Analyst firms: rock star bands or record label dinosaurs?

A recent contract renewal conversation with an IT analyst firm rep got me wondering how record companies ended up suing their best adopters and whether the end is nigh for them. Both music and research live on IP, and there are many similarities, though we’ll only explore the consumption and value aspects in this post.

Many have a better informed opinion than myself on the music industry but I tend to agree with Jon: there’s been a lack of innovation. The CD was a more practical format but quality wasn’t one hundred times better. I have yet to be immersed in a true quadriphonic experience, and so on. Sure thing, the mp3 format is much more practical but it would be far fetched to claim to say that the industry embraced it willingly. Actually, I would go as far as to say iTunes is Steve Job’s best ‘invention’, that was to get record labels to licence their music on it. In addition to the lack of technical innovation, there isn’t a great deal clarity in the offerings. Good new sounds maybe surfacing all the time however most are ephemeral. I can’t think of many that indeed built a following matching that of the 60ies  and 70ies (and even 80ies) household names. That last point is important, as building up a loyal consumer base is much more profitable than rotating new products.

Everyone knows what happened next in terms of sales (see graph) to the music dinosaurs: The Internet crashed into their bubble and made sharing much easier -ironically, the beatnik generation did not appreciate this. Meanwhile, the next-generation of buyers (Gen-Y) did not perceive the value or innovations to be compelling enough and went onto Napster. Tears and commotion ensued with BigCo into defending their IP in courts vs. teens, a true PR reputation disaster…

Things could have been very different though. The record labels could have improved the sound quality (DDD, lossless anyone?), packaged in  the lyrics into the mp3’s, and more importantly not let go the derived products such as concerts. Indeed, most old favourites bands capture the most of the revenues from middle-classes and many brought concerts into a separate management company, leaving the record labels unable to stage tours for smaller acts who don’t sell enough CD’s, bringing them into a downward spiral described above.  

Which leads me to the parallels with IT analyst firms. To start with, licencing is often on a named user basis, just like mp3’s. It’s rather inconvenient in the case of music and can quickly become frustrating for AR or MI professionals. As to the former, I can resell or give a CD to anyone but can’t legally share an mp3 with my wife (due to hardware changes, I’ve ran out of licences on iTunes and I also lost my library during the transfer, so much for the visionary genius of Apple). In the latter case, I’ve found better ways of making friends than explaining colleagues they can’t share research unless the company cough up several millions of bucks to Gartner or Forrester. Call me naive, but in today’s information based economy, knowledge workers want and need to share insight with their teams to deliver projects or products quicker. Giving access to research to more staff doesn’t work, what you need is to be able to recommend, add context to transform a research note into actionable advice. It’s just the same thing than with music: I could transfer (legally or not) all my younger sister’s mp3’s onto my laptop and not achieve much. What I want is her recommendation on which tracks to listen (or not in her case actually).

Secondly and as with many things, the experience is better live than reheated. Sure, much valuable insight can be pressed into research notes but just like rock stars, analysts sound better on stage, or unplugged in a SAS day. Just don’t tell them they’re rock stars, please: the majority struggle to exist as independents after leaving the mothership that made them. This is where the real value is: in the conversation. I am not advocating the whole research business should become a speed-dating exercice: everyone knows that face-to-face is not scalable (you need to add people linearily to increase revenues). There are other ways to share those insights, such as conferences. Some could argue they are too pre-canned stuff: for instance, the Gartner Symposia agendas are set about six months before and the content solidified at least 2-3 months ahead. I would beg to differ: going to a conference is a richer experience. It is time you spend away from the office to sit back and reflect, meet the analysts and exchange with peers.  It’s all well understood that research means more leverage and more margins, but Gene and George should not be fooled: customers are buying insights, not research.

Lastly, just like technology challenged record labels, the IT industry itself is maturing, with vast swathes being commoditised and more decisions being made by business lines, as opposed to IT departments, the traditional clients of IT analysts. I’d be surprised if there’s much RAS business left in PC and servers procurement but I don’t see either analysts make a move to provide advice to the business.

