Sunday, 4 December 2005

Advisory analysts do impact vendor sales and make/break products

Vinnie Mirchandani in a comment to Who do the advisory analysts think are their clients? wrote “…And let's face it... [IT buyers] make or break products and vendors - the analysts just report it. …”

This statement is patently ridiculous.

If the analysts were merely reporters, would the IT buyers spend over US $1 billion per year with the advisory analysts? No. Reporting can be gotten for free over the Internet.

Advisory analysts like Gartner RAS are not just reporters, but are extremely influential when it comes to specific sales deals and the success of a product. There have been a number of formal studies by the Analyst Strategy Group, Hill & Knowlton’s Penn, Schoen & Berland unit, InformationWeek, Optimize and SageCircle of how the IT buyers use industry analysts. In all these studies, the IT buyers themselves tell the researchers how extensively they rely on IT analysts for critical decisions like which vendors to put on a short list. The buyers use the analysts for this type of product decision making support for similar reasons why companies outsource payroll handling to ADP or their employee cafeteria to Marriott.

Besides these objective third-party studies, every vendor relate can specific instances where an analyst have negatively or positively impacted a sales opportunity. These sales impacts occurs because the analysts do more than mere reporting, rather they are active advisors to buyers and key influencers in the industry.

12 comments:

Vinnie Mirchandani said...

as I mentioned I used to be an analyst, now I work as a consultant to IT buyers. If you decompose the procurement (or the sales) cycle, the biggest impact area for analysts is in the vendor short listing step. But in building the RFP, creating the business case, scripted scenarios in software evals, due diligence visits os SI sites, reference calls, contract negotiations - defining steps in most evaluations - the analyst role is actually pretty small.

Most technology evaluations take a month to 12 months. The analyst is talked to at most for 30 minutes to a max of 8 hours in this process. A handful of their research notes are read during this process. Which was the reason for my comment that they should be spending a lot more time with buyers. It would vastly improve their research.

Anonymous said...

there are still many technology buyer who will (due to there own ideas, or as corporate policy) only buy from vendors in the Gartner leaders quadrant. as much as Gartner issues disclaimers, instructions whatever you want to call them not to use them this way, it's fact.

i like the Forrester Wave where everyone is a leader. don't really get that except to promote vendor interests.

Carter Lusher said...

I thought I would jump in and respond to Vinnie’s comments on this and other postings that the IT industry analysts are not as influential on deals as is generally thought.

Background – I was a Gartner end-user client while at an insurance firm. Then, I was a Gartner analyst for seven years and did over 10,000 client inquiries (yes I know the exact number from blue sheets and GAMEC). Then, I was an “analyst of the analysts” while at SageCircle. Now I have the pleasure of being the director of Corporate Analyst Relations at HP. So I have what I think to be a unique breadth and depth of understanding on the influence of the IT industry analysts on vendor sales.

Both Vinnie and Silicon Valley Guy make good points. However, I disagree with Vinnie’s position that the analysts have a minor impact on vendor sales.

As an analyst, the vast majority (90%+) of my inquiries were with corporate IT managers. About half of those inquiries were about technology procurement projects, primarily on software in various markets. The procurement-centric inquiries could be grouped into a) what vendors to include on a short list, b) review an existing short list and then add/delete vendors, c) strengths/weaknesses of vendors on the short list, d) market intelligence on the vendors and e) validation of the final selection. Often I had multiple conversations with the same client as he moved through his project. At each stage where I was involved, there was an opportunity to impact a vendor’s chances to win the deal. However, this information while it has an impressive number of data points, has to be considered anecdotal because Gartner did not, still does not, have a knowledge management system to track and analyze this soft data.

