SageCircle received an email from a reader asking whether we had seen the newsletter from a boutique analyst firm, which included a comment that Gartner has been increasing the number of Leaders on Magic Quadrants. The clear implication was that this analyst was accusing Gartner of corruption for inflating the number of Leaders in order to extract revenue from vendors in the form of analyst consulting days, research reprints, and so on. Of course, this analyst competes with Gartner for contracts and access to vendor briefings.

SageCircle has not noticed any “Leaders inflation,” but then we have not been doing any systematic, in-depth research which would be required for such an observation. We do note however that Gartner is being sued by ZL Technologies because the MQ that ZL has been listed on since 2005 still has only one (1) Leader and it’s not ZL. So I guess that Gartner gets criticized if it there are too few Leaders or too many.  The joys of being the dominate market player, everybody takes potshots at you.

The boutique analyst firm offered no proof, nor does it describe the research methodology behind the claim, so we cannot evaluate the validity of the claim.  Here are some general observations:

1. The boutique analyst firm analysts could be looking at only a few MQs relevant to their coverage and these may have been around for a number of years. Maturing markets naturally see the vendors migrate up and to the right as the market consolidates through acquisitions or failures, vendors become better at execution, and so on
2. The boutique analyst firm analysts do not notice that Leaders are not the only vendors who purchase reprints, vendors in all boxes – incredibly even vendors in the Niche box – acquire reprint rights and promote the MQs they are on. As a consequence, Gartner would not necessarily get incremental revenues because the Challengers and Visionaries might already be purchasing reprints of the Magic Quadrant
3. We don’t believe there is any “Leaders inflation”

To see if the distribution of vendors around a MQ was skewed in one direction or another, we looked up a random set of MQs just to see what the breakdown was between the various boxes.  Our example set consisted of hardware, software and services MQs mostly from 2009 (click the title to see the MQ):

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Columns: Ldr=Leader, Cha=Challenger, Vis=Visionary, Nic=Niche.

In this unscientific selection of MQs, we detect no particular “Leader Inflation” with Leaders having 23% of the total. However, different types of MQ have different distribution with the hardware Leaders capturing 32% of the total, while software Leaders only get 17%. At the individual research note level, the Help Desk Outsourcing has 52% Leaders, while the Social Software has only 9% Leaders. So clearly there are significant differences between different slices of the data in this small sample.

What about if we were to look at the same MQ, but from different years? Again using a small and unscientific example, we see that indeed the number of Leaders on the Managed File Transfer MQ did increase from 2008 to 2009. However, the number of new vendors added overall was even greater so that Leaders experiences only 21% increase while Visionaries increased 57%.

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To truly determine if there is some sort of skewing of vendor positioning would require an in-depth research project requiring a significant effort and data over a number of years. There would be a need to correct or account for many factors. Steps for an ongoing research project would include:

• Capturing data from all MQs over an extended period of time
• Comparing distributions by
  • Market
  • Initial release of the MQ and updates over time
• Tracking changes in the vendors listed to account for new entrants and market consolidation
• Tracking the discontinuation of MQs and for what reason
• Tracking changes in the lead analysts and contributing analysts
• Tracking evolving criteria to account for changes in position due to changes in the market
• Tracking evolving investment in and execution of analyst relations (AR) by the vendors – better AR execution can improve placement even if nothing else changes

There are unlikely to be any buyers – vendors, enterprise end users, media and so on – for this sort of research. So it is doubtful that any AR services firm or PR agency would actually invest the effort in doing the work to see if the claim about “Leaders inflation” is anything more than hot air. The lack of paying clients is also one of the reasons why nobody tries to audit the accuracy of analyst predictions and recommendations.

Bottom Line: Complaining about Gartner is a perennial topic for blogs and competing analyst firms. Rarely, if ever, do the analysts or bloggers expend the effort needed to provide solid facts and analysis to back up their claims. As a consequence, enterprise end-user clients and vendors should be skeptical about any claims about Gartner, Forrester, IDC and other large firms that are the targets of these attacks.

Question: How much would you pay to have someone audit the analyst research such as the Magic Quadrant?

