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Why technology industry disruption is also disrupting the analyst relations game

The analyst relations profession has always been a challenging one – fun, but challenging. Over the past couple of years, it has become tougher, and all indications are that it’s going to get even tougher in the coming years.

Like many buzz words that the technology industry latches on to, “disruption” is much over-used and often incorrectly applied. But the reality is that some technology market segments are being significantly disrupted by a range of forces, and by extension that is having a profound effect on the analyst business and the AR profession.

Confronted by this range of forces, many traditional IT vendors are struggling to get the attention they’ve previously enjoyed with the larger – and smaller – analyst firms. So, for AR pros, this means getting smarter & more creative if they want to get the cut-through they need.

But before we look at some of the potential solutions, let’s look at the problem. These are the forces at play:

Analyst business models are changing

To a large degree, analyst firms provide – and have always provided – pretty much the same thing to their clients, whether they are IT vendors or users. That is: content, engagement & advice. It’s a multi-layered approach which has worked for years & will continue to be successful, but here’s how it’s changing:

  • “One to many” is being disintermediated. The subscription model for written research & market share data has long been the cash cow for analyst firms, but it is being devalued by the vast amount of information available for free on the web. Some emerging analyst firms are using freemium models to drive interest in paid services, but there is a wealth of information available online – on vendor websites, on blogs, on aggregation sites and elsewhere. Quality written research is still relevant for most analyst firms, but it is no longer a differentiator.
  • “One to some” is gathering steam. Analyst firms have always done events – it’s a great way to promote the brand, the content and the ideas, but it also provides for more intimate engagement with customers. And it’s an area where many firms are focusing their investment. Gartner’s event business grew 17% last financial year, while the Symposium conference in Orlando in October sold out. IDC has a crowded schedule of events covering just about every country in Asia/Pacific, not to mention North America, Europe & elsewhere. And they’re not alone.
  • “One to one” delivers value, but doesn’t scale. A key value proposition for Gartner – among many others – has been its enquiry service, through which it is able to provide specific, personalised advice to both vendors & users. This is what many clients really pay for, but there are only so many 30-minute enquiries that an individual analyst can manage. Increasing enquiry volumes means adding expertise, which costs money.

The technology business ain’t what it used to be

In the beginning there were just a few technology vendors – old hands will recall referring to one predominant group as the BUNCH (Burroughs, Univac, NCR, Control Data, Honeywell). The minicomputer business started the process of expansion, but the advent of the PC in the early 1980s truly democratised the technology business, with the emergence of software standards & platform independence. The web further built on this legacy, spawning thousands of new players, while the smart mobile revolution has made everyone an app developer. But it gets worse:

  • There are few barriers to entry for new players. There are still barriers to success, but anyone with a good idea, access to some smart programmers and a half-decent marketing plan has the potential to carve themselves out a niche and/or disrupt existing business models. Add in some venture capital & social media cred, and they have the potential to be a real player. And guess what – they’re doing everything they can to get the attention of industry analysts.
  • The Internet of Things. What can we say? Even Gartner has declared it as the #2 strategic technology trend of 2015, and many other firms have been beating the drum about this for some time. This brings a lot of non-traditional players into the mix. And guess what – they’re doing everything they can to get the attention of industry analysts.
  • Everything old is new again. In part due to the IoT, many old established manufacturing companies are finding that they’re interesting & relevant again as they build sensing technology into products like jet engines, heavy haulage, air conditioning systems and more. As one analyst said to me recently, many of the new disrupters are 100-year-old companies, not creative start-ups. Think Honeywell, Siemens, Rockwell Automation etc. And guess what – they’re doing everything they can to get the attention of industry analysts.
  • Traditional IT vendors are looking for greener fields. The vendors we know & love are not sitting idly by while all this happens. They are well aware of the factors shaping the market & the emergence of new competition, and they are exploring their adjacent markets to maintain their growth. Unfortunately, they’re not seen as “sexy” like a lot of the so-called disruptors. But guess what – they’re doing everything they can to get the attention of industry analysts.

Analyst behaviours are changing

Being an analyst has always been a good gig, but it’s been getting tougher over the past few years. It’s still a good gig, but in general, analysts have less latitude than they once had to explore ideas, to think, to pontificate, to focus on the big long-term issues rather than the immediate problems in need of resolution. In simple terms, they’re more accountable for their time, but let’s look at the pressure points:

  • Analysts are busier than they have ever been. Most analyst firms have figured out how to get more productivity out of their analysts over the past few years, so many of them now goal their staff on the stuff that impacts their renewal rates – not just written research volumes, but also enquiry volumes and paid engagements. So analysts are not just more accountable, they don’t have the “slack” in their schedules they once had, or the ability to apply that as they choose.
  • Analysts need to know more about more things. Analysts in the Asia/Pacific region have always been broad rather than deep because they have to understand multiple geographic & technology markets, more so than their US & European peers, who have the luxury of larger markets which allow them to specialise. But all analysts need to understand the adjacencies to their focus markets, and that has become more complicated. They need to understand – and explain – how the new market dynamics affect the narrower markets they focus on.
  • Analysts are being used differently by their own firms. As we noted above, there is a greater focus on delivering events which engage analysts more closely with their clients, whether they are vendors or users. While these events deliver a good contribution to the bottom line, they require more time commitment, not just in terms of presentation delivery & travel, but also for preparation. Analysts involved in these events are expected to be “always on” even when they’re not on stage, doing client enquiries, networking & otherwise promoting the firm’s brand.
  • Analysts are being used differently by their clients. Not only do analyst firms run their own events, but IT vendors host them too. The user conference/roadshow/roundtable is a stock component in the marketing playbook of most IT vendors, and they love to use analysts in keynotes and breakouts to add an air of credibility and independence to their events. There’s nothing wrong with this, but once again it sucks up a lot of analyst time in preparation, delivery & travel.

Bottom line

What this boils down to is that many traditional IT vendors are struggling to get the attention of the analysts with whom they’ve engaged for years. They are competing for airtime & mindshare with a growing number of new players, whose stories are often more “sexy” than the business-as-usual messages they deliver. And this is at a time when analysts have less time to listen to vendors, and are more selective about what briefings they attend.

It’s a tough landscape, and vendors are going to have to get a bit creative to stand out from the crowd. There isn’t space today to discuss potential solutions, but I’ll do that in another post in the next week or so. In the meantime, I’d appreciate your perspectives on this dilemma, the ramifications and potential solutions.

Cheers,

Dave

How measurement of analyst relations programs has evolved to provide clarity in an uncertain world

The business of influencing the influencers has never been straightforward. Just getting agreement in the analyst relations community about what we mean by “influence” has always been the subject of lengthy & sometimes heated debate, but the evolution of new analyst business models, research methodologies and information delivery processes have added further layers of complexity.

AR professionals continue to be challenged by tightened budgets at the same time that the scope of their target audience is growing. Even the most disciplined AR pros who focus tightly on their key influencers sometimes find themselves distracted by their stakeholders pushing new players into the mix, and the deafening noise of others promoting their opinions via social media.

