Has time come for a disruptive analyst firm?

Wine connoisseurs take as much pleasure talking about drink than savouring it…. so let me indulge you into an analogy between research firms and some of my favourites.

As with fine wines and corporate buying trends, so goes analyst firms.  The shift of power from IT to Business signifies a move from Wine to Champagne….

Ray (@rwang0, LinkedIn, blog) writes here about the latest IIAR Forum London and he’s got a few interesting points.

  1. Client base and research approach
    • There’s a wine analogy there: Gartner is like a Bordeaux (predictable blends) and Forrester is more like a Burgundy (more variable but sometimes great).
    • Gartner tends to sell to a mature IT audience, which is where most of the IT budget is. Its research output thus tends to be more conservative, after all most people don’t really want to experiment the at bleeding edge. As a result, it’s unlikely you’ll be surprised by a genial piece of research.
    • Forrester does this as well, but because (or thanks to) its marketing research, also cater for that role and its research style tends to be more adventurous (the Giga legacy probably) even if its coverage quality and quality is less constant.
    • And IDC sells to IT vendors mostly, a little to industry leaders (has to be a Côtes du Rhône, with elements of both depending on the individual analyst for opinion whilst the trackers are more constant –Shiraz is a bit like Marmite, it’s “love it or hate it”).
    • The point there is that your client base is your legacy, and unless you’re Steve Jobs or Henry Ford, most fail to break away from ‘building a faster horse’. In IT research aspects, it translates into “IT must align with business” (yawn). Analysts have been preaching this for the last 15 years, and it seems the issue hasn’t gone away.  Some part of the IT will be run as a utility (a better word than cloud, and in the same bucket than facilities and real estate) whilst the innovative stuff will be done by the business. IT is the business, the rest is a commodity (this doesn’t mean that everyone knows how to provision a commodity efficiently).
    • Another interesting aspect is that because they sell to a mature audience, they will confronted to a bit of an issue when baby-boomers will (finally) retire in the coming 5 years and be replaced by Gen-X and Gen-Y who have no appetite for academic style research. [Note: there’s a discussion here with some fellow IIAR members on whether the Gartner client base is that, er, experienced. What do you think?]
      Indeed Gartner is trying (again) to grow its SMB user base, but unless they radically change the way research is written, they will probably fail again. Constellation has probably a good card to play there by targeting smaller, innovative companies –even though up to 2/3 won’t make it into adult age.
  2. On “design point”, Constellation is pitching itself right in the “future of work” trend.
    • For analysts, time will tell if it’s ensuring, but trying to retain them by force (check this letter from Forrester’s CEO George Colony on non-compete) isn’t going to build a star-stable. Indeed, whilst Gartner seems to be doing a good job at keeping its best analyst, but it’d be curious to see how the average experience of Forrester analysts has evolved over time. There seem to be more researchers who graduated as analysts than analysts who came from a previous career. That in itself isn’t a sole predictor for insight, though it helps, but one would think that there’s a cost aspect (it’s the Forrester vs. the Giga models).
    • For users, I’d venture out to say it’s again like Marmite.  For establish companies, dealing with established brands having real offices offices is probably deemed ‘safer’. For Constellation’s target customers, meeting in a Stabucks probably isn’t a problem. James Governor (@monkchips, blog) seems to have found out that being unconventional actually helps with his specific audience: developpers.
  3. On analyst access
    • In terms of business model, Ray is indeed accessible which is quite refreshing compared to other analysts who for instance reduce briefing slots to 30mn. Whether that can be scaled without administering Modafinil to the rest remains to be seen.
    • For end users, it would be a net-gain if the processes to ensure a constant user experience as Constellation grows in size work effectively.
  4. On research approach
    • Legacy firms underplay the community aspect indeed but let’s not forget that Gartner is quite a large community in itself.
    • From an end-user aspect, one could expect more innovative research.
  5. On sales
    • IMHO it’s where I’ll be watching Constellation as converting from a consulting model to a RAS one isn’t that straightforward. So far they seem to be on the right track though.

Bottom line:

  • Gaining enough scale to gain a sufficient end-user base is challenging for mid-sized firms but Constellation seem to be making all the right noises.
  • Establish firms need to break away from their traditional user base to reinvent themselves before baby-boomers retire.

