Saving money on contracts with the Forrester / Gartner duopoly is not simple

icon-budget-cuts-105w.jpgA common client inquiry we receive is in the context of someone negotiating with Gartner. Our clients want to know why in the midst of a terrible economic downturn, when vendors are cutting budgets left and right, that Gartner does not exhibit greater flexibility (i.e., cut prices) when it comes to contract negotiations. The short answer is that due to its end-user advisory market dominance – we estimate that Gartner has ~70% of the end user contracts – it does not have to be flexible. 

However, this issue is a little more complex than slapping a “monopolist” tag on folks over on Top Gallant Road. The reality is that there is an effective duopoly with tacit partner Forrester which gives them both the flexibility to be inflexible with it comes to negotiations. The last time this market saw pricing and packaging that in anyway favored the buyer was the mid-90′s when Giga and later META used significantly lower prices and “all you can eat” research seats to take market share from Gartner and Forrester. Alas, today there are no such firms that can play that role to counter Gartner and Forrester. As a consequence, the Big Two’s CEOs habitually inform Wall Street that they are maintaining their pricing and discounting discipline.

However, it is possible to reduce spending – notice we did not say “save money” – with the Forrester / Gartner duopoly without damaging the ability to access analysts for influencing purposes. However, it is not as simple as trying to wrangle a better discount from the sales rep. Rather it takes:

  • Knowledge about the firms’ business models
  • Knowledge about the firms’ research methodology and analyst culture
  • Knowledge about the true business value of Continue reading

AR & recession – Reconsidering analyst contract priorities

icon-budget-cuts-105w.jpgControlling spending is a high priority for most vendors during a recession. For analyst relations (AR) teams this mandate causes angst because it means cutting spending with analyst firms, usually a big part of AR’s budget. Discussing this issue has become an increasingly common inquiry for SageCircle strategists as clients work through budget cutting scenarios. 

One of the main sources of anxiety is the perception that analysts will start bad mouthing the vendor to prospects, making negative comments in the press, and cutting off AR’s ability to brief the analysts. This is usually an overblown concern as reputable firms will not damage their standing with vendors – a significant source of information and market insights – over short term contract spending changes. Analysts at the largest firms often do not know the size of a vendor’s contract with the firm and will not notice if the vendor cuts the contract by some percentage.

Unfortunately, there will be individuals who do resort to threats and making overtly negative comments about vendors in the press as pressure tactics to get contracts. Typically these individuals are Continue reading

How much to spend on analyst contracts [AR practitioner question]

question-mark-graphic.jpgInquiry: SageCircle received the following inquiry via e-mail: “Is our use/cost of the major analyst firms at about industry standard or better – especially as it relates to analyst contracts?”

“Are we spending the right amount on analyst contracts?” is a common question that SageCircle receives. This is one of a group of “standards” or “benchmarks” inquiries (see The Size of the AR Team [AR practitioner question]) that many AR managers wrestle with, often in response to their management’s demands for justification for budgets. While clients want us to provide a simple rule-of-thumb for analyst contracts (e.g., as a percentage of vendor revenue), we cannot provide it. Through our research, we have discovered that comparable vendors (in terms of markets, total revenues and number of employees) can have dramatically different analyst contract requirements.

The more important questions that need to be answered are: “Are the contracts providing us the services we need to reach our defined goals?  Are we managing the contracts to get full value? 

For end users clients, usually IT managers at large enterprises, the answers are much more clear cut. Even though enterprises use analysts for a variety of purposes (see Why technology buyers use the IT industry analysts), these purposes basically fall into either strategic and tactical decision support. Thus, spending can be focused on active topics and activities, especially where internal expertise is not available.

How much IT and telecommunications vendors spend on analyst contracts is dependent on a variety of factors. In this SageCircle blog post, we will focus on identifying the factors.

Breadth of usage – How many different functions in the company will analyst research and advice be supporting? The broader the usage, the more Continue reading

Managing the AR budget in a recession

icon-budget-cuts-105w.jpgWith all the turmoil in the economic scene, we have been getting inquiries about how to manage the analyst relations (AR) budget in a recession. This post is a roundup of content we have published on the SageCircle blog on the topics of budgets and spending. 

This content is the tip of the iceberg when it comes to the full set of intellectual property SageCircle has generated on these topics. There is more written research and SageToolsTM in the Online SageContentTM Library. There is also an AR Team Briefing on managing budgets in a recession. Finally we recommend that Advisory clients, either Blocks of Advisory Hours or Annual Advisory, schedule inquiries to discuss the budget implications of the economic uncertainty.

Purchasing Analyst Services, a six-part series:

  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 Continue reading

Forrester acquires JupiterResearch – will the analysts stay or walk?

logo-forrester.gifForrester Research acquired JupiterResearch for $23 million in cash plus assumed liabilities. JupiterResearch joins Forrester’s Marketing & Strategy Client Group. Click here to read the press release and click here to read a blog post by analyst Josh Bernoff.

The key question for any analyst firm merger & acquisition (M&A) activity is whether the acquired analysts – the core intellectual property value – stay with their new employer or leave. For example, in the case of Gartner’s acquisition of META more than 50% of the analysts left voluntarily or through buyouts within a few months.

Our initial impression is that the JupiterResearch acquisition is more of an expansion of Forrester’s services than a consolidation move to eliminate a competitor. This is similar to Forrester’s Giga acquisition, but different from Gartner’s grab of META which was clearly a strategic move to Continue reading

Right usage – Drive usage of the services you buy to ensure maximize business value [Purchasing Analyst Services, Part 6]

icon-budget-cuts-105w.jpgPart 6 of the Purchasing Analyst Services series does not directly address buying, but what happens after the contract has been signed. By taking into consideration how you are going to drive usage of the services you buy, enterprise and vendor buyers of analyst services can feed that back into the purchasing process to ensure that you will get the right services from the right firms at the right price and maximize business value from the contracts.

One of the key purchasing mistakes buyers make is not examining past contracts and determining if the services were adequately used. While some larger clients of the analysts will survey users on whether the firms under contract had responsive client service, timely access to analysts, and maybe ask a subjective question about usefulness, they rarely evaluate usage patterns to see if seat holders actually use the services at an optimal level to get business value. If usage by particular seat holders is low, buyers need to reconsider whether or not these seat holders should receive seats at contract renewal time. One of the best ways to save money is to not buy services that do not get used.

In addition to analyzing usage patterns, analyst clients need to evaluate their training programs and their processes used to encourage usage of Continue reading

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 Continue reading

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