One of the standard phrases in the nuanced lexicon of IT advisory company Gartner is "seek a clearer roadmap before you make a strategic buying decision". Deciphered, this means something like, "watch out, your IT supplier is facing intense change. It is not clear what will happen next." If Gartner were to turn its analytical methods on itself it might be using that phrase right now. The sector it dominates is variously sized at between $2 billion and $4 billion a year and has recently been the focus of rapid consolidation, with Gartner acquiring Meta, a long-standing second-tier rival for $162 million, and Forrester Research buying Giga.
At Gartner, the task of formulating a post-consolidation strategy is in the hands of Gene Hall, who joined as CEO in August 2004 with a brief to re-invigorate the company's stagnant growth.
But already the acquisition of Meta has attracted criticism, with some customers concerned at the loss of choice and some observers questioning why, having since laid off so many Meta analysts, it felt compelled to spend so much buying its underperforming rival in the first place.
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With a market share of nearly 50% and combined company revenues amounting to $894 million in 2004, Gartner is an analytical powerhouse. Hall's issue is that revenues have been all but flat for five years – even though Gartner has grown its management consulting and events businesses. In 2004 alone, for example, it held 56 conferences and events, bringing in $138 million in revenue, up 16%, and pulling in 31,000 attendees.
What next? Part of the growth will come from international expansion. Although Gartner is present in 75 countries, Hall wants to extend coverage in Japan, China and India. Currently, 40% of Gartner's revenue comes from the US. The Meta deal should increase the customer base in Germany, the UK, Australia and the Middle East.
Hall himself has a classic profile for a senior consultant, having worked in engineering and management. After a stint as an engineer at Sikorsky developing the Blackhawk helicopter, the MIT and Harvard Business School graduate joined the elite consultancy firm McKinsey. After 16 years, he moved to payroll processing services giant ADP where he was responsible for technology development.
He says in his six years at ADP he never received a single sales call from Gartner. That is why he believes Gartner needs at least four times as many sales staff.
But while virtually all the Meta sales team hung onto their jobs, only about half of its 115 analysts were retained, acc-ording to sources close to the company. Nevertheless, Hall says Meta's three main vertical market strengths – insurance, government and energy and utilities – will set the blueprint for a much stronger push by Gartner into vertical markets.
Has the consolidation in the analyst industry gone too far, pushing up prices and restricting choice? Hall says not, insisting that there are "thousands" of analyst firms out there that all do different things: "If we have less competition it's because we compete efficiently."
Not all Gartner's clients are from IT management, of course – some 30% of its revenue comes from vendors, who are also largely the focus of much of its content. This has led to repeated allegations of bias, bribery and, in a few cases, the presentation of marketing material as independent analysis. Gartner itself has been accused of giving more, or more favoured, coverage to vendors who are also clients – something it has always strenuously denied.
"We're very sensitive to avoid any conflict of interest," says Hall.
He also wants to increase the proportion of user clients. "There's a strong culture of independence among our analysts. They're evaluated on the value of their research and see themselves as champions of the user."
The series of checks in place to ensure objectivity have recently been strengthened. Analysts are prohibited from owning stock in client companies, their research is reviewed by their peers before it is published and an ombudsman's office, set up in mid-2004, recommends improvements. Until recently, the analysts themselves decided their research agenda, but in November Hall started tracking levels of subscriber interest over the web. This feedback, he says, will now determine the research agenda. "Vendors have no input," he adds.
Another sign of the change and consolidation that is sweeping through the industry: Hall reveals that the renowned Gartner ‘magic quadrant', an at-a-glance method of weighing up the merits of vendors based on the ‘completeness of vision' and ‘ability to execute', is in for a makeover. "Meta had a similar kind of analysis, and we are taking the best of both to create a third version."
