blog article Investing) [...]

La innovación en las empresas de informes y análisis en la era de Internet
Jul 1, 2008 13:39

[...] | Wikinomics trackback ¿Recomendarías este post? Más noticias sobre: Empresas, Sectores Tags: [...]

Lady Geek
Jul 7, 2008 20:52

Major firms are not doomed any more than Microsoft is seriously threatened by Linux.

Companies buy Operating Systems so they have some place to go if it fails.

People pay consulting firms for the “insurance value” of being able to claim “credible research,” and thus be able to share responsibility for the business decisions that result.

Vishal
Jul 18, 2008 2:43

Someone ( A gartner analyst no less ) once told me that Analyst reports are like Sausages … you have an appetite for them till the time you realize how they are made !!

Cheers
Vishal

tecosystems » RedMonk: We’re Not Perfect, But We Try
Aug 17, 2008 12:04

[...] – unwittingly or no. Ignorance is not an adequate excuse, especially for me of all people. But when I promised to address this situation back in June, I meant [...]

Dave Vellante
Oct 9, 2008 1:24

Just catching up on my summer reading– wow! Thanks for the comments everyone. To us at Wikibon, it’s all about the community first. Our CIO/IT advisors asked us to stick to a few principles: 1) stay true to the user community; 2) treat us as peers, not leads and 3) don’t be vendor whores. The rest just seems to fall in place.

When we first started Wikibon we set out to apply a true open source collaborative research model and we really have very few if any caveats to the use of our research. As far as transparency, one can always hit the history tab and see who wrote what, when.

In my experience this has meant we seem to be able to produce large volumes of very high quality research at very low cost and in far less time than when we were at IDC, Meta and Gartner.

Will this disrupt the established $3B research business? I don’t know the answer. What I do know is we’re having way more fun!

Steve Kenniston
Dec 17, 2008 11:51

This really is a great topic. Having worked as an analyst before I feel like I can say that business can be very “mafia” like. What has always been interesting to me is analysts commenting on technologies that they have never used, nor have any real hands on understanding of. Not only with the product but the current state of the challenges of IT. I think the wikibon guys have it right – peers helping peers.

I think these companies can monetize the business by offering other value added services that they can’t get today – a lot of companies hire consultants to help with their business and I think this will be no different – it will just force that community (the analyst community) to rise higher, be smarter and offer better servcies – at a more cost effective rate and leverage tools – such as the web (2.0) to be more efficient.

Wikinomics – The Real Truth behind Fake Steve
Jun 28, 2010 17:32

[...] tech is as world-changing as it is confusing. Many an analyst has made quite a living saying “this is the next big deal, you need to learn it and you need my help.” The truth is that for many companies traditional communications (face to face, phone, [...]

buy nfl jerseys
Jul 1, 2010 7:57

To us at Wikibon, it’s all about the community first. Our CIO/IT advisors asked us to stick to a few principles: 1) stay true to the user community; 2) treat us as peers, not leads and 3) don’t be vendor whores. The rest just seems to fall in place.

Who needs analyst firms anyways? « Not Another Framework
Nov 8, 2010 13:24

[...] by Naumi The following was originally posted on Wikinomics.com on June 13, 2008 – click here to see full comment [...]

Naumi
Dec 22, 2010 17:18

Just noticed this great article by Ray Wang (mentioned as Analyst of the Year in the chart above) on how to construct the collaborative analyst firm of the future. Also some good Q&A in the comments section. http://blog.softwareinsider.org/2010/07/24/personal-log-the-7-tenets-of-building-a-star-analyst-firm/.

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