While at SageCircle we conducted multi-client studies of the buyers of technology and how they used the industry analysts. In 2002, we used customer lists from the study’s sponsors supplemented by purchased lists from trade and business magazines. In 2003, we used purchased magazine lists only. In 2004, I became one of the sponsors for ASG’s (formed by SageCircle veterans so consistent with the 2002 and 2003 studies) survey of the tech buyers. The 2004 study was done using TechTel’s technology buyer panel. In 2002, the survey was focused on the industry analysts. In 2003 and 2004, the studies included other influencers so as to measure the relative weight of the analysts versus other influencers. The results were consistent across all three years. Key points:

• Various influencers (e.g., peers, press, IT analysts, tech consultants, management consultants, vendor domain experts, etc) have varying levels of influence at various points of the procurement cycle. No single influencer has high influence at every point of cycle.
• At various parts of the cycle (e.g., RFP creation) other influencers like tech consultants have more influence than the IT analysts
• The industry analysts are not the most important set of influencers, but are a close second to buyers’ peers, in terms of overall influence
• Analysts’ published research and phone-based inquiry play different roles and have different levels of impact at different parts of the procurement cycles
• On average, 56% of tech buyers have added a vendor to a short list based on the commentary of an analyst
• On average, 30% of tech buyers have removed a vendor from a short list based on the commentary of an analyst

However, it is not just SageCircle’s research that has looked at the impact of analysts on sales. As a client of Hill & Knowlton I have access to the Hill & Knowlton/Penn, Schoen & Berland's (PSB) 2003 “B2B Decision Making Poll.” The report is a very solid and professional piece of work. I have also purchased InformationWeek’s “Analyzing the Analysts” reports, both 1999 and 2001. While limited to InformationWeek subscribers, it was conducted in a statistically valid manner. All are very consistent with the SageCircle findings that industry analysts are the second most powerful set of influencers in the tech market.

Also while at SageCircle, I worked with my vendor clients to identify and document the analyst impact on their sales. Unfortunately it is much easier to identify the negative impacts than the positive impacts. But just looking at negative impacts it was an impressive percentage of a vendor’s top line. Client confidentially prevents me from sharing specifics. It should be noted that different markets (e.g., enterprise applications, servers, IT services, PCs, storage and so on) are impacted at different levels.

Having moved to the vendor side and working closely with HP Sales, I have a new source of data about analyst impact. Again it is easier to identify negative impact. Alas, again for confidentially reasons, I cannot share specifics, but the volume of the impact has shocked even me. Small deals, large deals, across HP business products -- but not consumer or SMB – the analysts have their fingerprints all over billions of HP’s revenues.

So bottom line is that industry analysts, especially Gartner, have a huge impact on revenues. At SageCircle, we estimated that the analysts influence over US$250 billion in tech spending per year world-wide and I now think that estimate was conservative.

Vinnie, besides your personal experience -- which has only a relatively few data points compared to the above -- do you have any systematic and broad research to support your position? >>grin<<

Carter Lusher said...

Oops, I forgot to reinforce what Anonymous said about tech buyers using the Gartner Magic Quadrant as a means to limit the number of vendors bidding on an RFP. While less common in the private sector, it used often in government, especially by US state and federal agencies. At the US federal level, the usage of Gartner Magic Quadrants has been reviewed and approved by the GAO (then the General Accounting Office now the Government Accountability Office) and the OBM (Office of Management and Budget).

Very scary.

Vinnie Mirchandani said...

Carter, good to hear from you!

TPI dominates the procurement process for all major outsourcing decisions.It does it on a consulting basis. Their clients do not use Gartner or Forrester much. A number of firms help clients with s/w evaluations - again they may do one or twonc alls with the analysts. My own data points since Gartner total over $ 1 billion in contracts and reflect a broad range of corporate buyers.

I agree in the short listing process the analyst is highly influential. So, yes if you do not clear that gate, you are SOL. But any more most tech deals are way competitive after you make ths short list. In those steps - reference calls, due diligence, negotiation that analyst is far less influential. Their consulting or groups like CFC may get involved with the client but the analyst role is relatively minor. And few AR pros- the target of this blog - focus on influencing Gartner consulting or benchmarking - would you agree?