A well-structured targeting & tiering process is a key element in ensuring that you’re focusing on the analysts that matter to your company, however you define influence and however broad or narrow the scope of your AR program. I’ve written previously about why targeting is important and how to go about tiering analysts.

But then you still need to determine whether you’re getting cut-through with these analysts. And that’s a bit harder.

There are a bunch of things that come into play when you’re trying to measure an AR program. Some of them are subjective, some of them are a little more concrete. As I wrote a couple of years ago, there is no single metric which will define success in AR – and counting the number of briefings conducted is certainly not that! – but smart AR pros will use a range of measures to build an overall dashboard.

A big piece of the puzzle is some sort of objective measure of how well your AR program is working, and what it is actually achieving. How better to do this than asking the analysts themselves?

So here comes the self-serving bit. Intelligen has been running AR effectiveness studies since 2003, annually surveying analysts right across the Asia/Pacific & Japan region. Not surprisingly, we think that this is a really important tool for keeping track of the impact of vendor AR vendor programs, and so do many of our clients, who subscribe year after year.

Our study is called Understanding the Influencers, and it has constantly evolved to reflect the changing nature of the analyst business in APJ, plus the changing requirements of our vendor AR clients.

Over the past few months, we have undertaken a complete review & revision of Understanding the Influencers. We have sat down with analysts to understand what’s important to them, and how to make this study more relevant for them. We have talked with AR and marketing pros across the region to understand the sorts of insights they need, and how to deliver them.

So here are the big changes (and what hasn’t changed):

A new survey platform, optimised for today’s web

Although Understanding the Influencers started as a phone survey, we took all the quantitative aspects online fairly early – in 2005 – and since 2006, the study has been hosted by Novagenus. Over the past few months, the outstanding team at Novagenus have built a complete new survey platform for us in HTML5, optimised for modern browsers and tablets. The new layout is clean and simple to use, minimising the amount of time it takes busy analysts to respond. For the first time, analysts will be able to write in the names of vendors not included in our standard segment lists.

A new survey questionnaire which reflects today’s AR world

We’ve tweaked the survey questions many times over the years to expand coverage and address new influences such as social media, but this year we put everything on the table and analysed the value of every question. The core attributes we use to measure AR effectiveness remain (plus one new one), but other questions have been removed, updated, simplified and/or clarified. We believe that this will not only make it easier for analysts to respond, but will also enhance the quality of the results.

Native language support

For the first time, we are effectively running three separate versions of Understanding the Influencers this year – in English, Chinese and Japanese. While analysts in China and Japan generally read & write English fairly well, particularly in the large global firms, we know that it will be easier and less time-consuming for them to be able to engage in their native languages. We’re hopeful that this will also increase responsiveness from local research firms where English skills are not so strong.

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Qualitative insights remain important

A significant differentiator for Understanding the Influencers has always been the fact that we overlaid the quantitative survey with qualitative depth interviews with more than 20 senior analysts across the region. This approach has allowed us to provide deeper insight into why specific AR programs are working (or not) and what other issues are important to analysts. We will continue to conduct these interviews with leading analysts who really understand AR, plus capture comments in the online survey in English, Chinese and Japanese.

More tailored analysis for vendors

One of the challenges of this type of study is that every vendor segments its target markets differently, and drives its AR program differently as a result. What’s important to one vendor will be less so to another, and the tools used will vary depending on size, resources and geographic focus. At the end of the day, we have to categorise both vendors and analysts according to their technology & business focus, what we call capture segments. It is impossible to get that 100% right, but we think we’ve improved our ability to map vendors with their target analysts by revising and expanding the capture segments. While we’ve always provided our vendor clients with customised analysis, we’ll be able to add a great deal more precision to that this year.

Earlier timescale for research & deliverables

We got a lot of feedback from analysts that our November/December schedule for fieldwork often conflicted with their need to finish research projects by the end of the year, so we’ve moved the start date to early October. This means that not only can we leave the analysts to finish their research in peace, but we can also deliver results for our vendor clients a month earlier. This ties in more neatly with typical planning stages which often take place in January.

Understanding the Influencers 2014 goes live next Tuesday October 7. We’re confident that all the changes we’ve made will drive up response rates and provide our vendor clients with deeper & more detailed insights on how to engage more effectively with the growing group of influential analysts in the APJ region.

If you’d like to know more, send me an email.

Cheers,

Dave

 

The three qualities of analyst spokespeople I most enjoy working with

Like any AR veteran, there are plenty of war stories I could tell about spokespeople who’ve gone feral in the middle of a briefing – whether they decided that it really was necessary to try cover 67 slides in 30 minutes; managed to throw the delicate schedule out by doubling their allotted time; forgot to tell the analyst that some sensitive details were under NDA; or stuck to a three-point mantra crafted by PR to deflect media questions (despite being told this wasn’t an appropriate response for analysts).

Specific details can wait for another time, but I’ve seen all of these scenarios – and more – and some of them more than once. While the reality is that these situations are the exception rather than the rule, it is important to plan to prevent them, and know how to manage them if things go awry.

Over the past few weeks, I’ve had the opportunity to work with three separate clients on developing and executing four different half-day analyst summits in two countries, which involved liaising with multiple marketing teams and countless spokespeople, many of whom I hadn’t worked with before.

Everything pretty much ran to plan at every event, and a big part of that was because of the “talent” we had available to put in front of the analysts. Planning & preparation are critical to the success of an analyst briefing, but all the plans in the world won’t save you if the spokespeople don’t deliver. In these recent cases, they did.

Because I’m naturally an optimist, I found it fairly unremarkable that all these events ran smoothly. Then last week I read a blog by the CEO of LinkedIn, Jeff Weiner, entitled The three qualities of people I most enjoy working with. Check out the full post because it’s pretty insightful, but in summary, Jeff picked out three characteristics – Dream Big, Get Shit Done and Know How To Have Fun.

It resonated pretty strongly with me, because I realised that I value the same qualities. As a consultant, I get to work with a range of people across a lot of vendors, but the most satisfying and long-lasting relationships are with clients (and analysts) who share those attributes.

I’ve written in the past about why you should train spokespeople to speak with analysts and also what you should teach them – I would encourage you to check out these posts.

But the focus of this post is on the ideal characteristics of spokespeople. In a blatant rip-off of Jeff’s post, I’ve adapted his Venn diagram and the attributes he described to fit the world of vendor spokespeople. Hopefully he’ll take it in the spirit intended.

Slide1Know their shit

Yep, this one’s a no-brainer! Any spokesperson you put in front of analysts should be a subject matter expert. They should be deep on their technology/solution area, or the business markets they’re addressing. A spokesperson who can talk about customer outcomes & market dynamics as well as being able to drill down on technology is like gold. But more than just being knowledgeable, they need to be willing to engage with other technology experts, who are generally strongly opinionated & sometimes just a little egotistical (otherwise known as analysts). They need to be able to hold their ground within reason, while also conceding that they don’t have all the answers – without damaging their corporate messages. Sometimes, the best spokespeople aren’t the most senior business executives – pre-sales engineers often provide more insight into what customers are doing than the execs who are running the show.

