Thursday, 8 September 2005

Does scale matter?

Interesting comments from James at Redmonk on our post from yesterday: Redmonk and the open source analysts.  

Indeed, does scale matter?  We would not dispute that Redmonk those two nice lads in a niche are doing well -a refreshing piece of news in the analyst landscape.  But is this model replicable or scalable to balance the frantically assimilating and aggressive Borg dominance?  Some, like Bloor, seem to think aggregation will help -we Just don’t know yet.  Nice plan though…

Note to James:

  • by replicable, we mean other firms’ ability to emulate the model

  • as for size is concerned, we would define it by number of “employees” (ideally while maintaining the revenue per head ratio)


James Governor said...

if you define scale as number of bodies then we basically have no interest in competing on that basis. we dont compete on the basis of number of analysts. obviously, in truth, we can't.

regarding emulation that's one to look at. obviously we're happy if others don't emulate us because we like the differentiation. on the other hand- I would argue that the new Business and IT alignment focused analyst firm, Macehiter Ward Dutton, is clearly using a "RedMonk-style" playbook as they build a comfortable business, having left Ovum.

I dont believe that bigger means better. We're more interested in quality of interaction than number of transactions.

And as for balancing the borg. I don't need to worry about that- the Borg's problem is balancing itself, as it teeters along, in search of "shareholder value" and yet more scale. Growth for its own sake doesn't benefit customers. And who is to say it wont topple over?

Would you prefer to work for a fund manager or a set of customers? I know which constituency I would rather serve.

Duncan Chapple said...

I'm not sure that James is quite right here. If you focus, then you can compete: three analysts by themselves and make a big impact in a niche: look at Canalys or Mako. But the key is to have the appetite to grow: to increase the revenue per analyst, and therefore the impact of that analysts views, by ensuring that these firms have good salespeople, administrators and project managers.

The market rewards quality, as long as you sell it. If you sell well, and you research well, then you will grow.

I think there's no point being proud of having the right approach and the right methods if you don't fight to bring that to the audience that needs your insight. If you think your research is better, qualitatively, then you have a moral imperative to grow your audience and to displace inferior market participants. In that sense, growth is good in itself - since a better informed end-user population is able to work better for the human good.

If taking on external investment is necessary to do that, then that -- in itself -- should not be seen as being a bad thing. After all, Datamonitor and Butler were able to take on external investors without a reduction in quality.

stephen ogrady said...

I'm not sure that Duncan's quite right here ;) There are obviously a wide variety of approaches that have worked within the analyst community, from focused to general, small to large. I think the view that revenue per analyst and the ability to sell and message to a wide audience is dependent on people is flawed, in that it doesn't recognize the benefits of having open content. By opening our research on blogs or our wiki or with freely downloadable content, we're able to scale our opinions to an infinite audience, and our traffic numbers would confirm our success in this area. The critical question then becomes conversion of that traffice, and again we're pretty comfortable with our success there.

Is any consulting business's ability to scale tied to people? Certainly. But the fact of the matter is that analysis, when compared to, say, systems integration, is not a tremendously time consuming affair. So as my colleague has said we believe that we have room to scale as is. Will we grow? Almost certainly. But give our success in leveraging open content, turning Google into a saleperson, I for one don't feel any "moral imperative" to grow. My general feeling is that small firms should add bodies to solve a specific problem, rather than for the sake of "growing."

ARonaut said...

Great discussion chaps....

Agree with James on the Borg, they're loosing focus, can't even talk within themselves.

Duncan, interesting oxymoron: "Datamonitor and Butler and Quality"...

Stephen, do you suggest teaming to work on issues? Coopetition in other words.

We like the idea of the Google sales proxy...