Right price – Acquire those services that meet your basic requirements [Purchasing Analyst Services, Part 5]

icon-budget-cuts-105w.jpgIn the past the way to avoid the price increases that Forrester and Gartner are initiating on a regular basis would be to use the usual purchasing best practices. These include waiting until the last minute before the end of the quarter or better yet end of the fiscal year to finalize a contract, playing one firm off another, signing up for a multi-year contract, and consolidating purchases to obtain a larger discount.

Alas, these techniques are not as effective now with Forrester and Gartner as they were in the past.

While there are hundreds of analyst firms, with some large ones like AMR Research and IDC, the unfortunate reality is that when it comes to the market for end-user advisory analysts, Forrester and Gartner have achieved a de facto duopoly. Because the market for their services is so underpenetrated, neither firm has to compete on price to grow revenues, clients, and market share.   Therefore they can concentrate on improving margins while growing revenues by expanding their sales forces. It is a very cozy duopoly. To date there have been no serious contenders to the Big 2 as replacements for the acquired Giga and META. As long as firm executives continue to impose pricing and discounting discipline on their sales forces the opportunity to negotiate a better price with the Big 2 is limited. Gartner has been especially disciplined, using a “Bloomberg model” of a price for the first seat, a slight discount for the second seat and no incremental increase in discounts after the second seat regardless of volume. So while it is still possible to negotiate on price, the opportunity is not as great as in the past.

The best way to get the right price for the analysts services you require is not to put all your effort into trying to whittle down Gartner’s or Forrester’s price. Rather, the approach for getting the right price is to get the right service from the right firm as laid out in parts 3 and 4 of this series (see below for links). By not falling into the trap of buying the most expensive services from Forrester or Gartner, you can still get the right price. 

SageCircle Technique:

  • Enterprises and technology vendors alike should not focus all their energy on obtaining incremental or minor discounts from Gartner or Forrester in the next round of contract negotiations
  • Buyers of analyst services should invest effort in seeking out alternative suppliers of advice in order to get what is needed at the right price

Bottom Line: As long as there are no serious competitors in the end-user advisory business to challenge Forrester and Gartner they have no motivation to discount their pricing regardless of the size of the deal. Buyers need to focus their energies on alternative sources of services as the way to obtain the right price.

Question: AR teams – How much of your effort when it comes to negotiating contracts with Forrester and Gartner is focused on getting price reductions?

This post is one in a series on the SageCircle blog about how buyers of analysts service, whether enterprise IT or tech vendors, can ensure they are might the right purchasing decisions. For those analyst clients needing much more depth than what is in this blog series, please check out the SageCircle AR Wiki where you can find a lengthy thread of articles that provide more depth and breadth on this critical topic including checklists and tools.

  1. Using five rights to avoid a wrong when it comes to purchasing Gartner or Forrester services
  2. Right reasons – Evaluate why you are purchasing analyst services
  3. Right services – Align the services you buy to better match the reason for info or advice
  4. Right firms – Search out alternative services providers that better match your reasons
  5. Right price – Acquire those services that meet your basics requirements
  6. Right usage – Drive usage of the services you buy to ensure maximize business value
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