This is the Explanation Mark! blog post.

 Analyst leaves Forrester! – The fact that an analyst leaves a prominent firm (in this case Forrester security analyst Natalie Lambert to vendor Citrix) is not news. People change jobs all the time for a variety of reasons. Even in a recession. What is interesting is how open the news has been with the analyst and Forrester tweeting and blogging (e.g., see this post) about it. In the past, analyst firms were loathe to admit that an analyst had walked out the door, only telling clients and others on an individual basis to keep the word from spreading. Luckily that attitude is no longer possible because social media means that the word will get out sooner than later. So kudos to Forrester for being open about the change.

70 new entries in the Analyst Twitter Directory in the last week! – We did two updates to the Analyst Twitter Directory with the result being that the number of analysts in the directory went over 900. You might want to check out the AR Twitter Directory as it has 48 new entries.

Which analysts actually tweet? Pshaw! It doesn’t matter! – After SageCircle tweeted about the Analyst Twitter Directory getting near 900, there was this reply by HCL AR wizard and former Gartnerian @robert_desouza “the correct stat would be how many actually tweet of the 899.” Then HP AR guru @gerryvz tweeted “Yes it would be an interesting project to stack-rank Twanalysts by frequency, insight qual & market influence.” To both twits we say “Pshaw!” That is because ranking all the analysts in the directory by volume or insight is not relevant. What is relevant for AR teams is whether your analysts are using social media. So it does not matter if social media poster boy Jeremiah Owyang is number one ranked of all 900+ analysts when it comes to social media usage if your market is storage hardware, because Jeremiah is not relevant to that market.

SageCircle has done a number of Analyst Social Media Traffic Analysis engagements recently. No two analyst lists are alike in the social media usage patterns. Each list has at least one analyst who might not rank within hundreds of the top of the directory, but who still does enough on social media for that particular AR team to monitor.

Twitter Lists are not powerful enough for the Analyst Twitter Directory! – Not yet, anyway.  This was a request that came in last week and it makes sense. Unfortunately Twitter Lists is pretty bare bones at this time and does not have features to make it a true directory (e.g., firm and analyst name, sortable). There will be an analysis soon of Twitter Lists and their usefulness for AR professionals.

Social media usage upgrades an analyst to Tier 1 status from Tier 2! – If visibility is a relevant criteria for an AR team’s analyst list ranking framework, then an analyst’s use of social media could raise her overall visibility and thus her ranking on the list.   This might mean moving her above the Tier 1 line – while bumping another analyst into Tier 2.

Bottom Line: Social media in the analyst ecosystem is still evolving. Analysts, AR teams, and research clients need to keep their finger on the pulse of change to ensure that they are not put into a competitive disadvantage.

Question: What are your favorite examples of effective use of social media by analysts or AR?

You read the headline correctly; Forrester and Gartner should never be considered Tier 1. Yes, yes, Gartner is the industry behemoth and Forrester is likely the number two firm for enterprise end users, but that does not make them automatically Tier 1 for the purpose of creating a ranked and tiered analyst list. 

In the analyst list methodology that SageCircle has developed, analyst firms should not be given an automatic “tier” because what should be ranked is analysts, not firms. Ranking should be done based on a set of criteria (e.g., industry visibility, research coverage, client base, and so on) related to the vendor’s and AR team’s objectives. After a ranked list is created, then AR draws lines on the list to split the list into groups (e.g., Tier 1, 2 and 3, or strategic, important, and secondary or whatever you want to call them) that will define the types the service level (e.g., 1-to-1, 1-to-many or none-to-many responses) the AR team will give each analyst on the list. Tiers and service levels are created based on AR resources (i.e., the bigger the AR team the more Tier 1 analysts can be supported). While the characteristics of the firm will contribute to the data for ranking, merely working at Forrester or Gartner should never guarantee an analyst that they will have Tier 1 status.

