This analysis does not look at areas of interest to investors, but seeks to pull out insights that are relevant to clients and prospects of Forrester Research, the number two advisory analyst firm, as well as communications and IT vendor analyst relations (AR) teams.
Forrester Research (NASDAQ: FORR) Chairman & CEO George Colony (Twitter, blog) and CFO Michael Doyle presented (replay available for approximately 90 days) at the William Blair & Co. Emerging Growth Stock Conference on Tuesday, October 6, 2009. Because the presentation was oriented toward investors that might not know much about Forrester, instead of the usual Wall Street analysts on quarterly earnings calls, there were some tid-bits of intelligence useful for clients and AR.
A large number of diverse data points but spread thin: One of the advantages that a large analyst firm has is that its analysts can – not always – have access to a large number of formal and informal data points to include in research and use with end user clients during inquiries. Forrester revealed that its analysts conduct 3,500 vendor briefings, 16,800 inquiries, 250,000 consumer survey responses, and 10,000 large company survey responses.
Sounds like huge numbers, right? Actually these numbers might not seem so impressive when the average per analyst is calculated. Forrester currently lists 193 analysts, not including research associates and researchers. That means that the average number of inquiries per analyst is only 87 per year or seven (7) per month. Of course that is the average, which means that some analysts will be doing much less than the average, maybe as little as three (3) per month or less than one a week.
Calculating the number of briefings per analyst is a little trickier because a single briefing can have multiple analysts in attendance. For this discussion let’s say three analysts per briefing, which then calculates to each analyst getting about six (6) briefings per month. Again, this is not an impressive number when taking into consideration how important vendor information is for advisory analysts.
Of course, inquiry and vendor briefings are not the only sources of the Forresterites’ data points. However, they often cite during inquiries and briefings the “large number of” whatever they are doing without giving hard numbers. Perhaps it is time for clients to peel back the onion and get the analysts to quantify the numbers before accepting their recommendations based on what the analysts are “hearing from clients.”
Forrester analysts – please feel free to comment on the number and source of your data points.
Mentions Forrester is part of duopoly with Gartner: It was interesting to hear CEO Colony mention, for maybe the first time in public, that Forrester was in a duopoly with Gartner. Colony said that the duopoly was created by the firms acquiring the two largest competitors (META by Gartner and Giga by Forrester). Of course, SageCircle first mentioned this duopoly in a July 2008 post and then reiterated our opinion in a March 2009 post. This is an important point because it shows that Forrester has internalized this status, leading to behaviors such as price increases that would not be possible if there were more competitors in the market.
Lots of green fields: The Forrester executives mentioned that it has penetrated only about 5% of the addressable market (25,000 companies with 4 million potential individual clients, numbers which are in the same range as what Gartner mentions). The implication is that Forrester has plenty of room to grow, which could lead to increased influence. More enterprise clients means more opportunities for Forrester analysts to advise them on vendor sales deals.
Forrester might be getting ready to pull the trigger on another acquisition: During the quarterly earnings call, Colony usually gives a small mention, almost rote, about potential acquisition activity. However, during this investor conference, he had an agenda item with a full slide dedicated to the discussion of acquisitions. He mentioned several times about how acquisition targets are getting to be more realistic (worn down by the recession) and are starting to discuss attractive deal prices.
Colony also pointed out how three of Forrester’s four major acquisitions were very successful, which is a higher success rate than normal. He said that Forrester is very careful about M&A and that they “would look at a thousand balls before swinging.” The objective of any acquisition would be to fill a gap in geographic coverage, product, or role.
Forrester has $275 million in cash and short term securities as of 6/30/09 so it certainly has the resources to acquire most any firm except Gartner and IDC.
Bottom Line: Public companies like Forrester and Gartner often reveal different information to investors than they do in marketing or sales situations. Savvy enterprise clients and vendors can pick up critical insights by carefully listening to investor presentations and earnings calls.
SageCircle clients are encouraged to contact us for more in depth discussions and possible implications.
Nice post – any thoughts on where these or any other acquisitions would be targeted? EMEA? Europe? APAC?
Forrester notes that the data side of the business is only 5% of revenue. Is this a missed opportunity? Primary data research is one of the things that separates a sizable firm like Forrester, and it doesn’t depend as much on expensive staff. Smaller firms simply can’t do this. That part of the tech research business continues to be dominated by IDC, not mentioned as part of the so-called duopoly. But if you look at vendor revenues, who leads?
I didn’t see it but what was the timeframe for George’s Colonies reference of
3,500 vendor briefings
250,000 consumer survey responses, 10,000 large company survey responses
If this was for 2009 to day then you need to account for that only being 3 Qtrss of a year, including 4Q seasonal adjustments.
Sam, Thanks for the question.
Criteria for acquisition was that it fill a gap – either geographically, product or role.
No specific geography was mentioned as a target. My observation is that Forrester needs much more analyst depth in every geography except US, so anywhere is possible.
Hi Merv, Always a pleasure to see your comments.
Completely agree that data is an important differntiator, not just with small firms and boutiques, but with the content and opinion available on the Internet and blogosphere.
I personally see the Technographics data as more valuable than the typical market research numbers available from IDC and Dataquest/Gartner. And Forrester is expanding its line of Technographics offering with Tuesday’s announcement about the launch of “Workforce Technographics” to analyze technology adoption in the workplace (see http://www.forrester.com/ER/Press/Release/0,1769,1307,00.html).
As to vendor revenues, the likely order is:
1 – IDC
2 – Gartner
3 – Forrester
4 – Ovum/Datamonitor
According to Forrester’s 10-Q, the vendor roles comprise 29% of Forrester revenue for 1H09.
Don, Thanks for the comment and question.
I think that George said “in a year” to mean an average year. Not so far in 2009.
I’ll double check.
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