Tell stories

Technology can be a dry subject at times. Speeds & feeds are important, but they’re generally only a point in time. Discussions about performance & comparative capabilities often descend into semantics & pedantry. While all of these things play a part, it’s not what customers buy, any more than they buy a dot on a Gartner Magic Quadrant or a Forrester Wave. What customers buy is solutions to problems, and the best spokespeople are the ones who can describe how they solved those problems for customers. They can weave a narrative, make it compelling and bring the customer experience alive, bridging the technology & business worlds. Analysts are always looking for proof points, and real use cases are among the most useful. Most importantly, these spokespeople are quite happy to walk away from their slides! These spokespeople are often the ones who can get analysts excited about their overall vision.

 Listen as well as talk

If I had a dollar for every time I’ve told a spokesperson that “it’s a two-way dialogue”, I’d be reasonably comfortable by now. But the truth is that analyst relations is about an ongoing conversation. There have been a couple of memes running around social media recently along the lines of “people listen to respond, not to learn,” and these are particularly applicable to AR. Yes, it’s important to listen to questions & respond appropriately, but it’s also important to understand why those particular questions are being asked. Every analyst conversation provides the opportunity to gain insight into what’s happening in the market. It’s not about asking for “free” advice or market intelligence, although some analysts are quite willing to provide it. Rather, it’s about understanding the nuances, asking for clarification, exploring the issues & providing a more informed response. A conversation is always much more fun than a pitch. And you just might learn something too.

What it comes down to is delivering a good outcome for both the vendor and the analyst. This takes a combination of planning & preparation, having good content, understanding the needs of the analyst, and making sure you have spokespeople who are appropriate for the discussion at hand.

And one more thing, which Jeff Weiner hit on – have fun! Getting a great result is always good, but enjoying getting a great result is always much more satisfying.

What do you think? Are there other attributes of great analyst spokespeople we should highlight?

Cheers,

Dave

Japan’s technology analyst business turns the corner

The technology analyst business in Japan – long constrained by weak economic & IT spending growth as well as some cultural challenges related to the use of external advisors – appears to be enjoying its most positive period in several years.

During a visit to Tokyo last month, I met with senior executives from the major global IT analyst firms, Gartner and IDC, as well as local advisory firm ITR, and found them all positive about business growth as the economy continues its recovery, although sentiment did vary from bullish to cautiously optimistic.

This is in stark contrast to previous visits over the past couple of decades, when the analyst business seemed weighed down by the weak performance of the Japanese economy and the challenges of adapting a “western” concept of external advisory to a culture much more reliant on peer networks & hierarchies.

Situation analysis

Japan is, was & always will be a complex technology market. It is huge – only last year surpassed as the second largest country market by a fast-growing China, according to IDC – and has a strong cohort of domestic technology vendors which have tended to dictate technology adoption much more than the large group of global multinationals which have operated in Japan for decades.

Native language support, the ability to innovate to meet the needs of the Japanese business & consumer markets, and tight relationships between local suppliers and end-user organisations have all shaped technology adoption & behaviour in Japan, and impacted on how analyst firms with “western” business models have engaged with Japanese clients, whether they are vendors or users.

Notwithstanding their enthusiastic reliance on technology, Japanese companies have not tended to see IT as strategic, or to elevate its role as a business driver or differentiator. According to analysts I spoke to recently and over previous years, no more than 20 to 30 per cent of Japanese enterprises employ a CIO, and very few of those have an IT background, coming mostly from HR and finance, so they tend to be heavily influenced by their suppliers, including the local SIs.

And while Japanese IT vendors have a voracious appetite for data – market size, market share & forecasts, not to mention any number of segmentations – Japanese market taxonomies don’t always map neatly to those defined by the global players such as IDC & Gartner, so this has represented a barrier to penetration of those accounts – in some cases requiring duplicate products to meet local & global requirements.

For their part, most analyst firms in Japan have maintained their investment in the market and are starting to see the dividends. IDC Japan is the oldest player, established in 1975, while Gartner ended its agency representation to establish a subsidiary in the late 1990s. That agency – ITR – has had information-sharing arrangements with Meta, Forrester and Constellation Research since, but has mostly relied on its local services to drive its business.

There are other local players, most of which are focused on providing local market share data to Japanese vendors. Some are technology specific, such as MIC Research, MM Research & Techno Systems Research while others are generic market research firms which cover technology segments along with other vertical markets, such as Fuji Chimera, Mitsubishi Research & Yano Research.

Forrester has maintained a sales office in Japan for many years, but has had no resident analysts in the country since the departure of its one representative earlier this year, while Frost & Sullivan has a good presence in some vertical markets, but a relatively low focus on IT.

But there are many signs that things are changing. Following is a snapshot of the state of play, based on my recent discussions.

Gartner Japan

Gartner has been investing steadily in the Japan business for the past few years with the addition of significant sales & support resources, evolving it from a sell-side market sizing organisation to one which now derives more than 60 per cent of its revenues from end-user organisations. According to Gartner’s Japan country head of research, Satoshi Yamanoi, the penetration of end-users remains quite small, particularly when compared with the US and EMEA, so the market opportunity is considerable.

Gartner now offers a complete portfolio of services in Japan, including research; consulting – which competes with likes of Boston Consulting & McKinsey; events – including Symposium/ITxpo & five summit events; and the EXP CIO peer networking program. The EXP program is approaching a critical mass, but Gartner hopes to increase this over the next couple of years.

Like other analyst firms in Japan, Gartner has very strong analyst retention, with many analysts having worked with the firm for several years. Headcount has remained stable at about 30 analysts for the past few years, but the research teams are now more tightly integrated with the global organisation, with the team leaders for infrastructure, applications & sourcing/IT management now reporting into global peers rather than working in isolation.

According to Yamanoi, Japanese CIOs and other executives are increasingly looking to understand global best practices for technology & business adoption and integration, so are more open to external guidance than previously. As well, other countries are looking to engage more closely with Japan, with Gartner working with government & business customers from China, India, Brazil & Japan.

IDC Japan

Similarly, IDC Japan has been enjoying some solid business growth without increasing its analyst headcount, which remains at about 35. Analyst retention rates are high, and according to managing director, Masato Takeuchi, it is difficult to recruit quality analysts due to the specific mix of skills required.

As in most other countries, IDC’s revenues are heavily dependent on quarterly market share trackers (which are often purchased at a corporate level by US & European vendors), but IDC Japan is also able to generate local language reports to meet the needs of Japanese vendors at both local & global levels.

The strong position of Japanese vendors in some technology segments means that IDC Japan is more actively involved in driving IDC’s global research agenda than most country offices. Several of the world’s leading printer vendors are Japanese, for example, while Japan’s strong manufacturing base across many segments means that IDC Japan is providing considerable input into defining the methodology around IDC’s research into the Internet of things (IoT).

According to Takeuchi, Japanese CIOs recognise that their role needs to change to one which acts more as a strategic advisor to the CEO, which opens up buy-side opportunities in some vertical markets, although IDC has not yet put significant focus on developing the Insights business in Japan. Retailers starting to explore the implementation of big data as they move to omni-channel is just one example of how IDC might leverage its global expertise for Japanese end-users.

