Why large advisory analyst firms don’t seem to mind losing superstar analysts

By SageCircle with special guest contributor Gerry van Zandt

Update 9/24/09 2:05 pm PT: We are receiving links to interesting related posts that we are now adding to bottom of this post.

The recent departure of Forrester analysts R “Ray” Wang (personal-branded blog, Twitter handle) and Jeremiah Owyang (personal-branded blog, Twitter handle) has prompted the usual commentary and hand-wringing around what these departures mean. Questions we’ve heard center around: a) do the departures signal the demise of traditional analyst firms; and b)  and why analyst firms cannot keep their superstars.

Answers: no; and maybe they don’t want to.

Remember that superstars have always been leaving analyst firms. In the 1980s, George Colony and Tony Friscia left Yankee to form Forrester and AMR, and Dale Kutnick left GartnerGroup to launch META Group. In the 1990s, Gideon Gartner left Gartner to create Giga, and a group of Gartner analysts left and launched Jupiter Communications (while a number of Gartner analysts did join Jupiter, they did not co-found it).  These are just examples where the superstars founded what became good-sized firms with many analysts. There are many more examples where superstars have become successful single practitioners or have intentionally kept their firms at a “boutique” size.

There was a similar burst of twittering (in the old fashioned sense of the word) when social media superstar and Groundswell co-author Charlene Li (blogTwitter handle) and two other social media analysts left Forrester Research in the summer of 2008 (see Bursts of analyst departures in a hot research area are not unusual). So was Forrester doomed? Not at all. It still retained Groundswell co-author Josh Bernoff (blog, Twitter handle). It also had a cadre of social media analysts built organically and expanded via the JupiterResearch acquisition, and it had a very promising young analyst who already had high visibility but had not yet achieved superstar status yet – Jeremiah Owyang. Fast forward a year, and Forrester has lost another social media superstar. Oh, woe is them! Not really. The fortunes of large, successful industry analyst firms do not rise or fall based on a single superstar. Forrester still has a large and strong team of analysts covering social media from many different angles. In fact, among the traditional IT and telecommunications analyst firms, Forrester clearly has the best and most prominent social media research coverage. This is partly because it caters to enterprise marketing professionals in both its end-user and vendor client bases, not just the IT department.

So why don’t firms like Forrester or Gartner keep their superstars? In some cases they can’t because the superstar is itching to start their own firm or wants to go in a different personal or professional direction. Nothing the analyst firm could do would keep them. However, in other cases, the business and/or compensation model of the analyst firm dictates its lack of motivation to keep the superstar.

Keeping the superstars

Advisory analyst firms, especially Gartner and Forrester, are focused on driving annual, retainer-based Research contracts. Research is a high-margin business (e.g., Gartner in non-recession years averages contributing margins of 65% for Research, 40% for Consulting and 51% for Events) and both Forrester and Gartner have promised Wall Street that they would push to increase the percentage of revenues from Research in order to improve overall company margins and earnings. Firms can easily improve Research margins by selling more Research contracts without having to increase analyst headcount. Gartner has improved Research margins from 59% in 2005 to 66% in 2008 by increasing Research revenues 48%, while keeping analyst headcount flat at 650. Both Gartner and Forrester have told Wall Street they are targeting 70% as gross contribution margin from the Research sector. The most important sales metric for advisory firms is net contract value increase (NCVI), which measures the firm’s contract renewals, contract losses, and new client contracts.

Revenue increase is the upside to superstar analysts. They definitely contribute to NCVI by helping bring in new business through their high visibility on hot topics, retaining existing clients by being available for calls or visits, and helping the Sales team whenever asked. With a savvy and large enough sales force and the right topic, a superstar can easily bring in $1-2 million annually in new contract value while helping to retain existing clients.

Margin erosion is the downside of superstar analysts. If their motivation for leaving is additional compensation based on the contract value they bring in, then the typical way for most firms to counter would be to raise their salary and/or bonus. However, this would eat into the Research contributing margin. Obviously, raising the pay for a single superstar would have minimal impact on the overall Research sector margin. What firm management fears is that giving a superstar more money would start an overall salary inflation that would result in a significant impact on precious margins.   

And, in the overall financial calculation, it is margins that beat out revenue growth, especially for public companies where investors reward earnings per share growth more highly than revenue growth.

Thank the departing superstar and hire the smart, ambitious replacement

Another reason why large advisory firms are less concerned about retaining superstars is that they know there is a large pool of potential replacements. While it is not possible to consistently groom a superstar, the firms definitely know how to take a smart, savvy professional and grow them into a high-visibility analyst that can generate many times their salary in NCVI.

Right now there are individuals with experience and expertise, either from the vendor or end-user side, who are burnishing their resumes because they want to be the “next Jeremiah Owyang” or the “next Ray Wang.” Remember, Jeremiah was the “next Charlene.”  The successful candidate will then join the firm and leverage that position to advance their career. Some of these superstars-to-be will stay only a couple of years, while others will stay for a long time. Regardless of the duration, this arrangement can be very beneficial for both the firm and the analyst.

Superstar status is not a given for even the smartest individuals. There are many factors such as personality, ambition, area(s) of expertise, timing, effective self-promotion, street smarts, writing and speaking skills, and willingness to put in long long hours. And to a certain extent, achieving superstar status requires a bit of luck as well as skill.

Related posts:

Why do they leave Forrester? by Jay Deragon on the “Relationship Economy….” blog

SageCircle Technique:

  • AR teams need to educate stakeholders that major advisory firms do not rely on superstars for their influence or business
  • AR should consider continuing existing relationships with departed superstars, particularly if they join a boutique firm or establish a solo practice
  • AR needs to have an analyst list management framework that is flexible enough to handle newly departed superstars and relevant boutiques, and not just focus on the large advisory firms
  • AR needs to have in place a process to quickly revise its analyst lists should a top ranked analyst leave a firm
  • AR needs to have an established process to evaluate the departure of an analyst, superstar or otherwise, and how much effort to put into briefing a replacement, temporary or permanent

Bottom Line: Superstars come and go, but large advisory analyst firms are built to succeed based on the work of many smart, savvy professionals, not just a few superstars. The biggest issues for an AR team concerning the departure of a relevant superstar are the distractions and disruptions to their strategic and tactical AR  plans, not whether the firm will lose its influence.

Question: Some superstars who leave a major firm discover they do not enjoy all the non-research work (e.g., taxes, securing business licensees, accounting, selling and so on) that come with being a single practitioner or starting a boutique. Can you think of examples of superstars who “boomeranged” (left a major firm only to return)?



  1. Put more briefly, Gardner’s brand allows it to charge high rates for the work of middling analysts, so both parties are happy. As soon as an analyst becomes a brand of his own, there’s no synergy left.

  2. Hi bfinucane, Thx fo the comment.

    I agree with the part about the power of Gartner’s brand.

    What I disagree with is “middling analysts.” Gartner has hired wicked smart people over the years. Some left, but many are still there. Not everybody has the desire to do all what it takes to become a superstar or a celebrity.

  3. is it true steve hilton at yankee is leaving? anyone know for sure? where’s he going?

    i called, left message. haven’t heard. big time small and med enterprise analyst

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