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Gartner surprised by new competitors that steal enterprise clients – Looking ahead to 2010

icon-crystal-ball.jpgThis post is one in a series where SageCircle pulls out the crystal ball and looks ahead to what happens in the analyst ecosystem in 2010. See below for links to all posts in this series.

 Gartner is the dominant player in the analyst market with more than a 40% market share according to information market research firm Outsell, Inc. When it comes to the enterprise technology product and services buyer market (typically IT managers), Gartner extends this dominance to approximately 70% to 75% according to SageCircle estimates. If Gartner continues to execute as it has the last four years it will see its market share grow, even as the total market grows as well.

Gartner has achieved this dominance through both hard work and dumb luck. Hard work as represented by making more than 70 acquisitions since 1994, doubling the sales force since 2004 to nearly 1,000 representatives, and creating mindshare with recurring research deliverables like the Magic Quadrant, Hype Cycle, and Gartner Symposium. The dumb luck comes in the form of competitors that focus on vendors rather than end users, fail to build sales and marketing functions, and/or are complacent to the point of being Gartner’s implicit junior partner even though they have the resources to invest in more effective competition.

While there are no signs that Gartner is going to get lazy or stupid next year, 2010 might see its luck run out when it comes to ineffectual or complacent competition. SageCircle sees firms that bring attitude, business attributes, and wiliness to invest to the game unlike others in the past decade. Some examples include:

  • Altimeter Group – While still tiny, with only four analyst/consultants, Altimeter Group has tremendous enterprise visibility and mindshare due to its principals’ exquisite exploitation of social media, conventional speaking opportunities, press quotes, and client contacts from their Forrester tenures. This market awareness should prove to be a significant lead generator that other more established analyst boutiques can only envy. It has made an important investment by starting to build a sales organization. Its current Achilles’ heel is that it is perceived as mostly a consulting body shop that sells hours rather than a retainer advisory firm like Gartner. The advisory model does significantly better at leveraging headcount, permitting a bigger investment in sales, which becomes a virtuous upward cycle. If Altimeter can effectively adopt an advisory model, continue to grow its sales force, and close all the leads generated by its principals visibility, it will lock Gartner out of many opportunities or defeat Gartner in head-to-head competition for deals that involve social media, enterprise application or emerging technology.
  • Corporate Executive Board – While not known as an IT and telecommunication analyst firm, CEB demonstrated interest in the enterprise IT buyer market by acquiring TowerGroup in 2009. With a few more IT analyst firm acquisitions, as well as organic growth, CEB could develop sufficient scale and expertise to be credible as an advisor to enterprise end users. CEB could then exploit its underappreciated strengths of an established enterprise client base and professional sales force.
  • Ovum-Datamonitor – Unlike Forrester, the “new” Ovum has already shown the guts to go directly after Gartner with its guerilla marketing stunt (see this post).  Using its “collaborative intelligence” approach with Datamonitor, Ovum can offer a different set of insights than Gartner which should prove to be appealing to enterprise prospects. The Ovum-Datamonitor duo, unlike most firms, has a sales force that if it can effectively sell the services of both brands, and should be able to compete with Gartner. Furthermore, Datamonitor has an enterprise client base into which it can cross-sell Ovum services. Finally, Ovum – though its Informa parent – has the financial resources to both grow organically and make acquisitions. Taking all these factors into account, Gartner faces its most serious new competition since the 1990s.

This does not mean that Gartner will lose market share or fail to grow the number of large enterprises as clients. In the coming year it will at least maintain its market share while adding hundreds if not more than a thousand large enterprise clients. Rather, this prediction says that Gartner will have true competition in the end-user market, a development that will benefit enterprises and vendors alike.

SageCircle Technique:

  • Research contract managers at enterprises and vendors should seriously evaluate alternatives to Gartner, especially in selected areas of coverage
  • Research contract managers at enterprises and vendors should, at a minimum, reallocate part of their Gartner research spending to other firms to foster better competition
  • Vendor AR teams should create an analyst ranking framework that does not give Gartner analysts undue credit for enterprise influence
  • Vendor marketing teams should explore reallocating resources away from Gartner (e.g., conference sponsorships and research reprints) to the new, more competitive analyst firms selling to enterprises
  • Vendor public relations and marketing teams should deemphasize the use of quotes from Gartner analysts in press releases and marketing collateral and use competing firms instead

Bottom Line: It is a truism that markets work more efficiently and effectively when there is strong competition. The analyst market has seen diminished competition since the acquisitions of Giga and META in the mid-2000s. This has led to research clients having fewer distinct voices as sources of advice and research contract buyers spending more because there was no price competition. The new decade has the potential for more vigorous competition that will benefit enterprises and vendors alike.

Question: What other firms might grow into legitimate competition to Gartner and Forrester?

Looking ahead to 2010 Series

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  3. Interesting post Carter, and I agree – especially about Altimeter (including Ray Wang) after the AMR acquisition by Gartner. New models of delivery can challenge Gartner, but only if the corporate management mindset can be changed.

    In this context your comment about CEB “not being known” as an IT provider is interesting. Their IT family of products is a significant proportion of their business (CIO Exec Board, Infrastructure Exec Council, Applications Exec Council and more), and several other services have significant IT overlap (Sales, HR, and so on). Plus they now have the IT Toolbox networking community.

    CEB’s “supported sharing” model is very different from Gartner’s analyst-centric service, and demands more active commitment from members. It can’t easily be used just to rubber-stamp decisions already taken. In my enterprise days, some CEB services were an essential part of our portfolio. But a lot of managers “just want answers”, and need educating about strategic use of insight services.

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