Tuesday, 12 September 2006

Ovum buys Orbys to grow outsourcing services [ANALYST EQUITY]

Duncan relates here Ovum's acquisition of Orbys, a UK outsourcing analyst/consulting firm. Coincidentally, this acquisition takes place shortly after the departure of Katy Ring who was covering this space. The press release is there.

Although we were critical of Ovum's inaction after the Borg annexed META Group, they actually seem to be gathering momentum to a point where they can in some areas be considered as a viable alternative to Gartner.

Update: Katy's new bio can be found here on NelsonHall's site.

21 comments:

Anonymous said...

Ovum (an obscure UK analyst firm) buys an obscure UK consulting firm, and loses its top customer friendly analyst (Dr Ring). This results in Ovum now a viable alternative to Gartner.......

What the ????

Duncan Chapple said...

Yes, Ovum is clearly a long way from being an alternative to Gartner. In a number of niches it has expertise that are as deep, or deeper, than the analyss at Gartner covering those niches. However, there are good analysts everywhere. Ovum is still unable to catch gartner's breadth or its ability to execute.

However, Ovum is more than a UK firm. Only a quarter of its revenue froms from the UK. In fact, it's less dependent on its domestic market than Gartner is. Ovum is a serious player in the telecoms market globally, as well as in Frence, Germany, Korea and elsewhere. It's not so obscure: it's growing fast and heading for $50 m in revenues.

Katy Ring is a great analyst; I learnt a lot from working with her. However, I don't think that Ovum or any other firm really wins business on being friendly. Ovum has other analysts. Past performance shows that few firms lose much business when senior analysts leave, and Ovum is large enough to recover from that -- especially since Orbys is in the Outsourcing area in which Ring has worked.

I've written more about the Orbys purchase at http://analystrelations.blogspot.com/2006/09/whats-future-for-orbys-consulting.html

Anonymous said...

Fair points Duncan - but losing your top outsourcing analyst at the same time as buying an outsourcing firm.......Doesn't exactly strike you as a well managed situation does it?

ARonaut said...

Duncan knows them... a bit

Ovum are a bit staid, conservative and slightly dull. But they have analysts that hold the water and are much easier to deal with than the Borg. They're growing.

So, are they a credible alternative or is that wishful thinking?

At ARmadgeddon, we believe that niche players can be very valuable and when used in combination can be a good alternative, provided they are correctly positionned.

Duncan Chapple said...

Yes, the key point here is that Ovum is a firm that, in comparison to Gartner, focusses in a plurality of market and national niches. That really reflects the firm's committement to scaling up its sales and marketing functions, which are underpowered relative to the firm's number of analysts. However, Ovum is also filling out the gaps. When I was there, Ovum has little or nothing to say about outsourcing beyond the work that Katy and others did on software as a service. Now, it's a major player in European outsourcing, as is evidenced by its influence in the NHS.

One really can't prevent analysts from moving on, especially when they have been there as long as Katy. Few, if any, of her colleagues at Ovum had been there longer. However, Ovum is clearly in a better position to maintain quality of service for clients now it has both Holway and Orbys in the firm. Katy's relationships will be important. However she also struck me as a very colleagial and straight-forward advisor; There's a good chance that she won't have had exclusive contact with clients. Ovum should be able to use the news about Orbys to sweeen news about Katy's departure.

Anonymous said...

Agreed they are a good firm - but still not convinced they can really step out of their UK comfort zone. For them to be really credible they need to acquire on a more ambitious scale than this...

Duncan Chapple said...

They have a number of obstacles. Honestly, there is a lot they can do with the same analysts and with only marginal growth in operations. Butler is a great example: a sales force that's much, much larger than the research business. Of course, all analysts are special, and it's hard to put client's concerns at the centre of their work. But they can repackage, experiment with more value-based pricing and explore more alliances. Acquisitions are great, but it's costly. Imagine what they could have done to their sales function with the price of the Orbys purchase...

Anonymous said...

didn't Katy Ring go to NelsonHall?

Anonymous said...

