Authors: Phil Fersht and Ray Wang: Industry Analysts who still give a sh*t
(This is a collaboration and represents our individual points of view and not necessarily our employers. Oh wait, that’s us…. moving on…)
We called it three years’ ago and we can now officially proclaim that the industry once known as “research” is close to meeting its maker.
Okay, the reality is it’s rare these days for analysts to comb for obscure facts, ask the hard questions, reach out to customers, dig deep with the system integrators, and circumvent corporate communication teams by going direct to employees for the inside scoop.
In fact, the alarming observation of analysts, especially in the large firms, is that most of them are spending all their time on evaluation matrices (e.g. MQs, Waves, Marketscapes, etc.). There seems to be precious little (or any) research coming out of these places anymore. Where are the big ideas? Where’s the insight? Where’s the thought leadership? What do these people stand for anymore?
When we sat down to talk to our client base, our analysts, and our clients, we determined that there were eight common reasons, namely:
1. Legacy business models are built on scare-to-play. The only way the legacy firms are making money is through selling reprints of vendor positionings. Sales folks tell vendors that if they don’t pay for briefing hours and advisory time, analysts will ignore them.
2. Tele analyst approach reinforces an ivory tower image. Today’s legacy analysts have no other means of getting data. Sadly, most rarely ever talk to buyers of services or users of technology. The situation is so bad, that many vendors are forced to provide 15 to 50 customer references because the analyst has no means to reach out to real customers.
3. Stone soup research model reflects the laziness of analyst firm methodologies. They are essentially having the vendors do their “research” for them. Another way to look at this, legacy analyst firms are strong-arming vendors into providing references as their primary method of reaching out to customers. Some analysts today are demanding three hour briefings with vendors to educate them – they are essentially making vendors pay to give them the knowledge they need to appear smart.
4. Egotistical narcissism drives power trips in evaluations. Legacy analysts love the attention of vendors pandering to their demands. In one case, a legacy analyst asked for 35 client references for a scatterplot chart. Vendors humored him just to play along.
5. Information often confused as insight. Many legacy analysts have precious little fresh insight of their own. Often legacy analysts operate on limited data and base “facts” from old surveys run at the corporate level. The result – dated insight not grounded with the reality of the buyer’s point of view. In fact, many have become so enslaved to the vendor evaluation model and have forgotten that they really are an analyst who’s supposed to provide insight to the world – not simply regurgitate vendor-fed marketing hype.
6. Limited practical experience hampered by siloed’ coverage areas. The legacy analysts firms create specialists blinded by the big picture and intensely focused on the hyper specific. Clients often express frustration in having to schedule conversations with multiple analysts who often can not match experience with context.
7. Lowered expectations reinforce lowered standards. Let’s face it, the legacy analyst firms have lost touch with their clients when it comes to research. Clients aren’t expecting insight anymore, and most the analysts just aren’t producing it.
8. Failure of research firms to bring in visionary leaders. Most of the traditional analyst firms prefer to have 20 year veterans as their lead visionaries to the market, many of whom have never worked in the real world and refrain from hiring dynamic analysts who can outshine them. Many refrain from talking to clients, speaking at conferences as they have lost touch with their customers – and are not incentivized to inspire – simply keep their money machine cranking along. They have become slaves to their internal politics and P&Ls, as opposed to shaping new ideas and insights to delight their markets.
The Digital Chasm Among Analyst Firms Is Growing
Buyers must seriously ask if legacy analyst firms are still analyst firms or are they merely advertising agencies for vendors smart enough to play their game? With the dearth of enterprise journalists and media, has the analyst become the new media for the enterprise market?
Gartner’s model is smart. It continues to create more categories to include more vendors with the goal of monopolizing a vendor’s resources and time. Many vendors now have multiple FTE’s dedicated to just Gartner’s evaluations. This model crowds out other independent voices and puts pressure on the other legacy analyst firms. Those dedicated to the analyst relations function have little time to see a different point of view.
We believe that should this continue, there may not be a research industry left in 2 years’ time. We believe that this model of racking and stacking vendors will no longer be sustainable.