Ludovic Leforestier (LinkedIn, @lludovic)

See also Duncan’s post on the IIAR Forum with Constellation:

And Ray Wang’s own post:

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26 Responses to Has time come for a disruptive analyst firm?

  1. EQ Tuesday 27th March 2012 at 18:53 #

    Love the wine anologies Ludo, great job. At the end of the day that old “tragic quadrant” applies, doesn’t it – analysts who understand their markets and how related technologies play, and can effectively communicate this info, and are effectively marketed, win. There are more ways to communicate and market than there were 20 years ago, and the more established firms tend to play catch-up on that front, but not to the point where they have been disrupted yet. Why? Because they still retain the largest number of analysts who are upper-right in the tragic quadrant.

    There is also an undercurrent of a doubt out there regarding analysts who spend all day on social media, doubt about (1) privacy and (2) if you are tweeting are you doing research? There are a few who have the cycles and multitasking ability to do both, but they are as rare (and as pricey) as a great Sauternes from a great year.

    To me in order to disrupt you have to seriously alter the cost/value model, e.g., how can an IT department or vendor obtain the same quality, depth and breadth of information that they get from Gartner for 1/10th the cost? Or maybe the size of the drink changes, from the Gartner magnum, to half bottles. When some analyst firm has come up with that equation, then the established firms will truly be at risk. Find me a $10 Chilean Cabernet half-bottle that satisifies as much as a $400 Pauillac magnum or $100 Napa 750ml.

    Best regards, Evan, ex-IIAR board member and ex-AR practitioner

  2. marcduke Tuesday 27th March 2012 at 20:23 #

    The irony of describing an analyst firm is not lost on me. I look forward to understanding more about Constellation in the future but I can’t help but feel that technology disrupts not people. But as always I look forward to learning more and being proved wrong.

  3. marcduke Tuesday 27th March 2012 at 20:26 #

    I find it somewhat ironic that we describe an analyst firm as disruptive. I can’t help but feel it is technology that is disruptive rather than a firm per se, but I look forward to learning more about Constellation in the future.

  4. Teressa Wednesday 28th March 2012 at 15:22 #

    I disagree with some of the thoughts – regarding younger generations disregarding traditional research – I think that is a construct of where they are in their own maturity cycle and as they mature will evolve to value traditional research methods more.

  5. Dale Vile Wednesday 28th March 2012 at 20:35 #

    What about analysts who communicate to different audiences using different styles? That’s what we do.

    If often take the same underlying material/advice and deliver it multiple ways – workshop style in a consulting context, presentation style at a F2F SIG gathering, debate style on a panel based Webcast, high pace Web writing style via sites like The Register, considered writing style on Web sites such as CIO Online and Computer Weekly, structured argument style in white papers and research reports….

    I personally think that analysts need to be versatile in how they communicate to be effective. Our methodology is based on four phases – observe, analyse, interpret and articulate – the first three being of little use unless the last one is done effectively.

    If you put the emphasis on formal reports and subscriptions, you won’t connect effectively with a lot of people. Equally, if you put the emphasis on social media, you miss the opportunity to connect with a bunch of others.

    I also agree with Teressa in that the Baby Boomers, Gen X, Gen Y thing is a red herring. I would also add that different people (regardless of age and maturity) absorb information differently. Some respond best to visual representation, some to the written word, others to audio or participative debate, and so on. Indeed, even a single individual is likely to respond to multiple modes of delivery depending on context, mood, job and hand, and so on.

    Bottom line, it’s versatility that matters, not individual communication channels, styles or mechanisms.

  6. Tony Lock Thursday 29th March 2012 at 11:05 #

    I agree with Dale. But in order to do analysis well in any field, never mind IT and business, it is important to have “some experience” to make sure that understanding is based on the real world rather than purley theoretical models. It also helps to have a decent grasp of mathematics and numbers as well as what infleunces the way peolpe answer questions.

    The wine analagy is nice, if a little constraining. 🙂 Especially to a good beer specialist.

  7. Ludovic Leforestier Thursday 29th March 2012 at 12:17 #

    @evanquinn, good point on the “disruptiveness”. IMHO, a business model can be disruptive as much as a technology (e.g. Dell, CheapoAirlines) and in the analyst space we have not seen 10x disruptive trends.