ARtist said...

bloviate \BLOH-vee-ayt\, intransitive verb:
To speak or write at length in a pompous or boastful manner.

Vinnie Mirchandani said...

Artist, sorry to offend. Carter asked what data points I was basing my comments on. BTW TPI's web site says they have influenced $ 375 b in outsourcing transactions...

Carter Lusher said...

Ah, so you were being very narrow in which markets -- outsourcing -- the analysts had influence over purchases. You've got to be more precise, my friend.

Also, you rather gloss over the impact of the analysts based on the influence on short lists. If the vast majority of the vendors in a particular market have been left off -- or put on -- a short list by analyst advice, then those vendors would consider the analysts to be nuclear in their impact. For them, nothing that followed made a bit of difference.

BTW, we consider Everest, the merged EquaTerra/TPI and related firms to be "analysts" even though their business model is closer to consultants. However, these firms have been hiring some former META, Gartner and IDC analysts so I would not be surprised if they start looking more like analyst firms.

Carter Lusher said...

Artist, was your "bloviate" comment in reference to me or Vinnie? I probably deserved it with my exceedingly long comment. >>grin<< You can take the boy out of the analyst firm, but you can't take the analyst out of the boy.

Vinnie Mirchandani said...

Carter, not just around outsourcing. In software firms like Accenture continue to influence a number of evals. In telecomm, Om Malik's blog is pretty influential. The WSJ wrote last week about the rapid growing influence of "elite tech blogs". So, in addition to the traditional PR, AR, IR trilogy, we are moving to a world where influence will also mean handling SR (sourcing) and BR (blog relations). If you want to put the latter 2 under AR, that's fine - but I would say the average AR person today (you may be an exception since you are already dealing with the TPIs) does not do much with them. Which was my point to start with - the analyst (as you and I were at Gartner) continues to be important, but there are several newer influencers.

Carter Lusher said...

First, I never said that the IT industry analysts, were the sole influencers of tech purchasing decisions. I was countering your position that "... the analysts just report it. ...” with various proof points that the analysts are incredibly influential, not just reporters of what was happening. So you are the one who misspoke by indicating that the industry have no influence. See, there you go, stirring up trouble. >>grin<<

There is nothing new about Accenture or any other management consultant or systems integrator as an influencer of tech buyers – they have been doing it for decades. SageCircle, H&K/PSB and others have measured the impact of a number of influencers as I mentioned above. Each set of influencers have different levels of influence based on their spot in the market and part of the buying cycle. For instance, tech buyers tend to be a little more skeptical about this set of influencers because the perception – rightly or wrongly – that the consultants, just by coincident, always seem to recommend their partners. Case in point, Accenture always recommending Siebel Systems back when George Shaheen sat on Siebel’s board.

Bloggers are quite similar to the newsletter publishers of yore and today’s pundits. Some bloggers are quite influential – hopefully ARmadgeddon will become one of the truly influential blogs. >>grin<< However, it appears that bloggers are falling into the domain of corporate Public Relations, not some emerging Blogger Relations function.

As to the idea of a “Sourcer Relations (SR)” for firms like Everest and the merged EquaTerra/TPI, I do not see it. Unfortunately I do not have extensive systematic research on the subject, but from my anecdotal information based on a number of sourcing companies that were clients of SageCircle and the AR pros I know at other outsourcing companies, it is AR that handles firms like EquaTerra/TPI. Perhaps you can do some systematic research to move us beyond anecdotal data points.

The one group of influencers that don’t seem to have a home are the management consultants and the systems integrators.

Vinnie Mirchandani said...

Carter, we have used up way too much real estate on these good folks' blog. I have started a thread on my Deal Architect blog

http://dealarchitect.typepad.com/deal_architect/2005/12/the_changing_in.html

let's continue there is you would like. And if not, remember I always agreed - you are prettier, I am smarter!