SageCircle strategists frequently see analyst relations (AR) teams give Tier 1 status to analysts of the Big Two, even if their true relevance should place them much farther down on the ranked list. This can lead to AR misallocating resources by putting too much emphasis on some analysts while not having sufficient resources to brief or respond to other analysts. Remember, depending on the market and the analysts, a single practitioner or boutique can have just as much influence as the Big Two.

SageCircle Technique:

• Develop (or use SageCircle’s) analyst list management methodology that uses a mix of weighted criteria
• Work with your internal stakeholders to set the criteria and weights as well as obtain buy-in for the final ranked list
• Set service levels based on AR resources
• Be disciplined – but diplomatic – about adhering to service levels even when you are directly contacted by lower ranked analysts

Bottom Line: Few if any AR teams have the unlimited resources required to support every request from every analyst. AR needs to develop a methodology for ranking analysts based on relevance to the company’s objectives. Then AR needs to split the ranked list into groups with the sizes of the groups based on the resources AR has available. Finally, AR needs to ensure that its internal stakeholders are in agreement with the ranking methodology and service level framework so that AR will not have problems adhering to the service levels when an analyst calls an executive to complain about their treatment.

Question: AR – How do you rank and tier your analyst list?

Vendor AR teams find it useful to understand the size and nature of an analyst firm’s clients when they are trying to decide if that firm has direct influence on their sales. Analyst firms whose clients are primarily vendors have little direct impact on sales deals because they are not advising IT managers and other technology buyers. Those firms with a significant contract value with enterprises can have a dramatic impact on sales especially through ad hoc, phone-based inquiry (see Don’t discount the business value of analysts’ 350,000+ phone-based inquiries with end-user clients) and signature product or market research (e.g., Magic Quadrant and Wave).

In its SEC Form 10-Q, Forrester Research provided some details into its client base. While not perfectly transparent, it does provide interesting insights. The filing reports the revenue breakdown by the three Client Groups, which have their own dedicated sales and analyst teams. There is also an “Other” category which consists “primarily of sponsorships and event tickets.” The “Other” category makes the percentages fluxuate quarter-to-quarter depending on the number of events that occur in the quarter.

As the table illustrates, roughly 40% of its revenues in the first three quarters came from its IT Client Group, which SageCircle interprets as “end users” at enterprises. This is a critical community for many technology and telecommunications vendors as these are often the primary buyers of technology, especially IT infrastructure (e.g., servers, storage, systems integration consulting, enterprise applications, et cetera).

The roughly 29% for the TI Client Group, focused on vendors, represent analysts who primarily advise vendors –although they can advise end users through so-called courtesy views and inquiries – and thus do not have a direct impact on active sales deals. The “Other” segment, the events business, does not have an analyst team so it does not have a direct impact on active sales deals.

So does this mean less than half of Forrester’s clients are those prime IT buyers that vendors prize? Not necessarily.

The M&S Client Group, which is focused on marketing professionals, has as part of its mission “Objective advice on which tools and technologies will best connect you to customers” (from Forrester’s website). This particular focus should interest vendors as it implies that at least some of the M&S analysts have a direct impact of sales deals. Unfortunately, Forrester does not provide guidance on how much of the M&S Client Group analyst team’s time is spent influencing technology product purchases versus providing “Data-driven insights” on “changing consumer behavior” using Consumer Technographics® survey data. So some percentage of M&S’ roughly 27% can be associated with clients who buy IT and telecommunications products, software, and related services for marketing purposes.

Assuming that Forrester’s total business with IT buyers is about 50% and with Forrester’s full year 2009 guidance of $220m to $233m, we estimate that Forrester’s “end user”-like client business is approximately one-seventh that of Gartner’s end-user business. This interpretation of the earnings data might come as a surprise to those vendors who perceive that Forrester is much more of a peer of Gartner. What this exercise illustrates is that perceptions can be wrong and depend a lot on the market space of the vendor.  

Broader Lessons

AR professionals need to peel the onion to get the data they need to make important analyst list ranking decisions and understand what is important is the measure of influence of the individual analyst in their market space regardless of the firm. Not even Gartner wields significant influence across all the IT landscape. In some situations, boutique analyst firms and single practitioners can have more relevant visibility or influence than the largest firms.