    @Teressajimenez and @dalevile: I quite disagree, the written style has changed enormously in the last 10 years. Check the old style letters and memo’s from the 70ies if you can find some, check the research reports from NASA for instance. And I remember when USA today was a novelty, now all papers have a much more concise style, with infographics, etc. Even the WP and FT.
    This said, @dalevile is right to say that we’re moving from a one-way publication to an online conversation.

    @locktd: do you mean some analysts are like lagers (crisp, instant gratification at first and bland with no depth after) whilst others are like ales (rich and complex but for the discernint one) and the best are a like bottle fermented beers (better after maturation but painful in high doses)?
    I fully agree with your point on real world experience -it’s hard to be a good analyst without (even if some achieved that) but I’ve never seen a great analyst who’s been just an analyst all his of her life).

    • Dale Vile Thursday 29th March 2012 at 22:24 #

      Hi Ludo – not sure what you are actually disagreeing with. If you are trying to say that people no longer want formatted PDFs they can print out (or nowadays perhaps read on their iPad) then you are mistaken. Most people are not into Twitter – really, they are not. And most people do not want two-way interaction online – really, they do not. When we do interact electronically, especially on social media, we have to understand that the people we are interacting with are in the minority, and depending on the medium are often not representative of the majority of passive ‘readers’. Of course interactive advisory/consulting in private (phone, face-to-face, email) is different kettle of fish.

      The main point I was trying to make was that different people consume (or interact) though different media/mechanisms at different times in different scenarios, and if you want to maximise your reach, you need to reach out through multuple channels in a variety of styles – from Twitter at one end to formal reports delivered through subscriptions or other traditional publishing mechanisms at the other.

      • Ludovic Leforestier Friday 30th March 2012 at 11:36 #

        Hi Dale,
        I guess I’d sum this up in saying we live in an attention economy. This impacts channels (people spend more time on Facebook, less in front of TV or reading papers) as well as format. On that latter point, IMHO long, academic style, papers have less chance to be read and made an impact. It’s highly subjective and maybe Teressa is right: GenY will be weaned from txting and grow-up. Maybe not.

  8. Lisbet Sherlock Friday 30th March 2012 at 11:30 #

    I think that there is still a strong market for traditional information – forecast, market sizing and market shares. We certainly need it more than ever. Where the disruption is coming is in how that information is sourced. It’s probably not just Cisco that has really pulled back on the numbers it releases to analysts and it’s probably not just Cisco that wants ever more accurate and detailed info from the analysts. The old model where we give you our watch and then you charge us when we want to know the time (or whatever that expression is!) is over. There are some companies that will be able to address this and some that will struggle. In terms of disruptive approaches here, I think we are seeing something very interesting emerging with the Candefero data and the possibilities that should bring to Canalys and I also think that Gartner’s analytics data will give them a great commercial advantage when they begin to exploit that more extensively. A really interesting question which Gartner asks on its CEO survey is “what type of information is coming that has the potential to disrupt your business significantly” with examples being things like DNA sequencing to the healthcare sector opening up the possibilities of personalized medicine etc etc. It seems to me that it would be a good question for the analyst firms to explore on their own behalf as well.

  9. David R Saturday 31st March 2012 at 12:14 #

    I think it is easy to kick Gartner. It’s always easy to kick the largest, most successful analyst company in the world. Plus any new entrant must think they bring something new to the table – else why bother entering in the first place.

    I think what Constellation is doing is exciting and interesting. I shall watch it careful to see how things develop.

    Will it be the first of the newer entrants to be able to scale-up? Lots of companies have started in the analyst space in recent years but I’ve not seen anyone grow up to be a serious global challenger to Gartner, IDC or Forrester yet.

    I think it’s interesting that we’ve not seen the same type of growth explosion from any of the start-ups in the analyst world that we’ve had in the IT space with the likes of Google, Facebook, Twitter etc

    Does the structure of the analyst market mean that won’t happen or that actually it doesn’t need to?

    Are we seeing the death of the global giants dominating the research world, with them being replaced by a multitude of small companies?

    No-one knows but I wouldn’t bet on it. Looking around at other industries, it still seems the norm for markets to generally be dominated by a small number of large companies.

    And as they get big, companies tend to become more conservative for a whole host of reasons. They bring in professional managers and not entrapreneurs. The downsides of getting it wrong are bigger. The complexities of running a large organisation and simply keeping the doors open and the lights on shouldn’t be under-estimated.

