Ethics and Independence Among Industry Analysts

There’s been a bit of a discussion going around lately on ethics in the industry analyst sector.

I understand why the ‘pay for play’ model can seem an attractive option for smaller companies looking to generate business but firms that go down this route always tend to get found out. Their credibility is eroded, they cannot attract quality analysts and their business slowly disappears.

Any analyst firm which values its long-term reputation in the market has to ensure that its research is independent (and also seen to be independent: for instance, I’d argue that there’s a greater need for analyst firms which produce sponsored research to be very open about their methodologies so they avoid any suggestion of conflict of interest).

However we do need to be realistic about the economics of the analyst business. Most analyst firms couldn’t exist without vendor cash – be it via sponsored research, consulting projects or speaking engagements.

And so long as analyst firms clearly communicate who is sponsoring their work, I’m fine with that. After all, the old principle of “caveat emptor” must always apply.

But what about:

  • the UK company that publishes a company profile – but gives no indication that the piece was commissioned by the vendor (and for which the vendor was effectively given copy approval)
  • the analyst that writes blog posts promoting a project that his consultancy is involved in – without disclosing his connection
  • the division of a large group that prioritises briefings based on the likelihood of selling reprints of the resulting company profile
  • the analysts that use a briefing as an opportunity to pitch their own services
  • the global company that says its analysts are more likely to recommend vendor clients to prospective buyers (because the analysts know clients better than those that are non-clients)
  • the vertical firm that refuses to take briefings with non-clients because it’s so busy doing consulting work it can only handle briefing requests from clients
  • and what about this experience highlighted by the corporate AR team at HP?

Thankfully these kinds of behaviour are limited and the examples are few and far between. But it does still happen.

As analyst relations professionals, we face a challenge. What responsibility do we have for ensuring these practices are stamped out? Are we proactive or do we just refuse to support them? Do we have a ‘quiet word’ in the right ear? Do we out the bad apples in public?

Or do we turn a blind eye – because actually it’s good to know that you can sometimes bung a few quid to an analyst and get something positive written-up about the company we work for?

Further reading on ethics in analyst relations

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22 thoughts on “Ethics and Independence Among Industry Analysts”

  1. I think that AR professionals do need to be proactive about the ethics because in the end of the day it reflects on our ethics and value to our clients also.
    However, I do believe that our job is first and foremost to get our clients on the analysts radar by ensuring that they know how and when to tell their “story” to the right analysts. In addition, we need to assist our clients to create a working relationship with the analysts that will improve their marketing and business development processes and upgrade their level of intelligence on their industry and ecosphere.

  2. I believe that if analysts fully disclosed their revenues, at least in terms of broad categories, from the vendors that they reported on in their research, that would be quite helpful. If I read a report that praised 3 vendors equally, one of which did more than $1 million in business with the analyst last year, another that did $250K-$500K, and another that was not a client, I would think that the information on the non-client vendor would be the most objective. I don’t think that any intelligent person believes that anything coming out of the analyst community is objective info about vendors who buy research from the analysts.

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  5. Nancy

    Thanks for your comment. I think every AR professional would agree that we need to get our clients on the right analyst radars!

    Should this always be our foremost responsibility though? What if the only way to do this was to behave in a less than open manner – for example if an analyst said that they would only cover your client if you paid them (perhaps through buying reprints of a report or commissioning a company profile)?

    Do you essentially bribe the analyst to take the meeting or argue that the firm will quickly get found out, lose credibility and therefore can be safely ignored?

    What constitutes unethical behaviour – and what’s simply being pragmatic?

    If the analyst firm regularly advises prospects that your client wants to win business from, does our approach change?

    I’d love to know what you – and other people think about the less black / white issues around analyst independence and ethical practice.

    Ultimately people need to have confidence in the analysts’ objectivity if they are to continue to be the major influencers in the tech market.

    Is it part of our job to help analysts stay on the straight and narrow – or do we look to secure their influence whatever the cost?

    (Lots more questions – sorry!)

  6. Rudolph

    Thanks for your comment. Your point is well-made. If analyst firms did have to disclose funding sources, then it would help users understand at least some of the background that the analysts bring to their research and consulting work.

    I am also sure that your last sentence will prompt some comeback from analysts. It will be interesting to hear how they respond.

  7. I for one would welcome the IIAR publishing a code of ethics with dos and don’ts for analyst firms and vendors alike. Not sure there is anyone better positioned than you guys to construct this. Happy to contribute to this process.

  8. As an analyst myself this is a topic of importance to me – hence I take friendly issue with the assertion that small analyst firms need to take money from vendors to survive.
    We do not – they (vendors) are welcome to buy a copy of our report if they want (some do, some don’t) – our sales staff cannot sell to vendors – only end users. We do not accept flights, hotels, expensive gifts – and as of recently not even the cost of a dinner. We write for buyers and end users only. (less than 10% of our revenues come from vendors)
    Yet we are growing at a fast pace and are profitable……
    Vendor money is easy money for sure – but it is not as essential as people seem to think.
    I honestly believe AR people really need to think through the value of the influence that a firm that makes it’s money from selling to vendors really has. And that is before we get to the whole ‘Ethics’ debate….as an old timer I have (just as you all do) many stories of analyst and vendor’s ethics falling into question. I honestly believe that the industry needs a clean up – and that such a thing would be good for us all – real analysis, based on true objectivity without the all the manipulation…


  9. Hi Alan

    I appreciate you stopping by and commenting. You raise some interesting points.

