It seems Gene took Gartner‘s shopping trolley on a jumbo to Oz this week and a page from George‘s book: the research firm just announced it was buying Ideas International [ASX:IDE] was established in 1981 as a consultancy service and since 1986 has provided its special brand of research to IT users and vendors. This acquisition is still subject to regulatory and other approvals.
This move has a strong reminiscence from Forrester’s purchase of Springboard last year (read our post:Forrester joins the feeding frenzy, buys Springboard)
Who is Ideas?
They’re a 40-strong company with 12 lead analysts with a strong brand name in the hardware space, providing benchmarking, very detailed detailed comparisons and competitive profiles of hardware and data-centre vendors. For instance their RPE2 methodology allows to compare data centres.
They sell both to vendors and “increasingly to end-users” according to our sources, though our assessment is that the end-user proportion is quite small.
According to their last annual report they’re highly profitable with AUD1.9m profits from an AUD8.7m income, quite a nice ratio. They have good leveage too, closer from IDC than Forrester with USD224k per employee, compared to Gartner who claims USD419k per billable employee (see their fact sheet) while Forrester’s revenues per employees stand at USD194k (source: company fact sheet). IDC is privately owned by IDG and doesn’t publish numbers but they’re in the $300m range for about 1200 staff.
Why IDEAS?
It seems that the Burton Group acquisition was successful enough for Gartner to repeat the operation with IDEAS. The feedback we gathered from various sources was that Gartner was surprised by the quality of the research (detailed stuff) and how much it was appreciated in IT mid-management circles, at the time they were striving to go up and appeal more to the C-suite.
Ideas is the same play: take some good techie content and give it a better reach through their excellent sales coverage. Gartner has more sales reps (usually of the aggressive type) than analysts and knows what good execution is about.
Gartner closed their consulting division in Australia in 2007 but grew their events and research there, and in other APAC countries (specifically India, China, etc). So this acquisition is not only complementary from a product coverage standpoint but also geographically. Crucially for Gartner, it should give them a better access to the fast growing APAC countries.
That’s a glimmer of hope for the support and management staff, usually the ones bearing the brunt of M&A’s (Gartner states they will “virtually retain” everyone, maybe they’s stick a hypervisor layer on top of them?).
Un-answered questions
As usual, it’s not clear if IDEAS will remain as separate product line within Gartner. Our prognosis would be that it will not be merged with Burton into that separate GFTP end-user service but rather in the “Don’t Call Me Dataquest” (HTTP or GFIL or whatever it’s called now). The IDEA brand will probably disappear, just like Dataquest, AMR, Burton, META, and most of the now 33 acquisitions they made since IPO’ing back in 1993.
Bottom line and takeways
It seems Gartner, the industry 800 pounds gorilla, is learning how to better execute for acquisitions. The META takeover did not go well at all, with over 2/3 of brains drained out of the company even if it was probably a good competitive move. This is to be contrasted with AMR (where the founders cashed in but the other analysts had been offered jobs and issued new laptops very swiftly) and Burton which went quite smoothly too.
- Other analyst firms will probably read this tale of consolidation with great chagrin, in particular Forrester and IDC who see Gartner pulling away even farther and quicker.
- In particular, this has implications for
CanalysCurrent Analysis (read Ideas International and Current Analysis Ink Distribution Agreement) - AR pros should do their due diligence as usual
- Check who are the analysts impacted on both side , the relationship status, any WIP, etc
- Decide a new action course where they used IDEAS as a second source
- It’s likely Gartner will stop white papers and things like that, look for other suppliers if you had something in mind
Read our 42 other posts about Gartnerand their previous acquisitions.
- Breaking AR news – Gartner buys Burton Group
- Gartner buys AMR -what’s the impact for AR Managers and competitors?
And also: Forrester joins the feeding frenzy, buys Springboard
By Ludovic Leforestier (LinkedIn, @lludovic and @bearingpointar) and Robert de Souza (LinkedIn, @robert_desouza).
Ludivic – interesting piece and good insight.
I do have a couple of comments here – Springboard and IDEAS are nothing like each other. Springboard was a struggling low-end researcher with its value proposition being it was mainly low-cost Indian (and other offshore) analysts. It cost Forrester about $3m.
IDEAS gives Garter real added strength in the APAC region, market data and quality IT analysts and relationships. With Springboard, Forrester purchased a bodyshop and probably already regret it (but it was pretty inexpensive so not a big deal).
