The Tech Sector Analysts

The first technology analyst group, International Data Corporation (IDC), was set up in the 1960s and had the field more or less to itself for almost 20 years. Today, there are more than 200 analyst groups examining almost every facet of the technology sector.

IDC’s primary service was and is analysing market share figures or ‘box counting’. Users attempting to evaluate vendors’ claims about the efficiency and effectiveness of their technologies were largely left to fend for themselves. That is, until 1979 when former IBM-staffer Gideon Gartner set up the Gartner Group.

Dodgy forecasts: B2B ecommerce
Giga $4.4 trillion by 2004
Jupiter $6.3 trillion by 2005
Gartner $7.29 trillion by 2004
US GDP $10.1 trillion in 2001

Gartner recognised that computer users the world over were suffering as a result of IBM’s stranglehold on the computer industry. They needed help in setting a strategic technology direction for their organisations that would not be undone by the next IBM ‘pre-announcement’.

The group gained much credibility in its early days as a result of Gideon Gartner’s ability to accurately forecast IBM’s next technology developments – no doubt thanks to the contacts he had on the inside. The company’s success inspired many imitators. In the 1980s, a slew of analyst groups, including AMR Research, Forrester Research and Meta Group, were set up.

In spite of their influence, many people are wary of analysts and question their independence. Among IT users, there is a residual suspicion that suppliers enjoy too much influence with analysts, and that a supplier subscription often buys more than just access to a research service and an occasional chat with the author.

At the same time, among suppliers, there is often paranoia about how or why analysts reach their conclusions – particularly when their products end up in the wrong box of the analysts’ ‘magic quadrants’. Nevertheless, many end-users still place great faith in the opinion and guidance of the analyst groups to which they subscribe.


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 cult of the personality

Many analyst groups – at least initially – are heavily influenced by the personalities of their founders, which has led to numerous fall-outs and defections over the years. Gideon Gartner, for example, eventually left Gartner to form Giga Information Group, which is now owned by Forrester Research (which, itself, was set up by George Forrester Colony). Dale Kutnick, fired by telelcoms analyst The Yankee Group, responded by setting up Meta Group.

Even the UK analyst scene has had its share of dramas. Martin Butler and Robin Bloor of Butler-Bloor, for example, had a bitter falling out that led to the creation of the Butler Group and Bloor Research.



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.


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.




The magic behind the Magic Quadrant

For a vendor, there is no more powerful sales tool than to be placed in the top right hand side of a Gartner Magic Quadrant – and no greater hindrance than to languish at the bottom left.

“If you’re in the upper right quadrant, you get the most phone calls,” says analyst watcher Dave Cadoff, “but if you are in the lower left, it’s virtually impossible to get a deal.”

The Magic Quadrant was introduced by Gartner in 1994 as a way of visually representing the various competitors in particular technology markets. For buyers, it offers comfort and reassurance that they are making the right technology decisions.

But for suppliers, it can be the source of much acrimony and frustration when they do not get the placing they think they deserve. Smaller and non-US companies, in particular, believe their voices are not heard.

However, the methodology is straightforward enough, says Gartner research director Betsy Burton. The Magic Quadrant is determined by two main factors: ‘completeness of vision’ and ‘ability to execute’.

Ability to execute takes in such factors as a supplier’s financial position, its staffing and its organisational structure. Vision is more nebulous, but encompasses Gartner analysts’ opinions of how distinctive the supplier’s roadmap is and where that particular market is going.

Next, the suppliers are ranked accordingly and distributed following a conference of Gartner analysts. The results are then shared with suppliers so that if they believe that Gartner has not taken sufficient account of certain factors, they can raise their concerns. From start to finish, the process can take months, says Burton.

But she defends Gartner from accusations that it is subjective. “Gartner doesn’t purely do everything based on quantitative analysis. Some of it is our opinion and is our analysis based on where we see the vendor going,” she says.




“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



Avatar photo

Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

Related Topics