ITR

Established 20 years ago, ITR has carved out a comfortable niche in the Japanese research & advisory market. With a comparatively small roster of 10 fulltime analysts plus about half a dozen contractors, it services about 300 clients, about one-quarter of which are end-user organisations and the balance are Japanese & multinational IT vendors.

ITR delivers buy-side advisory services to end-users through its subscription-based Strategic Partnership Service (SPS), plus undertakes short-term consulting engagements to help clients with vendor selection, IT strategy and IT architecture development. At the same time, it works the sell-side by producing market sizing reports for local vendors, primarily focusing on segments which aren’t addressed well by the bigger firms.

Originally a data-gathering partner for Gartner, ITR has a long history of partnering with global research firms, often translating selected content into Japanese to share with its local clients. Having also worked with Meta Group & Forrester, ITR is now aligned to US-based Constellation Research, which focuses largely on disruptive technologies.

According to ITR general manager, Hiroshi Yamamura, Japanese companies are slower to adopt disruptive technologies than their counterparts in the US, but there is a trend to technology purchasing moving away from the IT department to lines of business. Interest certainly seems to be growing – an ITR conference in May keynoted by Constellation founder & principal analyst R “Ray” Wang attracted 1,200 attendees.

Bottom line

There is growth at many levels in the Japanese analyst business. While revenues from existing services look healthy, there are new opportunities opening up as end-users more actively engage with external advisors, which means that the influence of Japanese analysts working for both local and global firms is increasing.

Japanese analysts rarely have influence outside of Japan, but they are significantly more influential in the domestic market than any foreign analysts will ever be. While IT spending growth remains moribund, Japan remains a huge market for multinational IT vendors, who would be well-advised to review & upgrade their level of engagement with analysts in the world’s third-largest market.

Cheers,

Dave

 

New firms sprout roots in the Asia/Pacific IT analyst landscape

Like the markets it supports, the IT industry analyst landscape is in a constant state of change. Firms come and go, research agendas shift to new technologies, business models are tweaked & redirected, deliverables metamorphose to reflect changed information consumption habits.

The last few years has seen quite a bit of consolidation at the “top end of town” as larger players have bought up smaller firms which provide them with access to new markets or opportunities. Forrester acquired home-grown APJ firm, Springboard Research three years ago, and Gartner soaked up IDEAS International in 2012. More recently, 451 Research picked up Yankee Group, a shadow of its former self, and Informa Telecoms transmogrified into Ovum, which it had acquired a few years ago.

These deals have been well reported, but just as interesting is what has been happening at the other end of the market. The analyst business is a classic “long tail” industry – there are hundreds of companies which fit the broad definition of “analyst firm” – and there are few barriers to entry, so there are always new players.

Over the past couple of years, quite a number of new seeds have been sown in the Asia/Pacific region. Some of these have already borne fruit, some are still quite nascent. They all have different business models, different focus areas, different capabilities, and how well they perform remains to be seen.

But they all have something to offer. As we’ve noted before, any analyst firm can give you insights into a market or technology – how important that is to a vendor depends on its own market focus, information needs, budget availability & many other factors.

Very few analyst firms have true influence over end-user purchasing decisions, but many influence around the edges, or can help create exposure for vendors to build awareness or help them better address their market opportunities. These are all valid outcomes of an analyst relations program, just addressed differently.

We thought it worthwhile to profile some of the “new” firms which have come on to our radar in APJ over the last couple of years. There are also a couple of firms which are relatively new on the scene that didn’t want to be included in our coverage at this point, but we’ll likely hear more of them as they get themselves established. We make no judgment on the capabilities or likely success of these firms, and to avoid any allegations of bias, they’re listed alphabetically.

 BigInsights (Australia)

Big data is a big topic, and that’s all that BigInsights covers, offering research, consulting, go-to-market services & training. The firm was founded by a former HP colleague of mine, Raj Dalal, who also spent some time covering emerging technologies for IDC Asia/Pacific. Also on board is another ex-HPer, David Triggs – as CTO – and former IDC Australia software analyst, Shayum Rahim – as research director – while the advisory board includes Ramin Marzbani, who in the 1990s built the internet research firm, www.consult, before selling it to ACNielsen; and Vikram Mehta, who rolled the blade server business out of Nortel to create Blade Network Technologies, later selling it to IBM.

BigInsights’ business model is fairly “traditional” and primarily focused on vendors with specific big data products, but includes some end-user services including discovery workshops & training. Key research studies include an annual technology & vendor landscape, and demand-side research on big data technology adoption, both covering the Asia/Pacific region.

 capioIT (Australia)

It’s been nearly four years since Phil Hassey set up capioIT, so he probably has more visibility than some of the newer firms, but still merits inclusion on this list. For a one-man band, Phil covers a lot of ground within his focus area of emerging technologies & emerging markets – recent studies have included topics as diverse as BI & analytics, infrastructure services, Chinese tier 2 & 3 cities, and natural resources IT solutions – but broadly his strength is around IT services & enterprise software.

With a background leading IT services research for Springboard and IDC Asia/Pacific, Phil delivers research & consulting services to vendors, but also undertakes custom consulting projects for end-user organisations in Australia as well as in other countries in APJ. Unlike many analysts, he also invests a lot of time & some of his own money doing on-the-ground research in many countries.

 Greyhound Research (India)

Former Forrester/Springboard analyst Sanchit Vir Gogia started Greyhound just over a year ago, positioning it as an IT & telecom research & advisory firm, focused on emerging markets. While many of the pages on its website remain incomplete, Sanchit told us that the firm targeted three audiences – IT decision-makers, IT vendors & partners, and venture capital funds – and revenue was reasonably balanced across the three, with clients in India, ASEAN and the Middle East.

Greyhound’s services include free & paid research, custom research, role-based advisory, toolkits & speaking engagements, with broad technology coverage focused on five business themes. Sanchit is also fairly visible through his blog, AsDisruptiveAsITGets, and on Twitter.

 Progessive Digital Media Group (UK)

Datamonitor founder, Michael Danson, who sold his business to Informa in 2007, has recently been rolling up a range of publishing & research businesses across a range of industries. The firm most relevant to this space is Kable, which does detailed primary research on ICT usage in 14 industries in 33 markets, and which also owns telco research & advisory firm, Pyramid, and Strategic Defence Intelligence, which tracks the global defence business.

For the past few months, former IDC Australia & Datamonitor sales director, Paul Hodges, has been ramping up the APJ sales operation in Sydney, and is planning to add country & regional analysts over coming months. Collectively, the PDM businesses have an enormous amount of data on technology consumption & usage, so the potential to further develop services of interest to both vendors & users is high.

 Specialist Computing (Australia)

After covering data centre technology for more than a decade with Gartner & a long career in marketing/technical roles with major IT vendors such as HDS, Phil Sargeant established Specialist Computing last year to focus on storage technologies, as well as server & desktop virtualisation.

While strictly speaking a consultancy rather than an analyst firm as there is no regular cycle of research, Specialist’s services are primarily focused on end-users, including creating & evaluating storage RFT/RFPs and creating storage & virtualisation plans.

