Revisiting Gartner's Influence

About two years ago I wrote this post on analyst economics. Since then Gene Hall, the CEO who came into Gartner 3 years ago, has been cleaning up operations and growing revenues nicely. As an investor I love what he has done.

But I read my former Gartner colleague Jonathan Yarmis rave about its growing "influence" - and I pause. Most CIOs I talk to have not increased spend with Gartner the last few years. Most think its research is passe.

I often see eyes roll when vendors present Gartner magic quadrants to buyers in competitive deals.  Because every vendor finds one in some sector in the last few years favorable to them. In one pitch, a vendor said "we are consistently in the best performers in Gartner's benchmarks" and the CIO turned to me and whispered "So, does that mean they are 25 or 35% overpriced?"

Many CIOs think Gartner is over-priced and has not passed along its offshore and other labor efficiencies. And SG&A continues to be too high inspite of Gene's clean up.

Gartner, smartly, does not break up its revenue sources.  It does not want buyer clients to ponder the conflicts it has with a large vendor revenue base. It wants its vendor base to continue to believe its buyer population is strong and vibrant. No real benefit in being transparent about revenue composition.

But if I were to hazard a guess most of the revenue growth is coming from price increases to vendors (few large buyers would pay even more of premium),  and newer SME buyers, especially overseas.  Does that translate to more influence? To a few vendors it probably does. To most buyers, the quality of the advice and the price for it is a better measure of influence. Not sure they would agree with Jonathan.

Jason Corsello, an industry analyst, who recently left Yankee, adds his perspective - beyond Gartner.

Brian Sommer, a former industry analyst and continuing industry influencer, adds his. And acknowldeges I am right! That has to be cached in web permanence!

Comments

[Jason Corsello]

Vinnie-

I hate to kick the industry as we are no longer wearing the respective badges, but I would agree, like many legacy business models, analyst firms need to evolve and innovate. People (not just CIOs) are buying software differently today than they did even 6-7 years ago. The "influencer" community has changed dramatically even in the last 3-4 years. I thinks its notable when, at SAP's recent user conference, the "bloggers" got better access to executives (chairman and CEO meetings) than even the best analysts.

[vinnie mirchandani]

Jason, not sure you are kicking them. By that token they "kick" tech vendors. We are in different ways in the opinion and influence business, and we say it as we see it.

I think, like you, there are several good analysts in the firms (like Jim Holincheck both of us know), but as you say vendors have turned them in to part of their marketing arsenal, and the analyst managements have let that go too far and now cannot easily turn the clock.

[Jim Holincheck]

I have been on vacation for a little bit (ok for longer than a little bit), but I thought I should respond now that I am back. Gartner has a lot of influence. I do not think anyone would debate that. It is only natural that vendors would want to take advantage of that. We have very stringent guidelines on how our research can be used. Sometimes, it does not get used appropriately and we have to police it (and I have certainly been involved in situations where that has been required). Having worked at another, smaller analyst firm previously, I can tell you that vendors look
at that influence much differently.

In terms of whether or not, companies are increasing their spend with Gartner, I cannot say more than what is already said in the financial releases. However, growth has been strong (which is certainly been reflected in our stock price) and our new end-user, role-based products have been extremely successful.

I get tired of the argument that end user customers think we have a conflict of interest because we have vendor clients. We have had end user and vendor clients for many, many years. This is not a new thing. CIOs know that we have vendor clients. Our business lives and dies though with serving the needs of end user clients. We become irrelevant to vendors if we are not relevant to end users. Would life be easier if Gartner had no vendor clients? Yes, it would be easier. However, I have never heard an end user client concerned about which vendors are Gartner clients.

[vinnie mirchandani]

Jim, welcome back from sabbatical -)

Look, people like you continue to keep the Gartner brand solid. And from our past history I know what a loyal employee you are.

But how many Jims can I honestly point to at Gartner? I know it sounds like good old days but the team in the 90s had several more analyst stars, each pretty dominant in their sector(yes, most already there before I arrived in 95 so not a pat on my back).

The influence reality is summed up in this blog I posted last year

"In the 1970's when CIO's wanted to know what to buy, they asked IBM.

In the 1980's when CIO's wanted to know what to buy, they asked Andersen Consulting.

In the 1990's when CIO's wanted to know what to buy, they asked Gartner.

In the 2000's when CIO's want to know what to buy, they ask each other."

I cannot blame Gartner employees for feeling good about your recent financial performance (heck even my stock went up!) but it masks a secular decline in influence

In an increasingly transparent world Gartner continues to be closed. There is no law which says you cannot disclose what percent of revenues come from buyers versus vendors. The market knows (or has heard) that your top 10 clients, revenue wise are vendors. You may say buyers don't care, but I am on this side of the equation in most sourcing transactions.

You want to really impress buyers - show me more examples like below. Gartner routinely did stuff like that in the 80s and 90s.

http://dealarchitect.typepad.com/deal_architect/2006/08/would_gartner_d.html

[Jim Holincheck]

We agree that the community (CIOs asking each other) is important. However, CIOs, even a group of them, have a certain lense that they view products and markets through -- their own individual experiences. CIOs do not get the breadth (and depth in some cases) of exposure to vendors, products, and customers that an industry analyst gets. I am not saying one is better than the other. Other CIOs, and consultants for that matter, get deep exposure to technology issues and challenges. Smart CIOs will and do take advantage of all the points of view to have the best information to make key decisions. Does that mean industry analyst influence will diminish? It only will if the value from that analyst point of view (or from the analysts themselves) diminishes. I think what you are saying ultimately is that the "value bar" is higher for industry analysts now than it ever has been. That is a good thing and it will only benefit customers.

[vinnie mirchandani]

Yes, Jim it is a point I have made to several AR folks. In most evaluations, companies call Gartner or look at its research at predictable points - in building a long list, getting input on a short list, broadly getting input on pricing. Often no more than 4-5 hours of input in a 3,6, 9 month evaluation/sourcing process. Is Gartner at its price points worth it for that input? To some CIOs it is, to many it is not.

also in many emerging areas - web 2.0, SaaS, even mobility I would say some of the best market analysis is coming from bloggers not your analysts.

Here is the vicious cycle. Bigger vendors circulate/issue PR about your MQs when they are favorably mentioned - typically later in the any technology's hype cycle. That late additional marketing only adds to the image that Gartner a) does better with older technologies b) favors larger vendors

Look Gartner has a role in the industry. My point is it is far less important, and therefore overpriced from many CIO POVs compared to 5-10 years ago.