    That in itself will – to some extent – drive the type of research they buy and who they buy it from.

    And you shouldn’t ignore the fact that Gartner is also trying to change with the times. For instance, you’ve got the introduction of Maverick Research (described by Gartner as deliberately exposing “unconventional thinking and may not agree with Gartner’s official positions”).

    I’d love for Gartner to be challenged in a big way. Competition is healthy. It keeps people on their toes and focused on delivering what customers want.

    But for all the exciting things happening in the market right now, I’m just not sure I see how that is going to happen.

  10. Justin Time Saturday 31st March 2012 at 20:29 #

    Interesting discussion. Trying to claim tiny upstarts can come along and challenge a firm like Gartner, with all its decades of pedigree is absurd.

    True – social media has given people a platform to be outspoken and channel their insight and research to mass audiences effectively

    False – small firms with loose affiliations of individuals which frequently turnover are not the future. They can agitate, take a little piece of revenue away from Gartner and generally make a nuisance of themselves. However, to challenge them for market presence, reputable brand and significance? Am I missing something here?

    The real threat to Garter would come from already-established firms with significant readerships and networks, which make the decision to leverage their size, brand and IP to enter the research business. For example, Deloitte, McKinsey or even a Thomson-Reuters could much more feasibly go after Gartner’s market share.

  11. Dale Vile Sunday 1st April 2012 at 21:48 #

    I agree with a lot of the thoughts with regard to Gartner, and it being unlikely that any of the smaller firms will pose a significant threat to its dominance in the forseeable future. However, I would also emphasise that it is not a zero sum game. Gartner (and other big firms) continuing to succeed does not mean smaller firms are failing to deliver value or are not viable as businesses. There’s plenty of room in market for analyst firms of all shapes and sizes to succeed, and smaller entities who work differently (from the big guys and each other) add to the richness of services on offer to both enterprise and vendor clients.

    • David R Tuesday 3rd April 2012 at 15:28 #

      I won’t disagree with that!

  12. Justin Time Thursday 5th April 2012 at 02:02 #

    Dale,

    I agree with you that there is ample room for smaller, well-defiined and focus analyst entities, but this whole talk about “disruption” to the analyst models sounds like bullshit. Point me to a single disruptive analyst firm genuinely changing the analyst business. I visited the Constellation website- http://www.constellationrg.com/research – and it just seems like a small firm trying to act like a big firm – there was no research there which made me stand up and think “this is really different, this is game-changing”. Seemed like more research reports for sale, more pay-to-play with very little insight being served up for free to encourage me to buy anything. Isn’t this just a lot of self-serving marketing?

    JT

    • Dale Vile Thursday 5th April 2012 at 13:12 #

      I can’t really comment on Constellation specifically, but I do know (from direct experience and speaking to colleagues across the small analyst community) that scaling an ‘associate’ or ‘franchise’ model in this space is really hard, and even harder when you have particularly creative and independently-minded animals in the mix.

      My own thoughts are more aligned with some other comments we have seen in this thread. Gartner is unlikely to be seriously impacted by anyone starting out today. If new entrants come up new ways of doing essentially the same things in areas that are important to Gartner, then it will just adapt (we have already seen this).

      Gartner is much more likely to be threatened by entities with deep pockets and a significant existing level of enterprise incumbency and sales presence. And if you are such a player looking to diversify, a large enterprise research/advisory market dominated by a single firm (with all the associated grumblings and unrest) is potentially going to look like an attractive place to ‘go disrupt’. Put simply, it is money, presence, leverage and commercial clout that’s going to matter more than creative research delivery in Gartner’s heart land.

      So where does that leave the rest of us? Well there is a lot of need out there that Gartner is not interested in addressing, hence my previous comment about the market still being very healthy for us little guys with complementary rather than competitive propositions.

      And that’s not at all being defeatist. Personally, I would not want to do what Gartner does – I much prefer doing the Freeform thing in the Freeform way. As long as people keep telling me we’re adding value (and paying us!) then what Gartner et al are up to represents little more than market context. I am sure a lot others running smaller firms in line with their own agenda and passion feel the same.