The Bottom line: The only way to resurrect research is to bring back talent – and motivate it
We can talk about new business models for hours, but the one missing ingredient in today’s fading research business is the lack of passionate people who want to know everything about their area, who are talking to the people who buy and sell technology and services… who care about what they represent and articulating what they think and do.
Where are those people? Are they hiding, did they retire, or did they just give up? Or did they just figure out how to check the boxes as analysts and give up caring about their careers?
Without passionate talent, we’re doomed and research can – and will soon – be put to bed as a distant memory that once was. Maybe a couple of smart individuals will save this industry, but it needs some serious saving…
Posted in : Confusing Outsourcing Information, HfSResearch.com Homepage, Outsourcing Heros, smac-and-big-data
This had me nodding violently – excellent piece. I can’t remember the last time a good piece of research crossed by desk from the big firms. Much more value from the new research companies like HFS,
Have noticed this alarming trend for a while now. There’s very little fresh insight and vision from the analyst firms these days. It’s as if they just gave up. All the insight these days (or varying quality) is on blogs and social media groups.
Are your saying both your firms are at risk of extinction I’m the next few years?
@Rick – the whole “legacy” analyst industry is at risk if the major firms only produce vendor matrices as their product – I fear this is a slippery slope. When you have 20 scatterplots from 3 firms showing several different views of “analytics” (for example), where different vendors are outperforming in each one, the effectiveness of this “research” just starts to wear off. Do you really think vendors will keep paying $25K licenses for this stuff in a couple of years, once the influence over a tired audience is waning?
At HfS, we focus very hard on balancing the model with 15-20 research articles per month – and the occasional blog to spice things up! Yes, we understand the pressure to be fresh and insightful is harder than ever, but we still refuse to give up writing research!
My interest is what the new successfully analyst firm looks like – assuming HFS is one of those of course. Will there be another firm that can grow to $100 million in revenue? These new crop of firms seems to have low growth,low headcount/banding of independents, analyst turnover, and a move to open research models completely dependent on consulting revenue.
@Rick – Good observation. The next wave of firms likely to be smaller – there’s no need for the big clunking 1000+ analyst firm anymore. The new wave will be more specialized, has lower infrastructure costs – and “born in the cloud”. I see the newer wave of analyst firms in the 10-75 employee range…and there won’t be a ton of them, more a few winners emerging. Some may not even have been formed yet.
@Rick – in addition I see the next wave more focused on developing and influencing communities, more consultative with their relationships, more focused on quick and timely insights when needed. And more focused on developing individual analyst brands and less on a faceless corporate model.
Thanks Phil – great insight.
What about new talent? You both have research firms – how do you find, train and retain young research analysts?
As for the other analysts, many of them realized that it’s easier and/or more profitable to simply create marketing materials instead of doing real research which takes a lot of time and pays less than case studies, “thought leadership”, paid engagements, etc.
@Gabriel – finding, training and motivating young (and mid-career) analysts is the Holy Grail to being effective in this business. I know only too well the temptation of analysts to write puff pieces for vendors – it’s not a scalable model and buyers really don’t read boring white papers these days. Our strategy is to pay them well, incentivize them on doing more strategy work with clients, and making sure they put out 2-3 POVs a months that explores their areas, drives new thinking etc.
It takes real investment in people and management processes to make this all work – and we are still learning!
@Phil I know it’s not easy for small firms to invest in new people (many tend to focus on the founders and a few of their friends or professional connections) but I agree that it’s critical for the future of research. Being an analyst is not very tempting for most people because it’s not one of the “cool” jobs and it doesn’t pay very well (unless you’re some kind of guru).
Analysts aside, maybe the research world is also suffering from these Business Delusions (http://www.goodreads.com/book/show/136181.The_Halo_Effect?utm_campaign=new_friend_updates_email&utm_content=title&utm_medium=email&utm_source=friend_updates)
For instance, this is happening a lot in the research world IMO: “The Delusion of Rigorous Research: ” Many bestselling authors praise themselves for the vast amount of data they have gathered, but forget that if the data aren’t valid, it doesn’t matter how much was gathered or how sophisticated the research methods appear to be. They trick the reader by substituting sizzle for substance.