Forrester need to be bolder when making acquisitions. Gartner is much more prepared to pay a premium for quality research houses (AMR, Burton etc), which actually add some value and user clients.
It’ll be interesting if either of them decide to rescue what’s left of Yankee Group….
Stanley Kerr
Yankee… hum, yes, what did they become???
Stanley – the facts and analysis you provide on Springboard are completely inaccurate on all counts. As for IDEAS and Gartner, the acquisition is open to interpretation and I wish them the best.
Definitely a lot of huge inaccuracies in this post. Having worked with both firms, Springboard went from start to exit in about 6 years and expanded to have the biggest Asia/Pacific footprint outside of Gartner and IDC. Ideas on the other hand has been a struggling analyst firm for over 20 years and has been trying to sell themselves for several years. Both firms have their strengths and weaknesses, but I felt this post was way to negative on Springboard and way to positive on Ideas- at the end of the day they are also very different firms.
Not knowing the exact purchase price, I do know the amount mentioned is amazingly off the range that I heard.
Excellent insight, Ludo – and fast too.
Somehow, I managed to miss the price!
Which according to the press release is AUD1.4/share, meaning a couple of happy guys will be able to afford a Bugatti Veyron or a nice yacht.
http://www.ideasinternational.com/Resources/Press-Releases/Ideas-International-Recommends-Cash-Takeover-Offer
This is about 2.5x income.
Ludo & all,
To compare Springboard & Ideas is completely misleading. The only thing the two firms have in common is a roughly similar geographic location. They have very different product portfolios, different research approaches, different skillsets, different heritages, and to look at this as an Asia/Pacific play for Gartner is also to miss the point.
Ideas has always been a “global” player in its own small way. It opened offices in the UK and the US very early in its history because that was the best way to reach its original clients, who were of course the major multinational hardware vendors – none of those in Asia then, & few now. It extended its presence in the US with the acquisition of DH Brown a few years ago, but has had limited success in Asia/Pacific outside of Australia.
Ideas has been on the market for many years. Every major firm, including Gartner, Forrester, IDC, Ovum & Springboard, has looked at buying Ideas at least once, and some of them more often. What is more interesting is why “now” was a better time to buy Ideas than any previous time – I suspect that the alignment with Burton you refer to may have something to do with it. The fact that Ideas finally made a decent profit in 2011 after several years of weak results may have also been attractive. But I seriously doubt that it had anything to do with increasing reach into emerging AP markets.
I think we also need to keep some perspective about the price & the value of this deal. Ideas listed as a low cap stock on the ASX in 2001 for $A1 a share, and for many years its shares languished in the low double-digit cents. So a $1.40 price for a $1 share over 11 years isn’t a huge return on investment. The bulk of Ideas shares (about 14 million outstanding) are held by private investors. Former CEO & current director Ian Birks owns about 1.8 million shares & current CEO Stephen Bowhill about 1.3 million according to their annual report. Founder John Tulloch also owns at least 900K shares according to documents filed as part of the takeover offer, and possibly more. I believe many of the senior management also have reasonable shareholdings. So they’ll all get a nice payday, but that $20 million is going to be spread a lot of directions, so I don’t see any of them retiring to south of France with a private yacht…
Personally, I’m enormously pleased for the Ideas guys because I’ve known them for years, they’re good analysts, & I know how hard they’ve worked to make the company viable – and saleable. I think this is a good deal for both Ideas & Gartner, but I don’t think it’s helpful to speculate this deal into something it’s not.
cheers,
Dave
Ludovic
Possible typo? Do you mean really mean Canalys because you then link to a Current Analysis / Ideas distribution agreement…
I’m really not sure this has any implications for Canalys, which is largely focused on mobile devices and channel.
Indeed David, thanks for the correction.
Good comments Dave, my point about Burton and the increased reach that Gartner brings is still valid. As the comparison with Springboard, they were two vendor-oriented research firms based in APAC, that was the only point and mostly to find an angle to the post.
Part of the appeal and value prop for IDEAS is its global reach, which is unusual for a firm of its size.
Indeed, I think IDEAS a nice complement to the recent Burton Group acquisition in terms of depth of focus, addressed audience, etc.
Pingback: Gartner completes acquisition of IDEAS International « The IIAR Blog