  13. R Ray Wang (@rwang0) Thursday 5th April 2012 at 21:11 #

    Really enjoyed the discussion. Happy to share w/ you more details about how we’re set up for market disruption and how we deliver this disruption on behalf of our clients.

    R

    • Dale Vile Friday 6th April 2012 at 17:23 #

      Hi Ray

      I for one would be very interested in hearing about this. So far, I have not seen any alternative model scale in a robust manner. The startups over the past few years that have grown convincingly (and continue to grow) seem to have pretty much all followed the traditional services route (albeit quite often in niche areas).

      Of course my assumption is that scale is necessary to drive significant market disruption, otherwise new ways of doing things simply act as a catalyst for larger incumbents to adjust their behaviour and/or extend their porfolios (which I guess is a form of disruption, but doesn’t really affect the shape or composition of the market that much). Perhaps I am wrong on this, so would be interested in your views.

      On a specific point, I am intrigued at the notion of delivering disruption on behalf of your clients. Would be really useful if you could elaborate on what that translates to in practice, as I can’t quite get my head around what it means 🙂

      Sorry if these are dumb questions, but a few of us have been experimenting with alternative models for years, and while we have made them work well and do good business in our chosen areas in our chosen ways, I don’t think any of us really believe that we are impacting the Tier 1 firms that much.

      Having said that, I’m not sure any of us have declared market disruption as an explicit objective as you have, so I am personally very pleased to see you leading the charge 🙂

      Cheers
      Dale

  14. Yonathan Cohen Sunday 8th April 2012 at 18:06 #

    I think you should look at STKI (www.stki.info) from Israel. They have reinvented the industry.in Israel they are 3 times the size of Gartner, serving both vendors and users.

    • Dale Vile Tuesday 17th April 2012 at 08:16 #

      Not that is very impressive. Not sure there is a new business model here as such, but a lot of substance behind a well-differentiated approach. If you have ever had problems reconciling analyst numbers with your own data and experience, I recommend you read the methodology section on http://www.stki.info.

      • Dale Vile Tuesday 17th April 2012 at 08:18 #

        Should have read – *Now* that is very impressive – shouldn’t try to type before finishing my first cup of coffee 🙂

  15. Peter Tuesday 17th April 2012 at 20:30 #

    Hey Ludo – You have certainly started a very relevant debate. I look forward to hopefully chipping in with some “disruptive comments”!!

    • Ludovic Leforestier Wednesday 18th April 2012 at 10:23 #

      Hi Peter, nice to hear from you and looking forward to the disruption…

      To be honest, I haven’t see a great deal of disruption so far in the marketplace. Gartner is successful to selling to end-users but is challenged to modernising its deliverables and branching out of IT. IDC struggles with end-users and consolidations. Forrester stays level and muddles with roles and playbooks.

      What I would have expected a while back was:
      – open source research, that’s gone fast to nowhere -unfortunately
      – new research deliverables, like “debates” or more in terms of benchmarking and best practices or in general things closer to business issues and easier to consume
      – more networked analyst firms, a bit like Constellation and Altimeter
      – some new end-user firm leveraging social networks and the likes, a bit like a cross between the CEB, Canalys and Experton

      Instead of this, it seems there’s been a polarisation between the end-users focussed firms on one camp, the number crunchers on the other ones, the pundit in another pole and finally a growth in “marketing services”.

    • Peter Wednesday 18th April 2012 at 11:13 #

      I don’t think new research or analyst initiatives need to be disruptive to either gain traction or win business from the three majors. I believe that they can provide a service which offers something different, more flexible, more contemporary and more independent. As others have already acknowledged there is still a place for high-quality, research of markets and market sizing. But there is a waning appetite for paying large amounts of money for subscription research that is also available to your competitors. I also sense a demand for external input to the sales and business development process that is more closely aligned to individual vendors’ sales and marketing strategies and tactics. In this way the individual (or small business) can be a catalyst within the vendor’s team to develop more innovative working practises. Lastly, it can also mean the development of more innovative commercial terms that are more closely aligned to performance and results, something the Big 3 have kept at arms length. But at the end of the day there will also be the strong attraction of individual relationships between the analyst and those paying him (her) as there always has been. However, I do hope that we can prove to be more closely aligned with the “agility”, “flexibility” & “innovation” that we emphasise to our end-user audiences than some of the services delivered previously.

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