Agree with your perspective and what you said:
“The next wave of firms likely to be smaller – there’s no need for the big clunking 1000+ analyst firm anymore. The new wave will be more specialized, has lower infrastructure costs – and “born in the cloud”. I see the newer wave of analyst firms in the 10-75 employee range…and there won’t be a ton of them, more a few winners emerging. Some may not even have been formed yet. … in addition I see the next wave more focused on developing and influencing communities, more consultative with their relationships, more focused on quick and timely insights when needed. And more focused on developing individual analyst brands and less on a faceless corporate model.”
The sad but true facts are that most analysts get 90%+ of their revenue from vendors they are supposed to be writing about objectively. They also never fully disclose from who and how much they get. Why does the FTC continue to allow this to occur? It should be up to the business consumer to assess analyst objectivity with full disclosure.
Couple that inherent bias with the customary superficial analysis completed on very deep and broad software offerings and you get a model that does a piss poor job in helping businesses make technology decisions based on objective and detailed analysis.
This analysis on software products certainly does provide another data point that should not be totally ignored, but I believe that giving it more than 5-10% weighting is only for the very naive and/or lazy. How much weighting do you and your readers believe a prudent business should should give to this type of analysis when making a product decision?
Beyond piloting the technology themselves, with rare exception I believe that analysts should stick to macro-level analysis, which can be very good and valuable, and leave product assessments to experienced consumers using the products or to analyst firms with business models able to complete detailed analysis without being potentially tainted by vendor revenue. Do any analyst firms actually meet this criteria any more?
20 years from now people will laugh in disbelief at just how much influence these “influencers” actually had in technology buying decisions. I can hardly wait!
I think my biggest current concern about the ‘analyst’ world on top of the cogent points made here is the alarming trend of technology company advisors promoting their client’s enterprise software strategy as ‘research’.
There’s been a lot of crystal ball gazing ‘analyst’ visions promoted that are – surprise, surprise – remarkable similar to what their client’s products purport to address.
This is not analysis/research but product marketing strategy in disguise and a lot of people in the real world can smell it a mile off. The digital transformation space has been rife with this for months, with all sorts of characters promoting cargo cult manifestos and logic patterns for something they have never actually been involved with.
What tech companies claim their products do and the problems they can solve and the real world are two very different realities…Having product marketing strategists confusing actual business strategists with bogus research and visionary thinking destroys the credibility of the analyst world fast, and feeds the idea that the slow moving, conservative analyst behemoths are somehow more reliable.
You can never lose with genuine business insights and research, knowledge is power etc etc…
@Chuck you seem to be the first one who mentions the business consumer. I’m not sure why but many of them (including executives) really like superficial “research” (maybe because it’s easier to digest).
As for the objectivity of the analyst, I’m not sure how the consumers of research can possible assess it…
PS: in 20 years we’ll have a new generation of “influencers” – I wonder how they will be different from what we have today
Phil and Ray, Valid points here but there is perhaps a larger question about what is research and who cares for it. Vendors do, and firms will find ways to make money about it.
Legacy firms as you call them started in an era when legacy methods were used – I still remember the sales pitch from decades ago offering a visit to a Stamford library and calling someone to have pages of reports faxed over. With information and insights at our fingertips – literally – and a generation of users and buyers more confident about making up their own mind based on social feeds, what is the value of real research?
Yes – there is – in fields where there is room for true invention or discovery – but not the kind of tech industry analysts. Expert views of someone who can be a sounding board or of someone who can help clarify thinking will still be useful. But I would not call that research, isn’t that just the marketing content to showcase your expertise and create a pull to monetize in a real engagement – with a vendor or a user – but someone who values the engagement?
I think diffetently on several points. The analyst deliverables need to change as the environment and analyst business models evolve. Decision data is everywhere.
I find business leaders looking for tech guidance are less interested in thought leadership and deep research and more interested in making smarter decisions about what to use, how to deploy it and who to run it.
This is a people business. Talking to people — really talking to people — is what it’s all about. Always has been.