There are many other similarities between music and research, in particular when it comes at comparing those ecosytems. The focus of this post  -that will be the subject of a follow-on post. These thoughts are more on how services for the minds are consumed and where the value lies

Bottom line: as IT is maturing, research firms need to reflect on where value lies for their clients, namely insights on business and technology, and on the best ways to capitalise on their IP. Currently, the subscription business model is still very profitable for the large IT research firms (Gartner, IDC, Forrester) but licencing restrictions makes difficult for clients to extract the value of their insights.  Those firms need also to rethink the experience their customers are getting and move up the value chain.

Takeaways for research firms

  • The value of research firms is in the insight, not research. Areas to explore are community of peers to provide insight (CEB, Forrester) and peer-sesssions at conferences.
  • From a buyer’s standpoint, seat based licencing is anachronistic, painful for users and will have to go in the long run even though margins are good for now. Forrester allows to share some documents, Gartner has a pricing model ‘by the drink’ (GFPS) but those are timid evolutions still.
  • Innovation around new products, audiences and delivery is the only way to fight commoditisation in the long run. For instance, Gartner stated on toolkits, Forrester is trying to appeal to roles (with some success in marketing, less so for IT because of its vertical and geographical coverage gaps), the freemium model work for some firms even if margings are a challenge.

Questions for AR pros to ask themselves and relay to their research firms sales reps

  • Is the research published by IT analysis firms fitting with your needs?
  • Do you -and other users at your company- find the corpus of research hard to navigate? For instance, do you have a good view of what is and (more importantly) what is not available, and where?
  • Can you easily abstract, relate and contextualise the insights to make them usable within your company?
  • Is the written research enough or do you need to call the analyst to make the findings relevant to your business?
  • How do you and can you share research? Is that a challenge when working on project in virtual teams?
  • Do you find that the report you want is always in the service you don’t subscribe to?

Those are my personal opinions, what are yours?

Thanks to the following peers who provided feedback and input for this post, in no particular order: Paula Schmidt (@paulaschmidt), Simon Levin (blog), David Rossiter (@davidrossiter, blog), Gerry van Zandt (@gerryvz) and Duncan Chapple(@DuncanChapple, blog).

Update 26/9/13 -some related posts by others

10 thoughts on “Analyst firms: rock star bands or record label dinosaurs?”

  1. I don’t quite track the argument —

    1) Real business insight doesn’t come from canned research, it comes from 1:1 access to the analysts.
    2) Firms need to take more modern approaches to licensing and/or packaging canned research.

    Is the answer found in innovation in the types of canned research products (like toolkits), in discounting reader seats, or in returning to client enterprise-wide research licensing practices?

    Or is it in clients having more conversations via inquiry with analysts, to get customized, context-appropriate insight?

    Either way, from the analyst firm’s PoV, it’s a question of managing scarce IP (either access to research or to analyst’s 1:1 attention) in a manner that doesn’t undermine the firm’s business viability, yet not irritate client base into declining to renew.

    My PoV: canned research is tangible, portable, and somewhat less perishable than a telephone conversation — all useful traits that cause it to grab an outsized share-of-mind for AR pros. Downloading and reading a report is certainly less hassle than scheduling and executing an inquiry. But in end-user organizations, it’s analyst 1:1 access that delivers the real business value.

    It’s pretty rare that I come across a report so insightful and substantive that, by itself, a six-figure IT investment could be defended with it.

  2. Rob,
    IMHO, enterprise-wide licencing is a good solution but firms need to be better at fostering communities, extracting trends from conversations and abstracting the insights.
    They also need to differentiate from market research and free content by having more fresh, original, differentiated thought leadership.
    It’s a tough act indeed.

  3. Completely agree: “what you need is to be able to recommend, add context to transform a research note into actionable advice.” With rigid service models it can be tough to the job properly.

    I often found Gartner seats underutilized, it’s true. At the same time I haven’t yet seen an AR team where all its members had the luck to get a seat. But then, why not let AR teams and companies benefit from a service model that allows a broader set of people using the service, and this in a way that is highly beneficial for the AR work and for the business. Forrester with their service units model is providing higher degree of flexibility. But then here, you have this central control instance internally to pass through. In cases it’s stretching the distance between you, AR person and the AR activity far. Hard paddling needed first before you can ride.

    New service models could lead to a better use of the purchased service, higher value for AR and for the business.

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