Vendor lapdogs

Many sceptics question the impartiality of analysts and wonder how easily the fat cheques that major suppliers pay for analyst services sway their judgements. And they point to the many examples of over-optimistic forecasts and outrageous analyst predictions that proved to be wildly inaccurate.

For example, in 1999, the Gartner Group forecast that, by 2004, the application service provider (ASP) market would be worth some $25 billion worldwide. Yet after two years, the bottom had dropped out the market and it is worth only a fraction of that.

One explanation for such irrational exuberance is commercial opportunism: The bigger the numbers an analyst group conjures up, the easier it is to sell its own research services about that new technology.

The analysts themselves are usually affronted by such suggestions – but they often question the integrity of some of their peers. For example, Bob Weiler, the former chairman and CEO of Giga Information Group until its acquisition by Forrester Research in February 2003, complained that there were “a few firms… that blatantly can be bought off”.

Forrester’s Stan Dolberg says that he has seen rival analysts (rather than sales staff) at trade shows actively involved in selling on behalf of clients. Some analyst groups may even give their analysts sales commissions.

In spite of this, Dave Cadoff, a marketing consultant and author of Analysts’ Secrets Exposed, says that the mainstream analysts are honest, but that suppliers often need to pay more attention to their analyst relations effort – if they have one.

“They are all very smart people. You can’t influence them, you have to make a cogent argument and you have to have the detail to back up everything you say. If you lie, they are going to find out,” he says.

The best way that suppliers can make a good impression on analysts, he adds, is to give them access to customers. “They love that,” he says, “because they sort of believe the vendor, but they always believe the customer.”

The influencers

Analysts can almost dictate whether or not a company makes it to a customer’s short-list, says Dave Cadoff, a marketing consultant and author of the book Analysts’ Secrets Exposed. “When I was working at a web content management company, it was not ranked very highly in a Forrester Research report and that probably cost the company hundreds of deals and millions of dollars,” he says.

Market researcher Outsell backs up this belief. It suggests that more than half of the largest companies in the US subscribe to analyst research services and, in a survey, one-third admitted that they have an “extremely high influence” on their technology selections.

In the UK, supermarket chain Sainsbury’s hired Gartner to advise when it sought to overhaul its entire IT department. “We found Gartner very useful as a third-party, advising, guiding and providing some input about global best practice,” says Sainsbury’s CIO Margaret Miller.

Consolidation

When Forrester Research revealed that revenues had plunged by one-third in 2002, it provided definitive proof that analysts were no more immune from the economic downturn than the companies or industries they cover.

For Forrester, the answer was to acquire rival Giga Information Group, Gideon Gartner’s second stab at IT analysis, set up in 1995. New media analyst Jupiter was almost an early victim when it narrowly avoided a brush with bankruptcy in 2000 by merging with wealthier rival MediaMatrix.

However, many other, smaller groups have not lasted. Hurwitz Group, a respected group of heavyweight analysts, was forced to close its doors in October last year. PC Data and Strategis Group also closed in 2002, while Gartner sold TechRepublic to online information provider CNet.

In the UK, ComputerWire, which once straddled the worlds of both print publishing and IT analysis, filed for bankruptcy twice before its assets were sold to Datamonitor, a broad-based analyst company that has itself suffered from a revenue decline and patchy profitability.

Meanwhile, many others are finding the recession is tough. In the UK, both Butler Group and Bloor Research have been forced to rein in expansion plans and adopt flexible, low price strategies to maintain demand.

Quotes

“The one thing that really annoys me are analyst groups that write reports and white papers that are heavily biased towards the vendor’s products because they have been paid” Rakesh Kumar, vice president of Meta Group

“Analysts for hire, from a vendor’s perspective, are good. Vendors like them… You might know that these are analysts for hire, I know this, but the average customer might not,” says Dave Cadoff, a consultant and author of the book, “Analysts’ Secrets Exposed”

“This [Sun StarOffice] is a serious threat to Microsoft… StarOffice has around 30 percent of the German market already.” Robin Bloor, Bloor Research, August 1999