Industry Analysts - in a time of upheaval

I watched a replay of a webinar run by Carter Lusher and Duncan Chapple which focused on Gartner’s and Forrester’s recent earnings and their influence on technology markets. Both Carter and Duncan are long term watchers of IT Analyst Firms and if you are into “analyzing analysts” you will find the replay available here pretty interesting.

They touch on revenues, events, number of salespeople, reprints of research reports and other metrics as measures of an analyst firm’s “influence”. One perspective Carter presented “Gartner explicitly said for the first time that 75% of their contract value are in users. So this is all about the end users, and the influence on buying. On the other hand, Forrester has been stagnating for a long time.”

I run into Gartner, Forrester and IDC analysts on a regular basis at vendor events. I have watched firms like Constellation and Diginomica mature over the last decade. We analyze technology markets, not analysts and there we get plenty of independent input from work on our books, video series, advisory projects etc. So, I will defer to Carter and Duncan – their analysis of analysts “in the moment” is spot on.

However, I am working on a project which looks at the history of IT and of industry analysts and how in some ways we may be coming full circle to the dawn of enterprise technology. In the last couple of years I have also studied research for other projects from energy and healthcare analysts, and geopolitical advisers. So it has been interesting to see how IT industry analysis has evolved (or not) since my time at Gartner from 1995-2000.  

First let me explain my “full circle” comment. In the 80s and earlier, corporations truly did not understand the power of “data processing” or how to account for its costs and payback. Consulting firms like Index, Nolan Norton, Booz Allen and others helped companies with such analysis.  Analyst firms – which blended publishing and light consulting/advisory - weren’t popular yet. Most applications were built, not bought. Packaged software had its own convoluted acronym – COTS – Commercial Off the Shelf.

In many ways, we are back in that world. Clearly Generative AI is causing major upheavals. However we have been going through other megatrends tumbling into each other for the last decade – massive digital transformations, COVID, Ukraine-driven energy shock, climate change, supply chain and labor chaos. It's trite to say it, but it has been relentless upheaval.

And we are back to where many executives are baffled by the complexity of technology and don’t know its real cost or payback. Suites were supposed to cover wall to wall processes across the enterprise. Many companies have ended up with 50, 70, 90 surround applications around these “suites”. Cloud computing was supposed to be the end state, yet 70 to 80% of vendor’s customer bases stick to their old, rusting previous generation applications even as vendors guilt them of “technical debt” and warn them of recruiting challenges and compliance risks. We are back to building many applications. In fact, for many the most promising use case for Gen AI  is developer productivity. They find very few vendors have COTS solutions for their changed industries and global regions.

In this world, consulting firms like Bain, BCG and McKinsey are helping companies with technology strategies more than analyst firms. VC firms have led the way defining new operational metrics for startups and defining new market categories much more so than market watchers.

I hear from buyer executives: analyst firms still sell FUD and insurance. “You can tell your board you followed our recommendations”. We did that decades ago. Today, that’s lazy, un-customized advice.  

In my 5 years at Gartner, I estimate I did 10,000 “GAMECs”. That was an internal log of every query call we did with  a client. They would be looking for Y2k compliant applications and ask us to validate their short list, or rely on us for negotiation advice or for help identifying the right SI for their implementation. The subject matter varied from call to call, but with so many data points our Magic Quadrants wrote themselves. We truly had our finger on the pulse of enterprise customers. Now I hear vendors complain that analyst firms instead have them take months to fill out surveys that they use to create their MQs and MarketScapes. What happened to first-party conversations with decision makers?

In 2000, when I left Gartner, its revenues were under a billion. Last year they were just shy of $6 billion. However, much of that has come from over 25 acquisitions Gartner has made since. Many of Gartner’s acquisitions like AMR and CEB extended its vertical and business process capabilities, but have they used that to reshape their definitions? My little firm has been tracking edge applications in verticals and emerging markets as the world re-globalizes. Surely the analyst firms can do similar and dramatically broaden their definitions for market categories they launched a decade or two ago?

I have heard vendors complain they find ex-CEB folks have process excellence but very little knowledge of their products or that of their competitors. They say Gartner acquisitions have not been fully integrated even after years and the advice is consequently fragmented. Don’t you hear about similar slow integrations at acquisitive software vendors?

Some of the first few advisory projects we did at Deal Architect showed us how many professionals beyond industry analysts are involved in a software decision. It led me to write about the “thousand points of influence”.

Gartner had a remarkable run in the 90s. Concepts like Hype Cycle, Total Cost of Ownership, Service Oriented Architectures are impactful even today. The application group I was part of defined market categories like ERP and CRM which have similarly survived. We were encouraged to challenge, not just praise vendors or go along with fashionable industry commentary. I don’t see that kind of “bravery” in IT analysis any more. Even fellow bloggers focus more on reporting from vendor events and doing cutesy social media stuff.

In contrast, I do see some spunk in energy analysis and in geopolitical advice. Those analysts do so even as they are under a lot of pressure to support woke political positions and to not piss off ruthless dictators around the globe.  IT market analysts, in contrast, are afraid to offend far less powerful vendor executives or bureaucrats.  

In my Gartner “boot camp” in 1995 I heard a comment from a truly curmudgeon analyst -“Sacred cows make the best hamburger”. It has stayed with me for the last 3 decades.  We all need to adopt that critical mindset about the industry, for governmental mandates and about our analyst community. We look silly otherwise with so much upheaval around us.