@Sunder – good to hear form you! Completely agree with your comment about analysts validating marketing messages and being great sounding boards. That is how most have evolved (on the vendor side) – so maybe they should be called marketing analysts, and not research analysts?
On the user side, it’s a different ballgame entirely, where clients need validation AND data-driven informed advice. Analysts in a user context need to be research drive and consultative to be effective,
@Oliver – like Sunder pointed out the focus in more on marketing validation and messaging that “research” and “insight”. Some analysts are really excellent marketing experts for vendors in their space – that is their true value – validating messages and producing information that can support vendor sales presentations. It’s great marketing support, but certainly not independent “research”,
@Barbara – yup – completely agree it’s a people business. Not a real research business. Also lots of politics behind the vendor/analyst relationships that drive the outcomes the smart vendors want to see. Kind of justifies our point here….
@Gabriel Gheorghiu : Knowing how much revenue firms received from the vendors they are writing about is a very relevant data point to help business consumers assess just how objective the analysis and opinions really are. Business consumers should be provided the information and allowed to make their own conclusions. My God, the FTC requires bloggers to disclose if they get as much as a t-shirt, but requires no such disclosures from “analysts” in their “waves”, “magic quadrants” and other vendor evaluations and “contests” funded mostly by the participants rather than the buyers. Does that seem right and in the best interests of consumers?
Since no one has taken the time to respond to my question previously posed, I will ask it again: ” When purchasing complex and broad technology, how much weighting should prudent business consumers generally give to analyst evaluations of specific products?” I believe it should be no more than 5-10%, since relative to alternative methods and sources available this analysis is generally superficial and often surrounded with the aforementioned conflicts of interest. I suspect that many of the people here may even have a conflict of interest in answering this question.
@Chuck my answer to your question is that I agree with 10% 🙂 But you have the public evaluations which anyone can see (for free or not) and the private evaluations (when the analyst is supposed to understand your needs and “customize” the evaluation). The public ones should be used only as high level suggestions on what may work for you and the private ones should be validated by checking different sources of information.
To your first point, I agree that sharing the data is important but I noticed that not many business people want that. Most of them want conclusions, recommendations, solutions, etc – very few want the actual data.
@Barbara How can business leaders make smarter decisions without deep research? Based on their gut feeling or the reputation of the analyst? By reading high level reports and marketing collateral?
Most decisions in enterprise software require a lot of research, but most executives rely on analysts and consultants to do most of the work for them. This is ok, but business execs rarely validate, question, or analyze the “recommendations” they get from analysts and consultants. Some “gurus” realized that they can easily create superficial research which only looks sophisticated to those who don’t really understand it – this is what’s killing research, IMO
Gabriel, Take a good look at tech decision processes today. Buyers are better informed than you’re giving them credit for.
Phil, Deep conversations = large part of research, which fuels the people business aspects. The new data gathering, analysis and visualization technologies can take care of much of the rest. This seems – orthogonal? – to your list of points in boldface.
I like to slap labels on things to make them easier to understand.
Phil and Ray are decrying the increasing trends toward punditry and quantified analysis. A pundit (from Sanskrit pandit or learned person) is a talking head, speaking to a mass audience, conveying not just information but the importance of their expertise. Trouble is, what’s said to a mass audience doesn’t help an individual or company make a better decision. Big analyst firms used to have a narrow readership in enterprises because only a small group needed to know what IBM and a small group of competitors were doing about mainframes in the coming 18 months. That audience has exploded, and the pundit can’t help everyone in the audience today. Data can try to stand in for that expertise.
The rise of quantified analysis, starting with simple market share to today’s matrices and black-box “positioning” charts, arose from two issues: analyst firms hired hundreds of bright young people who didn’t have 10 years of hands-on IT experience, and firms needed to push out more research documents per quarter (without higher research costs), to prove “value” at annual contract renewal time. While it looks great to have a mass of data points and collapse that into a snazzy chart, the negotiation that goes on behind the scenes to get this vendor data has nothing to do with the tech product’s business value. And doing these reports doesn’t teach bright young people how to suss out business value.