Related post: Forrester Research Q2 2009 earnings

SageCircle Technique:

• AR should review assumptions about any analyst firm’s size in the analyst ranking and tiering framework used to create analyst lists
• AR should inquire with their Sales colleagues to see if the number of prospects and customers mentioning Forrester research is shrinking, growing, or staying the same.  This will help determine Forrester’s continuing ability to influence vendor sales

Bottom Line: While Forrester is clearly the number two advisory firm in terms of total number of end-user clients, it should not be assumed that its reach is as great as market behemoth Gartner. AR needs to take a fact based approach when making decisions about allocating resources for outreach activities.

Question: AR – What was your perception about the relative size of Forrester’s end-user client base versus Gartner’s?

General News

Analyst Twitter Directory – On November 5 and 7, SageCircle added a total 70 analysts to the directory and changed the entries of seven.

Forrester Research has released its 10Q for 3rd Quarter 2009. There will be an analysis by SageCircle on Monday, November 9th.

People on the Move

CMS Watch – Apoorv Durga (Twitter, blog) joined covering portals and content management.

Forrester – Natalie Lambert (Twitter) departs to join Citrix.

Gilbane Group – Ted Treanor (Twitter) joined covering digital publishing strategies.

Send SageCircle Your News Tips

Are you or people you know on the move? Are there changes at an analyst firm to follow? Please let us know and we’ll post the news in future editions of Analyst Ecosystem Update. Send the information to info [at] sagecircle dot com.

As we get closer to 2010 more analyst relations (AR) teams are engaging in the annual planning exercise. One of the ways to enhance the power of planning is to systematically and honestly assess the program and its accomplishments. 

Below is a quick check list of assessment techniques. You can listen to a discussion of some of these techniques on the November 3^rd SageCircle AR Community podcast which you can listen to by clicking here.

SageCircle Technique:

• Conduct an audit of how AR has performed in the last year
• Conduct an audit of what AR has accomplished in the last year
• Ruthlessly evaluate how AR is allocating its time
• Do a zero-based rethink of all spending, especially Forrester and Gartner expenditures
• Poll AR’s internal stakeholders on perceptions about AR’s role and business value
• Survey analysts on AR’s effectiveness
• Leverage SageCircle’s Analyst Relations Diagnostic™ service (free for non-clients)

SageCircle Advisory clients are encouraged to schedule a phone-based inquiry to review information from assessments, brainstorm priorities for next year, critique draft AR plans and any other planning needs.

Bottom Line: Planning starts with an honest assessment. AR teams need to check their past year performance, allocation of resources, and internal and external stakeholder perceptions to make AR planning an effective tool. 

Question: AR – What other types of assessment tools do you use?

Join us for the December AR Coffee Talk on “End of Year Check List”

December brings the holidays, but also tasks that should be completed before 2010.  This AR Coffee Talk will review those planning activities that can make the start of the New Year smooth and productive.  We will provide checklists, but bring your ideas to share. There are three sessions to make it easy to schedule:

1. December 2 at 10 AM Pacific  Free - Click here to register
2. December 8 at  9  AM Pacific  Free - Click here to register
3. December 14 at 8 AM Pacific  Free - Click here to register

This dismissal by the judge hearing the case does not mean the issue has been settled as ZL Technologies can pursue other legal options.

Related SageCircle posts:

• Gartner Statement about the ZL Technologies lawsuit
• This not the first time that Gartner has been sued nor will it be the last

From the Research Magazine website: Round one goes to Gartner in libel battle

5 November 2009 | By Brian Tarran

Gartner has succeeded in dismissing a libel complaint brought by a software company angry at being described as a ‘niche’ player – though the vendor has been granted leave to file an amended complaint.

District Court Judge Jeremy Fogel agreed with the IT analyst’s argument that its Magic Quadrant reports and the positioning of ZL Technologies in the ‘niche’ quadrant constituted “non-actionable opinion”.

ZL had argued that its placement in the reports was derogatory “because they are understood by technology purchasers as a warning, by Gartner, that ZL and the ZL products are not good choices for enterprise email archive applications”.