 Tech Research Asia (Australia & Japan)

Tim Dillon had an extensive background as an analyst – leading IDC Asia/Pacific’s mobility practice, establishing Current Analysis’ European analyst operation& heading up Asia/Pacific research for Current Analysis, among other roles – before setting up TRA two years ago. Tokyo-based Trevor Clarke, formerly IDC Australia’s lead infrastructure analyst and a former editor of Computerworld Australia, joined the team as a partner a few months later, with former Corporate Express/Staples CIO, Garry Whatley, coming on board more recently.

While TRA positions itself as able to assist end-user executives – and many of its engagements are with CxOs and CIOs across the region – the majority of its revenues are derived from ICT vendors and service providers.TRA has broad technology coverage – although its published research has a strong focus on mobility and the future of work – and says its primary focus is analysing the business outcomes from technology, rather than technology per se. All of its team are active on the regional speaking circuit.

Generally speaking, all of these firms have chosen to focus on market niches where they can compete effectively with some of the bigger players. Key advantages they enjoy include nimbleness & flexibility, unconstrained by the business models, research methodologies & market taxonomies of the more established firms.

Of course, they lack the reach & scale that give some of the leaders a certain amount of market muscle, and scaling up requires adding quality analysts, who are often hard to find. And while some of them will be capable of producing quality research across the APJ region, they will understandably be stronger in their home markets, simply because no amount of travel can compensate for having feet on the street.

From an AR perspective, vendors should be thinking about how, when & why to engage with these firms. Some will make more sense than others, but they’re certainly worth exploring further.

Have we missed anyone? Let us know if there are other new players we should be looking at.

Cheers,

Dave

Gartner just bets bigger & draws further from the pack – analysing Gartner’s & Forrester’s 2013 financial results

Everyone knows that Gartner is the big gorilla of the technology research & advisory business. It’s not just that it now generates six times the annual revenues of its nearest competitor, Forrester Research, but how it plays the game. Gartner bets big, & expects to win big.

Gartner & Forrester have both reported their 2013 financial results in the past few days, and the CEOs of both firms came across on the earnings calls as happy with their numbers. They pretty much hit the revenue & income targets they forecast 12 months ago, and were comfortable about hitting similar targets in the coming year.

The difference is in where the bar is set.

  •  For the year ended December 31, 2013, Gartner generated total revenues of $US1.784 billion, a 10 per cent increase on 2012, and at the lower end of 10 to 13 per cent growth forecast it announced 12 months ago. This year, its revenue growth guidance is 9 to 12 per cent.
  •  Forrester reported full year revenues of $US297.7 million, a 2 per cent increase on 2012, and at the upper end of the -1 to 2 per cent growth it forecast a year ago. This year, its revenue growth guidance is of the order of 2 to 5 per cent.

 Same same, but different

Issues of scale and nuanced discussions about the difference in the research portfolios aside, these two firms effectively sell the same products into the same markets, yet one expects – and gets – double-digit growth, while the other sees single-digit growth as a reasonable outcome.

For all the similarities between Gartner & Forrester, there are also plenty of subtle and not-so-subtle differences – in their research agendas, the type of analysts they employ, their sales approaches and so on. Perhaps they can provide some insight into the difference in performance between these two firms?

In 2012, the difference between these companies was much about sales execution, which was covered in detail in our blog post A tale of two sales teams – an analysis of Gartner’s & Forrester’s 2012 financials. This post is our most-read article of all time, by a significant margin, and continues to attract hits 12 months on.

The 2013 results are a little more complex, but I’m going to break them down in a similar way as 2012 to provide some insights into how these two firms approach a multi-billion dollar market which both of them continue to claim is under-penetrated.

Top line, bottom line

  •  As noted above, Gartner finished fiscal 2013 with total revenues of $US1.784 billion, an increase of 10 per cent over 2012, while Forrester reported revenues of $US297.7 million, an increase of just 2 per cent
  •  Gartner posted a net income of $US182.8 million, an increase of 10 per cent over 2012 & 10.3 per cent as a percentage of revenues, while Forrester reported a net income of $US12.8 million, a 51 per cent decrease on its 2012 result, & just 4.3 per cent as a percentage of revenues

Gartner’s Q4 revenue growth was similar at 10 per cent, while Forrester’s was a little stronger at 3 per cent. Gartner’s Q4 income growth was weaker at 4 per cent, but so was Forrester’s – declining 56 per cent. Gartner CFO Chris Lafond highlighted investment in the salesforce as impacting Q4 income, and while Forrester didn’t discuss this issue specifically, it pointed to investment in its consulting headcount & weaker conditions in Europe as affecting its overall bottom line.

 Research

Syndicated research services continue to account for the bulk of revenue for both firms – 71 per cent for Gartner, and 68 per cent for Forrester. But while Gartner’s research revenues grew 12 per cent for the year, Forrester’s were flat, and declined 1 per cent in Q4. Gartner’s guidance for 2014 research revenues is 11 to 13 per cent, and while Forrester didn’t provide a specific forecast for research, it did suggest that growth would come from other areas.

As we saw last year, Gartner didn’t spend a lot of time talking about research, apart from the numbers, while Forrester chairman & CEO George Colony introduced the earnings call with a discussion about the firm’s research focus in the “Age of the Customer”, as well as highlighting the increase in delivery of playbooks – now totalling 64 & double the previous year.

 Consulting

Forrester includes consulting in “Advisory & Other” which also includes events, while Gartner breaks it out as a separate line item. From a growth perspective, Forrester appears to have done better here than Gartner, with a 5 per cent increase in advisory, compared with 3 per cent growth in consulting for Gartner.

Consulting has become a key focus for Forrester – it increased the number of consultants to 60 at the end of 2013, and plans to almost double that to 114 by end 2014. That’s still a lot fewer than Gartner’s 480+ consultants, but a serious statement of intent. The aim is to move Forrester analysts out of project consulting to focus more on research & advisory, and consulting was flagged as one of the areas of strongest growth in 2014.

Gartner also seems to have fixed a few issues in its consulting business, which delivered disappointing results in 2012. While 2013 & forecast growth is modest, Gartner highlighted a backlog of $US106 million at the end of Q4.

Events

With a 15 per cent growth to just under $US200 million in revenues, events are the gift that keeps on giving for Gartner. That growth was achieved by adding just three events to the calendar, bringing the worldwide total to 64 events. Attendee revenues increased 11 per cent and exhibitor revenues increased 17 per cent for the year, suggesting that Gartner has struck a good balance between the needs of its delegates and sponsors.

Forrester doesn’t break out its events revenue, but indicated that it was pretty comfortable with its 2013 commitment level, focusing on “fewer, bigger, better” events focused around its most important five to seven roles.

Headcount

Gartner didn’t break down its headcount figures in its earnings statement, but CEO Gene Hall pointed to a 16 per cent increase in sales headcount at the end of 2013, and said that the long-term sales headcount growth target was 15 to 20 per cent a year.

For Forrester, total headcount grew 4 per cent, with research (including consulting) increasing 10 per cent to 475 and sales growing 5 per cent to 485, and with Forrester also highlighting that salesforce attrition was at its lowest in eight quarters. Once again, Gartner’s greater focus on the salesforce is obvious, and while it continued to fill research roles through 2013, it is unlikely that research headcount grew at the same pace as its sales team.