Phil and Ray have it right: there’s a new model rising. Today, business tech decision makers, more and more, will only pay for help to actually make better decisions. For most, that means interacting with peers also doing what they do; or interacting with (and not just reading) experts who have either done what they do, or are actually talking to those who do. Executing on that model is today’s challenge for firms like ours.
Lots of great comments on this post. We’re seeing new models evolve and it requires us to train and build new talent where we can. The challenge is that the end users are looking for advice as Barbara says so some times you need experience. For vendors, there’s more than just product strategy regurgitated as Oliver is stating. Vendors are looking at broader strategies on alliances, product direction. They are also looking for folks who can articulate business value as part of field marketing programs. In many ways, the role of the analyst is also taking over where media traditionally played a role as key enterprise journalists have been snapped up by vendors who provide better pay and opportunities in creating content marketing. All in all, this market is very dynamic and should be fun to watch and be a part of.
Thanks for all the comments!
#2 seems to be the root cause.
As an analyst in one of these “legacy” firms, I hate to admit that much of what Phil and Ray write about here is correct. But I do want to add it is not because we don’t want to produce more creative insight, its because our firm directs us to focus on quadrants. Its become the center piece of the business. While the quadrants are useful tools for our user customers, I do agree analyst firms need to invest more in producing research that goes beyond vendor evaluation – it feels like a slippery slope we are on.
This all presents an amazing opportunity from my point of view. We’re not an analyst or research company for so many reasons, many of which are driven by client needs. I’ve previously worked for Gartner, Forrester and Giga Information group and listening to clients and the experts giving advice – no one is happy in those old models now except a small few creaming from the top.
I should say, sorry if this seems like a pitch, I’m just one of those ‘passionate about the business’ folk, (I’m not an analyst BTW).
What I was hearing clients say and acted on was the following;
– My team needs help, not just me so I don’t want a named license
– I don’t need or want a subscription. I just want to buy what I need and when I need it
– I want advice sure, but I want you to come and help me deliver on it too!!
– If you’re giving me advice, you’d better be basing some of that on your own, current experience. Don’t just tell me what other clients are telling you
– Help me with outcomes, not just decisions on the journey: I need continuity.
– I want your help to be from a diverse mix of perspectives in the way my business is so you’ll need expertise working with you that’s way beyond just the IT
– Stop with all the 70%+ margins, this isn’t the 90’s.
– Work together to help me get what I need. I don’t care about your internal P&L’s
and the analysts…
– I’m over booked, we need more people (lots of calls on a flat salary)
– There’s too much admin that’s not aligned to delivering client value (reporting up)
– What about my brand? I’m the expert!
I know not everyone will agree with all of this, but most I’ve spoken to agree with some. Clients can’t buy easily as subscriptions mostly must come from opex and that’s tightly controlled. Written research alone was profitable but it’s now seen as something that should be free – and I’m inclined to agree. That’s why we’re not charging for ours but we are paying to have some of it created – so it’s not free, we’re just not charging clients for it. For us, research is an intro, a credibility and relationship builder so when you what help with context or delivery you know where to come.
I guess one point I’m making here is, I believe we need to focus on those with the most need – the enterprise clients, not the vendors. As has always been the case in my view, if we win the clients trust and ear, they will engage with us and the vendors will follow – and by then we may not care whether the vendors come or not. I’ve sat in on many analyst enquiries – 100 or more. In my view, the greatest value delivered was always to the end client. I can’t remember the last time I heard a vendor being thrilled with an enquiry. Happy yes, but not ecstatic like a client finding out something amazing or saving a ton or time or money from some advice to make them look great and/or perform well.
We’re doing as so many are and bringing passionate people together. We’re joining independent folk up, facilitating collaboration by giving clients what they asked for. We’re using a percentage of our own money to fund the good old needs driven research too which as you say is becoming more and more rare. This is research the clients ask for and need, not what the vendors want to push.
We can benefit from the old models struggling to continue. As the world has moved on so much, the research industry should too and for those that do the future looks amazing.