    It’s interesting to see what you say about your revenues. My experience suggests that CMS Watch is more the exception than the rule. Almost every smaller firm that I talk to says that their customer base is comprised more of suppliers than buyers. Given what you say, I am thinking that in future I should now start asking why that is…

    BTW, I also think there are plenty of larger firms that would struggle if you took away their supplier customers!

  10. Alan,

    As I’ve said elsewhere, it really does depend on what on is analysing. If analysing products as you are, then clearly there is a massive danger if any such work is being sponsored – indeed, more than a danger. If (as in our case) it is more about documenting industry best practice, then it is in everyone’s interests to understand this – but equally, unlikely that the end-user community would fund the kinds of surveys we do. As you have said elsewhere, there are different models.

    It may just be that I’m an honest bloke trying to make an honest living in what is “an industry needing a clean-up” – I do hope so, but I’ll leave that for history to decide. Equally however, I think we should be careful to distinguish between different kinds of analysts. Some exist purely or mainly to be marketing consultants to vendors, helping them to sell more stuff: that’s a valid business model, as long as it is declared. To say an analyst firm is corrupt just because it accepts the vendor dollar is making the (false) assumption that all analysts are by default acting on behalf of the technology customer; equally, to see a flight as a bribe is making other assumptions (personally, I see that a flight is often recompense for the free advice that ensues in the one-to-one sessions).

    As a final point, there is a broad assumption that analysts exist primarily to influence customers’ buying decisions. It has taken me a long time to work that one out, as I wasn’t an analyst by profession until later in my It career. When you say “I honestly believe AR people really need to think through the value of the influence that a firm that makes it’s money from selling to vendors really has,” it looks like it’s making that assumption, correct me if I’m wrong. We don’t directly influence buying decisions – nor do many of the smaller firms that I can think of (MWD, Quocirca, Redmonk, Disruptive Analysis and the like). What we (aim to) do is influence technology adoption, deployment and operational best practice, on both the vendor and consumer side; we also look to help vendors deliver their technologies in the most appropriate way to the most appropriate parts of the market, which are going to derive the most value from them. We believe this is a useful service, provided objectively and independently, and we are very happy to charge vendors for it.

    As I said on my own blog, perhaps I missed the point somewhere on what it means to be an analyst 🙂 Still, I welcome the whole conversation on ethics. I don’t believe anyone in this business can claim to be technology-independent, but at least we can strive to ensure any untoward practices are identified and removed from the equation.

    All the best, Jon

  11. If HP’s example in particular is so clear cut, why don’t they simply name the analyst group and use reputational damage to drive better behaviour?

    Come to that, all the other examples quoted here seem to be anonymous too…

  12. Steve

    Thanks for your comment and the longer post.

    I cannot speak for HP but the other examples cited in this post are all personal to me.

    I didn’t name the firms because I don’t believe that’s the most productive way forward. I understand the temptation but I am not sure it would really achieve that much. The firms will undoubtedly deny the allegations (they have to, don’t they?) The resulting public row would just make more people doubt the independence and objectivity of the analysts.

    I believe the better way forward is for the AR community and the analyst community to work together and try and agree a code of conduct that everyone can sign up to. That way, we can be all be firm in our rebuttals when “pay for play” is brought up – and offenders know they risk being ”named and shamed” if they then breach an agreed code.

    As an organisation, the IIAR is trying to take positive action in this area rather than just grabbing headlines. The feedback we’ve had from analysts is that they concur with our approach. Most analysts value their integrity and independence to the utmost. We shouldn’t forget that.

  13. Jon,
    I actually agree with pretty much everything you say – the key thing is in distinguishing between analyst firms and their value.
    You are right that many analyst firms do not influence buying decisions (though that is pretty much all we do at CMS Watch) – but that does not stop some of the firms from claiming they do, or at the very least overstating and at times misrepresenting their analysis.
    I am aware of your work and respect it, and of course follow closely the work of MWD (my ex colleagues) and rate them very highly – I genuinely read and recommend their work to others, buyers included. My issue is not with them or others like them.
    My issue is with analysts who ‘play the game’ – and with AR people who do likewise, its a disservice to all. Worse still is the impact on small vendors who don’t understand the rules of this ‘game’ and more importantly buyers who rely on what they believe to be independent advice when it is no such thing.
    Transparency is the route forward – but that is something many resist with all their might.
    I know I take a firm (maybe strident) position on this – and I know that at times it winds people up – but I really do believe it to be important, and a discussion that is long overdue. I take my hat off to the IIAR for wanting to be part of it.

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  18. An update.

    The IIAR is setting up a group to look at this whole subject with a view to defining some sort of “code” or “best practice”. I will leave it fairly loosely defined for now because we’re not entirely sure what will ultimately come out of the process.

    Marius Jost, an IIAR board member, is leading our work in this area. If you are interested in participating, please do get in touch with him via our website

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