Client retention & contract value

Client retention is a critical metric for analyst firms – as it is for many sales organisations – because it’s generally easier to renew & increase an existing contract than to sign a new client. Generally, these are calculated on 12-month rolling averages, and we’re assuming that Gartner & Forrester use similar approaches, despite slightly different terminology.

Gartner reported a 82 per cent retention rate in terms of total client numbers, compared with 73 per cent for Forrester, while Gartner claimed a 98 per cent wallet retention rate, compared with 86 per cent in dollars for Forrester.

For Gartner, year-on-year contract value grew 12 per cent to $1.423 billion, while Forrester’s agreement value declined 2 per cent to $US216.5 million.

Outlook & areas of concern

Both Gartner & Forrester appeared reasonably bullish about 2014, despite the different target growth rates. For Forrester, 2013 was impacted by weakness in Europe due to economic issues & client restructuring, while Gartner highlighted the US federal government and government in some parts of Europe as areas of softness last year. While no major improvement in government spending is expected this year, neither firm flagged it as likely to have any deeper impact in 2014.

Forrester went into 2013 on the back of a weak year characterised by poor sales execution, and set itself some modest goals as it set about correcting those problems. Delivering against its guidance, it has proven that it can execute against a plan, so can be expected to do that again in 2014 if it continues to focus its efforts on the areas which will grow its top & bottom lines.

Gartner went into 2013 on the back of a strong year, with all its ducks in a row. It’s in pretty much the same position as we go into 2014, and has a pretty strong track record of executing against its plans.

In 2010, Gartner was just over five times bigger than Forrester, but based on 2013 revenues, Gartner is now six times the size of its closest competitor. With a significant margin between the growth forecasts of these two firms and barring any major changes in the market, we can expect this delta to increase this year, and probably beyond that.

So long as Gartner bets big in terms of investment in its sales & research headcount and the growth targets it sets itself, as well as playing those cards sagely, it will continue to outperform not only Forrester, but many of the smaller firms which follow it in the revenue rankings. This might be good for Gartner, but whether it’s good for the technology research & advisory business overall is open to debate.

What do you think?

Cheers,

Dave

It’s all about the conversation – why Gartner Symposium works at so many levels

As Gartner Symposium season draws to a close this week in Barcelona, it’s worth reflecting on what a powerhouse this event has become right around the world & why it’s become so important – for users, for vendors and – most particularly – for AR professionals. Regardless of your attitude about Gartner, you can’t ignore Symposium.

Events have become a serious business for Gartner. Although accounting for just 11 per cent – $US174 million – of Gartner’s 2012 revenues, they were the highest growth area at 17 per cent. The firm now runs close to 70 events around the world, some of them technology-specific, but Symposium is still the big kahuna, with eight locations globally.

The numbers are big – in terms of delegates, exhibitors, sessions and analysts. And dollars. What separates Symposium/ITXpo from every other IT industry event is that everyone pays to play – in Australia, delegates pay about $3,500 each (sometimes included in contracts), vendors pay $50,000 and upwards to buy a piece of real estate on the ITXpo showfloor, and cheapskates like me pay a few hundred bucks just to hang around the showfloor chatting to exhibitors, analysts  & delegates.

But the interesting thing is that it delivers value for everyone – it’s symbiotic. I’ve written before about how AR professionals should plan to get value out of Symposium, but let’s summarise how this works:

  • AR folks get to connect with analysts through 1:1s & informal discussions, as well as introduce spokespeople
  • AR folks get to hear about what analysts are saying about their companies & their competitors
  • Vendor salespeople get to pitch to high quality prospects, including CIOs
  • Vendor sales & marketing folks get to hear what Gartner really thinks about them, 1:1 or in audience
  • Gartner analysts get rich insights about hot button issues from conducting back-to-back 1:1s with the country’s leading technology users
  • Gartner salespeople get to pitch their services to users & vendors alike
  • Everyone gets to hang out & talk about technology, business & stuff….

In this video I talk with a few AR-savvy vendors about why they commit so much time & money to Symposium. It’s obvious that all of them go there with some very clear objectives.

It’s all about the conversation. If you can’t get some value out of Symposium/ITXpo, you’re probably not trying hard enough…

Cheers,

Dave

Crunching the analyst firm numbers – what do they tell us about Gartner, Forrester, IDC & others?

Not all IT research is about numbers, but the IT analyst business definitely is. It’s a business after all, and if you don’t make the numbers, you don’t have a business. But what’s interesting is how many different ways there are to make the numbers stack up.

It’s somewhat ironic that while IT analyst firms often rely on public – and private – disclosure of information from both vendors and end-user organisations to make their prognostications, they often don’t like to reveal too much about their own businesses. The big public firms, Gartner & Forrester, disclose good detail about their revenues to meet their statutory requirements, and perhaps a little more, while the private firms tend to be fairly vague.

As a former analyst, I’ve always been intrigued about the insights you can gain by breaking down the numbers. Topline and bottom line figures tell you one thing, but there’s often a more interesting story when you dig a bit deeper – you can see this in my recent post analysing the 2012 financial results for Gartner & Forrester.

I’ve long considered analyst headcount a good indicator of the health of analyst firm. If the headcount is growing, then that’s a reasonable sign that the business is also growing – or has good prospects of growth. Analysts are a product, and typically you don’t hire more of them if the ones you’ve already got aren’t selling.

But it’s not as simple as that. If you can increase revenue without adding analyst headcount ie adding costs, then you’re going to increase the profit margin, which is also a positive indicator. So you need to look at the relationship between analyst headcount, total headcount and revenue to get a better idea of how a firm is performing.

This is where it gets tricky. Not all of these data points are available for all firms, nor are they necessarily comparable. But by poking around the websites of a few of the leading firms and asking questions of their PR folks, I’ve come up with some insights.

Analyst headcounts

For simplicity’s sake, I’m going to use the term “analyst” a little loosely because of the different way that each firm categorises their staff, combining analysts & consultants, because these roles are sometimes shared.

According to Gartner’s website, it has 902 analysts and 500 consultants (total 1,402), an increase of just under 10% from a year earlier, while Forrester employs 432 “research professionals”, a decline of 4% from last year. IDC told me it employs 1,075 analysts, which is higher than the 1,000 stated on its website, although that latter figure has been unchanged for some time.

Ovum advised me that it currently employs 102 analysts and consultants, which is lower than I’d estimated from the analyst bios listed on its website, but those include management. This figure seems largely unchanged from a year ago. Frost & Sullivan confirmed that it employs 1,800 analysts and consultants worldwide, and while this figure seems relatively unchanged, it is unclear how many of these are focused primarily on IT & communications, as is the case for the other firms.

Looking at analysts as a percentage of total employees, Gartner has the lowest ratio – just over 25% – while IDC has the highest, at 63%. Forrester – at 35% – and Ovum – 55% – sit in between these two extremes, and all appear to have drifted downwards slightly in the past couple of years. Of course, these firms have quite different business models, research services, analyst types and client bases, so it is not unusual that the ratios should vary, but it is interesting how starkly different they are.