The company claimed to have suffered damages of at least $132m “as a direct and proximate result of Gartner’s defamatory statements”.

However, Judge Fogel noted, “There is no allegation that Gartner actually said that ZL is not a good choice.”

In granting the research firm’s motion to dismiss, the judge left the door open for ZL to submit an amended complaint within 30 days – though leave to amend has been denied for claims made by ZL under California laws on unfair competition and false advertising.

The AR podcast is a review of the latest news and trends in the analyst ecosystem along with tips and tricks for analyst relations professionals and analyst research consumers. SageCircle strategists Dave Eckert and Carter Lusher co-host this bi-weekly program. You can find all the SageCircle podcasts on our podcast page.

Visit the podcast page to download the MP3 file or listen to the episodes on your computer.  Click here to subscribe to the podcast within iTunes

SCP 12: Table of contents. Numbers in parentheses refer to minutes:seconds when the article starts within the podcast.

[00:00] Opening

[00:57] News – Forrester’s and Gartner’s 3Q 2009 Earnings Announcements

[07:41] Growing enterprise client base enhances influence and relevance

[10:40] AR-Sales Case Study – Countering a negative research note

[15:16] 2010 Planning Tips

[21:22] Upcoming Events

[22:45] Closing

Our goals for the AR Community Podcast are two-fold. The first goal is to provide an additional venue for SageCircle research that complements our existing deliverables, whether free (e.g., SageCircle blog) or client only (e.g., the Online SageContent Library, the largest and premier repository of AR best practices and downloadable tools available in the industry). The second goal is to develop real-world podcasting skills so when our clients are considering their own podcasts we have the experience (and scar tissue) to help them start podcasting without having to re-invent the wheel.

With only two public companies,* Forrester and Gartner, in the advisory analyst/market research industry it is difficult to obtain details about how analyst firms are doing in this economy. Frankly, most firms will not share publicly their sales and client numbers. As a consequence, SageCircle looks for other data points about what is happening in the analyst market. 

AMR Research CEO Tony Friscia and CRO Bruce Richardson made some interesting statements about AMR’s sales in the October 30^th “AMR Research’s First Thing Monday” podcast titled “SAP’s Earnings Call” (available on iTunes and AMR’s podcast webpage). While discussing the state of the ERP market, Tony said:

“…Let’s look at this through the lens of our business. I think in many ways our business is a leading indicator. When a recession is looming we see a downturn and how companies work with us. When things are getting better we tend to see ahead of the curve. Are we seeing the end of a cyclical trend? Our business in the last three months has been very, very strong. …”

Because Tony was using this point about AMR sales in the context of a broader discussion about the ups-and-downs of the enterprise software market in a recession, SageCircle interprets it as likely true and not spin to make AMR look better. Certainly AMR had a large layoff in the first week of January. In addition, Tony and Bruce were both ‘gloom gus’es during many podcasts through early and mid-2009. They were so pessimistic about the economic situation that for many episodes of “First Think Monday” they would only worry about the economy and not address either enterprise software or the outsourcing market. This attitude started turning around in the last few months as they stopped obsessing about the economy and started addressing issues more relevant to AMR’s core research. In addition, AMR is now hiring with four sales and three research positions currently posted on its website.

* Informa, owner of Datamonitor and Ovum, is a public company but it does not break out the financials for its analyst business. Because Informa is a large diverse company, details about the analysts firms cannot be teased out of the financial statements.

SageCircle Technique:

• Clients and prospects of analyst firms need to dig deep to obtain relevant intelligence about the financial health of firms before they considering signing a contract
• AR teams should incorporate financial strength into their calculations about the relevance and influence of analyst firms. Firms that are cutting sales and research headcount are also cutting the opportunities to influence market perception and sales deals because they will have fewer enterprise clients

Bottom Line: AMR Research’s CEO provided an interesting data point about his firm in an unguarded comment on a podcast. This illustrates how social media can be a source of unfiltered insights from analysts and executives.

Question: Enterprise and vendor clients and prospects of AMR – Have you noticed any changes in attitude from AMR sales representatives, analysts and management in the last few months versus earlier in 2009?