@Lyndon – seems like a great on-tap expertise model you’re developing, and agree access to expertise has become a major issue with the firewalled analyst houses. However, back to Barbara’s earlier point, the analyst firms still do quite well with the “sounding board” model, the bigger issue clearly seems to be the move away from writing research. I would argue your model is more disruptive to the (highly expensive) consulting firms than just traditional analyst firms,
“This is a people business. Talking to people — really talking to people — is what it’s all about. Always has been.”
So true! All the rest is changing all the time, this fact will stay,
What a great article!!! I truly hope it reaches every analyst relation and marketing lead of all the vendor organisations!
In my point of view, analysts, specially the legacy analysts are victim of their own system. It’s only when the vendor relations executives are educated and made aware of how to not to depend on 2×2 in their marketing/sales pitch, analysts will move away from churning these day by day to becoming innovative in producing some new & thought provoking research.
This article sure brought a smile to my face. – Perhaps because it reflects a lot of my own thoughts, – Though perhaps this situation is unavoidable, given that someone needs to pay for the work involved.
Someone mentioned the quadrants as being the only focus, and the appearance of many similar types have made me chuckle many times as well. BUT I guess that the invention and definition of these quadrants in themselves have some kind of value. Maybe this is the real innovative contribution of classic analysts? (aah – probably not – new quadrants are also invented by vendors)
As I sit back with a micro brew in one hand and a fishing pole in the other enjoying retirement, I find your OPED to be spot on but I respectfully submit that it doesn’t go far enough. When I left HFS we were big into innovation and I think that there needs to be some injected into how analysts assess the landscape by fundamentally changing how it is accessed.
Objective valuable insight comes from understating the present and prospective buyers in given verticals for specific processes. In reality the actual landscape is comprised of these present and prospective buyers. It may be a bit of a paradigm shift requiring some heavy lifting, none the less I feel that analysts need to focus on them.
The BPO providers, consultants and the analysts covering them historically represent somewhat of a good old boys club. Everybody in the club talks with everybody else in the club and a smattering of cherry picked clients. What’s wrong with this picture?
To me that is almost akin to using a state’s visitors guide to reach conclusions about the reality of a given area. It is hardly an objective perspective with a 360 degree view that will paint an accurate picture warts and all.
Simplistically speaking, I would advocate slicing up the G2K into verticals and canvassing them. Drill down to discover the good, the bad and the ugly. I think a good way to gauge the pulse of a vertical is to access it through trade associations. You can get a pretty good feel for an industry at one its conventions/trade shows and/or SIGs if one listens and asks.
An analyst firm focusing on buyers would be a horse of a different color.
Great article – spot on. Like consultants and lawyers, analysts come in many flavors, but from my perspective the smaller firms have the edge at this point.
Two phrases come to mind: “caveat emptor” and “follow the money”.
In my mind, services firms [disclaimer – we are one] have the edge here. We spend almost all of our time engaged with customers evaluating, implementing, upgrading and, yes, fixing their HCM/WFM systems. We know what they need, and we know the vendors like no one else.
If you are a buyer and need new technology, sure, look over the information the analysts have to offer. But when you are serious, consider engaging a services firm with a defined objective vendor selection process, fierce independence, and sterling reputation. I’m sure one of the analysts firms can point you in the right direction 😉
This is great stuff (as usual)! We see the same thing over here on the procurement / supply chain technology side. But, it’s not just the big legacy analysts in the back pocket of the mega vendors. The mega vendors also use boutique “analysts” who blog and write white papers, but are essentially marionettes or “toothless bumbles” as I wrote here… http://spendmatters.com/2014/05/28/toothless-bumbles-and-the-search-for-objectivity-in-the-procurement-solutions-market/
What’s funny is that a few weeks ago, a c-level group within a users group of a mega vendor approached us to facilitate a panel, but when the mega vendor found out, they freaked out that an objective voice would be speaking, so they were able to insert one of their marionettes instead. It was a bit sad and dis-heartening, but we did send the c-level group a set of questions that they might want to ask Pinocchio. 😉
For myself, I’m just happy to whistle “I got no strings to hold me down”. 🙂
Keep up the great work Phil (and Ray)!
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