Unfortunately, we don’t have accurate data for sales headcount for these firms (except Ovum, which is about 25% of its total), but we do know that Gartner has invested heavily in its salesforce over recent years, particularly in Asia/Pacific, but elsewhere as well. Forrester and IDC have also increased their sales hires in the past year, evidenced by total headcount growing at a greater rate than analyst headcount.

Mapping headcount to revenue

The headcount figures become more interesting when we map them against revenues. Forrester and IDC have similar revenue per employee figures – about $US236,000 – but Gartner’s is about 25% higher, just under $US300,000.

headcountThe differences become even more dramatic when we compare revenue per “analyst.” Gartner is generating more than $1.1 million per analyst, some 70% higher than Forrester, and more than 200% higher than IDC! Granted, the different business models don’t make this an apples-for-apples comparison, but the deltas are large enough to demonstrate the point.

So what does this tell us? Certainly, Gartner has optimised its sales-to-analyst ratio in recent years, but can it still make gains from pushing this approach further? At what point does reducing the analyst percentage of headcount start to have a negative impact?

Forrester blamed poor sales execution for its weak financial performance last year, and has indicated a greater focus on sales to turn the business around. But does it need to match Gartner to make that happen? Forrester is about one-fifth the size of Gartner, so does scale change the equation?

IDC obviously has a different client base to these two firms, and the analyst workloads are quite different, but can it benefit from adopting this approach, driving analyst percentages down and sales ratios up to increase revenues & margins?

And what does this mean for other, smaller firms, where the sales ratios tend to be lower? Can they learn and benefit from Gartner’s approach?

On the surface, this doesn’t look like a good trend for the analyst business, from an AR perspective. But on deeper assessment, fewer analysts with greater impact & influence are much easier to engage with than lots of analysts with less impact. In other words, simply increasing analyst headcount is probably less effective than improving the penetration of existing analysts by putting more sales resources behind them.

This is one of those areas where I don’t have all the answers, but I find the questions intriguing. What do you think? How important are these ratios to the performance of an analyst firm, to the health of the analyst business overall, to the execution of a vendor AR program? What else can we learn from this analysis?

Cheers,

Dave

Why LinkedIn is now more important than Twitter for tech analysts in APJ

While LinkedIn has long been popular with tech industry analysts in Asia/Pacific for some types of social media engagement, it has recently bypassed Twitter as the preferred platform for just about everything, as analysts focus more on how effective each platform is for engaging with their specific audiences.

It’s not to say that analysts have fallen out of love with Twitter – that’s certainly not the case – but it seems that they are less infatuated than they were. They are spending more time with their old flame, LinkedIn, and their new dalliance – a little surprisingly – is YouTube.

Why this has happened makes for some interesting discussion, and I’ll get to that a little further on.

First, some context around these conclusions

For the past 10 years, Intelligen has conducted a survey of industry analysts in APJ, primarily focused on analyst perceptions of specific vendor AR programs, but also exploring analyst preferences and attitudes on a range of issues. The most recent iteration of our Understanding the Influencers study was conducted in late 2012, and yielded responses from 132 analysts at 19 firms in 10 countries, overlaid with 20 in-depth qualitative interviews with senior analysts.

For the past two years, we’ve asked some specific questions about analyst use of social media, so we now have some comparative data to analyse. In short, we asked analysts to tell us whether they use key social media platforms for research and promotion “often”, “sometimes”, “rarely” or “never”. For simplicity’s sake, we equate the aggregate of “often” and “sometimes” to “regular” usage.

From a research perspective, analysts are using LinkedIn to search for subject matter experts (both users & vendors) and raise questions about user experiences in the many discussion groups; posting questions and testing hypotheses on Twitter; reading vendor and commentator blogs to gain insight into product and technology directions; watching YouTube videos to update on products, technologies and strategies; and many other ways of gathering information.

From a promotion perspective, analysts are posting links to research and events on Twitter and LinkedIn; earnestly expanding their networks on LinkedIn; building their personal brands through ongoing “news” commentary on Twitter; writing blogs which detail their research and/or opinions; and many other ways of raising their profile and building awareness of their capabilities.

The 2011 results were discussed in detail in this blog post, but in summary what we found was interesting and relatively unsurprising, confirming what we knew anecdotally. Nearly all analysts were using some form of social media, but fewer of them were using SM “regularly”, with analysts in India the greatest proponents. For research, analysts preferred LinkedIn & blogs over Twitter, while for promotion, analysts preferred Twitter over LinkedIn.

What’s changed in 2012?

When we compare the 2012 results with 2011, we can see that the usage patterns are fairly similar, whether we view them from a geographic or platform perspective. As there was a significant correlation between the response sample in both years, this gives us confidence that the differences are fairly real, not a result of sample differences.

Social media use 2012In the case of the research results, there is a very strong correlation between 2011 and 2012, with a couple of minor variances. What is interesting is that the percentage of analysts using LinkedIn for research has increased slightly, while use of blogs & Twitter dropped at a similar rate, and use of YouTube increased sharply (although the volumes are lower).

From a promotion perspective, use of LinkedIn decreased slightly, but the decline in use of Twitter and blogs was much greater, meaning that more analysts are now using LinkedIn for promotion than Twitter. LinkedIn is the preferred platform for promotion in India and Greater China, while analysts in Australia use both LinkedIn & Twitter equally, and ASEAN analysts still have a slight preference for Twitter.

So not only is LinkedIn the preferred platform among APJ analysts for both research and promotion, but Twitter is now used by more analysts for research than for promotion. The delta between research and promotion use has grown – analysts are now more focused on gathering information via social media than just pushing out their opinions.

Why is this so?

There is a strong likelihood that LinkedIn’s decision to stop supporting Twitter last year has changed analyst behaviour – analysts who were previously posting to LinkedIn via their Twitter accounts are now using LinkedIn as a primary platform, often pushing updates out to Twitter. But many analysts are still using these platforms separately.

What has taken place over the past couple of years is a better understanding among analysts of these platforms, and which ones yield the best results – and it has a lot to do with audience.

Research use 2012For analysts, Twitter undoubtedly has many benefits. It is quick, it is real-time, and through the use of hashtags, retweets & searches it allows analysts to reach people they couldn’t otherwise even identify. But engagement is relatively casual & ill-defined, and there continue to be doubts about how influential it is in enterprise B2B purchasing decisions – this post from Influencer Marketing Review last week provides some interesting insights into how sheer volume of tweets has a very limited relationship with influence over enterprise software buyers.

LinkedIn is more “formal”, but it has the advantage of a known audience. LinkedIn members have detailed public profiles which allow analysts to determine how relevant they are to their research areas (and assess credibility), connections are made in a more structured way, and discussion groups bring like-minded individuals together in generally more substantial conversations.

Both platforms have something to offer analysts and will continue to do so, but it’s hard to see how LinkedIn will not remain the partner of choice. Analysts are focused on depth, detail, specifics & context, and that’s what they get through LinkedIn. But analysts are also opportunistic and self-promoters, so they’re not going to walk away from Twitter any time soon.

Personally, I find the increased uptake of YouTube just as interesting. Once upon a time, you could never have engaged the analyst community with video, but the fact is that they are watching more, and YouTube is an extremely simple & accessible platform. Done well, done smart & done in moderation, it has a lot to offer.