Here is an interesting announcement concerning the launch of a new ICT market research and marketing services firm that brings together former senior IDC analysts who were caught in IDG’s right-sizing exercise. A few points about the HENRY Corporation:

• Each analyst is also an independent practitioner, some with a firm name and some under their name
• With the exception of Martin Hingley (Twitter,  blog), most of the Fellows are not active users of social media
• With the exception of Simone de Bruin’s LinkedResearch website and to a lesser extent Hingley’s blog, none of the other Fellows have a formal web presence

SageCircle’s initial impression is that HENRY Corporation will be the marketing function as well as sales organization for this group of former IDC senior analysts. As such it will be somewhat more involved with its portfolio of analysts than Valley View Ventures, which acts simply as a sales agent for its associated analysts and boutiques.

Below is a blog post by Hingley on the launch, followed by the official announcement.

Overview from Martin Hingley, one of the original HENRY Fellows:

The Henry Corporation Brings Familiar Experts Back To Support The ITC Industry

What happens when a major market research organization off-loads most of its senior analysts in EMEA? I’m sure it does its best to run its services with newer researchers. However many industry execs will miss the quality of support, ideas and advice that they once had. In the case of my old company some familiar faces, now independent, are also as eager as ever to provide support. For myself I set up ITCandor in May 2009 and am publishing research and offering my services through this web site.

To help bring potentially lost expertise back to the industry on a wider level Carsten Schmidt launched the Henry Corporation on November 1^st 2009. The aim of the organization is to provide clients with marketing supporting (presentations, consulting and market reports) on the ITC industry in EMEA.

The constitution is a loose grouping of senior executive ‘Henry Fellows’ – currently all ex-IDC analysts with decades of experience in tracking complex markets. Current Fellows include:

• Anne-Lisa Wang (HAIKKOO) – Software industry, applications, enterprise portals
• Claus Egge – storage systems, data leakage, cloud based content, green IT, new media types, data security, disaster recovery/BC, server, storage virtualisation
• Marcel Warmerdam – IT markets, forecasting, market models
• Martin Hingley (ITCandor) – ITC markets, data centre, cloud computing, CSR, digital explosion, forecasts, market shares
• Pim Bilderbeek – Telecoms, multimedia, social media, enterprise mobility, unified communications, cloud computing, managed services, data center, and mission critical infrastructure
• Simone de Bruin (LinkedResearch) – pan-European partnership strategies pan-European partnership strategies in the software/services industry

Official Announcement:

New, international ICT market research and marketing services firm for professional marketers

Copenhagen, Nov. 2nd 2009

HENRY Corporation today launches with a partnership of experienced analysts and marketing consultants ensuring ICT vendors financially attractive and innovative marketing strategy and go-to-market solutions.

A rapidly transforming technology industry demands agile strategy and marketing support. Experts with deep knowledge in their core areas combined with execution capability to solve time-to-market challenges.

The HENRY Corporation bases the span of competencies on professional associates – HENRY Fellows. This federated approach allows for the delivery of solutions that meet specific marketing requirements in any given situation. Overhead and administration costs are reduced and the HENRY Fellows responsible for managing concrete project deliverable will focus on the return on investment for the ICT vendor rather than prioritizing own available resources and need for branding.

The HENRY assets are a network of experienced, independent market analysts within executive ICT business and marketing advice and a network of speakers from both small and major international research companies.

Founder Carsten Schmidt, a former senior manager with research company IDC, is confident Henry’s approach will tap into: “Professional marketers in knowledge industries are networked people. We depend on individual expertise across all kind of borders. By introducing personal governance to corporate IT market research HENRY Corporation brings to the market not only knowledge and experience but true independence and objectivity”.

The company’s services include a speaker bureau for ICT vendors, event management services in cooperation with IDG in Denmark, and strategic and tactical marketing services for ICT vendors in Scandinavia and the Netherlands. 

More information at: www.henrycorporation.com

Founder Carsten Schmidt can be reached at cs@henrycorporation.com or +45 3142 1900.