What does this mean for AR?

While we’ve seen changes in how analysts are using social media, the fundamentals from an AR perspective haven’t changed. When I wrote about this topic last year, I provided this advice to AR professionals, and I think the guidelines are pretty much the same.

But what do you think?

I’ve relied on both quantitative data and qualitative feedback to draw my conclusions, but what do you think? Social media is still an evolving area, so I’d be really interested to hear experiences from AR pros & analysts alike, plus answer any questions. Let me know – you know how to do it!

Cheers,

Dave

A tale of two sales teams – an analysis of Gartner’s & Forrester’s 2012 financials

If you ever wanted evidence that success in the analyst business is about more than good research, then the latest financial results from Gartner and Forrester tell the story – it’s as much about sales performance as anything else.

In its earnings call on Wednesday (US time) Forrester chairman & CEO, George Colony, CFO Michael Doyle & recently-appointed chief sales officer, Mike Morhardt, all pinned the blame for weak 2012 results on a complex sales compensation plan implemented in early 2012, which subsequently accelerated salesforce attrition & impacted bookings growth.

A week ago, Gartner reported much stronger growth for the fiscal year, and attributed its performance, in part, to a continued focus on improving sales productivity. Increasing its sales headcount by 12 per cent over the year probably didn’t hurt, either.

Looking at the numbers and listening to the earnings calls, Gartner appears to be at the top of its game & would seem to have no intention of backing off, while Forrester is more in recovery mode from a tough year, with its outlook still a little tentative. So let’s take a look at the breakdown and see what it can tell us about the prospects for both firms.

Top line, bottom line

  • Gartner finished fiscal 2012 with total revenues of $US1.616 billion, an increase of 10 per cent over 2011, while Forrester reported revenues of $US293 million, an increase of just 3 per cent
  • Gartner posted a net income of $US166 million, an increase of 21 per cent over 2011 & 10.3 per cent as a percentage of revenues, while Forrester recorded net income of $US26 million, a growth of 13 per cent & 8.9 per cent as a percentage of sales

While the deltas between those sets of figures are telling, they’re not too bad when compared to the Q4 numbers. Forrester’s revenues grew less than 1 per cent from Q4 2011 and net income declined 47 per cent, while Gartner reported revenue growth of 11 per cent and net income growth of 31 per cent.

It’s not unusual to have a strong Q4 – most sales teams are driven to close deals at the eleventh hour – so the fact that Forrester didn’t push more over the line is interesting. Gartner CEO Gene Hall spoke of double-digit growth in earnings, revenues & cashflow in Q4, plus double-digit growth in research in all of its major geographies. There was no such enthusiasm on the Forrester call.

Research

Syndicated research services account for about the same percentage of revenue for both firms – 70 per cent in the case of Gartner, 69 per cent for Forrester. But while research revenues grew 12 per cent year-on-year for Gartner, Forrester’s grew at only 6 per cent. The delta was even greater in Q4 – Gartner’s research revenues increased almost 13 per cent, Forrester’s less than 3 per cent.

Outside of the numbers, Gartner didn’t talk about its research business much at all. By contrast, Colony spent a good chunk of his introductory remarks talking about research products & methodologies, most notable of which was his discussion of playbooks, which Forrester introduced in 2012 to guide customer roles through every stage of a strategy, from development to execution. While the broader analyst & AR community seems a little uncertain that the playbooks are a true differentiator for Forrester, Colony confidently stated that the firm would double the number of playbooks from 39 in 2013, with all of them being constantly refreshed.

Events

There is no doubt that events have become a nice cash cow and a great growth business for Gartner over the past few years. Events revenue grew 17 per cent in 2012 and 21 per cent in Q4, and now account for 11 per cent of revenues, up from 10 per cent a year earlier. In 2012, Gartner ran 62 events worldwide, and plans to increase that by a handful this year – why wouldn’t you, when attendee numbers grew 8 per cent, exhibitors increased 20 per cent, and the business provides a 46 per cent gross contribution!

Forrester doesn’t break out events revenues in its balance sheet, but seems less bullish about this segment than Gartner. Forrester had been steadily increasing the number of events it hosted, but plans to reduce the total to 19 in 2013 – “fewer, bigger & better events” with improved customer experience.

Consulting

This was a weak segment for both firms. Gartner’s consulting revenues declined 1 per cent for the year and 8 per cent in Q4, which Gartner CFO Chris Lafond said was “below expectations” and was a result of contract optimisation. Despite this, Gartner had increased billable headcount by 5 per cent by the end of the year.

Forrester’s consulting revenues are included in “advisory services and other” which presumably includes events revenues. This line item declined 2 per cent for the year and 4 per cent in Q4, with CFO Michael Doyle saying that consulting delivery had been impacted by analyst attrition, although bookings had grown.

Headcount

Gartner didn’t mention total or research headcounts on its earnings call (and hasn’t yet updated its factsheet), but there is little doubt that both of those increased in 2012. There has been a constant stream of research headcount requisitions posted (and filled) over the past several months, and there have been few departures. Gartner said that it added 149 sales positions, bringing the total 1,417, and billable consulting headcount increased to 503.

Forrester said on its earnings call that sales attrition slowed after modifying the compensation plan mid-year, and that it finished the year with 274 quota-carrying salespeople, 239 of whom were “fully-ramped”, after increasing recruitment. Its press statement cited a total salesforce of 462, up 5.5 per cent for the year, while of more concern was the fact that analyst headcount declined 4 per cent to 432. Forrester also stated that it would eliminate approximately 30 jobs “to streamline its operations” but gave no detail about where those cuts would be.

Outlook

Gartner is bullish about 2013, saying it is “well-positioned for another year of strong growth” and providing formal guidance of 10 to 13 per cent growth in total revenues, with research strongest at 13 to 14 per cent. Forrester’s guidance range for the full year is -1 per cent to +2 per cent, with executives saying it was hoped that recent & ongoing changes to the sales structure would lead to a modest increase in sales productivity.

What next?

Gartner seems to have all the levers for its business in the right places, but no doubt will continue to fine-tune. This is a company which has comfortably increased its prices by between 3 and 6 per cent per annum since 2005, has a quarterly client retention rate of 83 per cent (from more than 13,300 clients) and attracts more than 6,000 CIOs to its events annually. The juggernaut rolls on…

Forrester certainly doesn’t look as comfortable, but it’s not out of the game by a long shot. Less than one-fifth the size of Gartner, the third-largest IT analyst firm now has 2,462 clients, having consolidated its accounts for a single client view, and its client retention rate is just a little lower at 77 per cent. If it adjusts its levers correctly this year, it will stay on track and return to growth.

Both of these firms know that clients will continue to buy information and advisory services from them, whether the economy is good or bad – what differs is what they buy in up and down markets, and how much they pay. Both of these firms still think there’s plenty of upside – this is what they had to say about long term prospects:

“Our level of penetration is very low in all of [our geographic markets], even the US.” Gene Hall, Gartner CEO

“This is a target-rich environment, the market opportunity is as big as ever.” Mike Morhardt, Forrester CSO

Sounds like a good business to be in… what do you think?

cheers,

Dave

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