Orbys was less than 10 full-time staff and a poor bottom-tier outsourcing advisor with tiny revenues. Ovum seems intent on buying dying firms (RHK, Summit Strategies, now Orbys). The only smart thing about them is the fact they are employee-owned and can make their own decisions, but regarding their outsourcing strategy, the only reason they are doing quite well isthe fact that IDC and Forrester are so poor at outsourcing coverage (especially in Europe) and is becoming a natural competitor to Gartner as a result.

Anonymous said...

I was just wondering what people think about Pierre Audoin Consultants. I know very little about them, just that they are very strong in Europe, but quite weak in the U.S.

Duncan Chapple said...

I don't think those number for Orbys are quite right: I think there were nine full-time consultants, two in the interim consultancy and at least three support staff. But a "poor bottom-tier" outsourcing advisor would not be generating almost $8 m with nine consultants. It seems that they must have been delivering a lot of value to get that sort of revenue. It's a very high revenue per fee earner.

Anonymous said...

Orbys was doing $2-3m revs max and has been desperate for a buyer for the last couple of years. Your employee counts are probably correct. Kudos to Ovum for moving into this space - they like buying up little firms, but have yet to show how they can truly integrate them into a workable global model with modest-quality research and being a (very) low-payer for analysts. They are still predominantly a UK/Europe shop with limited US presence, but seem to have stolen a march on Yankee in the telecom space the last couple of years.

Anonymous said...

Orbys was doing $2-3m revs max and has been desperate for a buyer for the last couple of years. Your employee counts are probably correct. Kudos to Ovum for moving into this space - they like buying up little firms, but have yet to show how they can truly integrate them into a workable global model with modest-quality research and being a (very) low-payer for analysts. They are still predominantly a UK/Europe shop with limited US presence, but seem to have stolen a march on Yankee in the telecom space the last couple of years.

Anonymous said...

Though Duncan's defence of Ovum is admirable, the fact is that Ovum are way too UK focused. This acquisition simply underlines that further. They are the leading Telco analyst (better IMHO than Yankee, Analysis put together) but for IT they are crap, and IT Services only of interest for the UK.

BTW: If as another poster said they pay their analysts next to nothing, then how come their services are so expensive???

BTW: PAC are tiny (but good), yet led by some very odd guy (can't remember his name)

Duncan Chapple said...

Honestly, you have to keep things in perspective: Ovum is neither a Gartner-killer nor a bunch of croquet-playing Limeys. That's not a defence, just saying things as they are. For example...
* Orbys is three times bigger than the comment above suggests. Ovum's annoucement states that the firm's revenue was four million pounds; that's seven million dollars, not two million.
* Is Ovum really too focussed on the UK? Just 27% of its revenues are there. Which firm has a smaller percentage of its revenues in its domestic market?
* If their research is so national, how come they get renewals from the three quarters of their clients which are abroad?

Duncan.

P.S. Ovum salaries are pretty comparable with all the other firms: when I worked there, I could complain about the air con, but not the wages.

Anonymous said...

Helloooo Duncan,

the only reason people buy Ovum's IT research (for what it amounts to) is because of their UK knowledge. Most of those are probably in the US (vendors!).

Your 27% is very misleading, why are people buying Ovum - because they are a UK firm and they know that market. Thats why we do - and the only reason..

And don't go telling me we are the only ones ;-)

Might be different for Telecoms research, but I doubt it - can't see anyone buying Ovum to understand the US market

Duncan Chapple said...

You're really approaching this with a vendor-hat on: they are the people who think there are primary differences between countries in the modalities of technology use. Of course, even Ovum doesn't conduct most of its research into UK businesses. In fact there are great similarities across countries. The major differences are between verticals and firms at difference stages of growth. Ovum doesn't mainly write about trends in the UK market (outside of the Holway business). It's true that people do buy Holway at Ovum for the UK coverage. However, Ovum's research on telecoms and software is about business models and technologies that are being deployed internationally. For example, anyone looking at scenarios at the US telecoms market would be wildly reckless to not look at what Ovum and Mason/Analysys are saying, simply because they have very different ideas about possibilities for the US market.

Grant said...

Ovum's purchases make a lot of sense. It is easier to grow a business by buying customers than by hiring specialist analysts. Well known analysts, especially old school ones, often do not translate into new business. Katy was a software analyst at Ovum and was old school so this will not be a major loss to Ovum as it moves away from behaving like an academic institution towards becoming a successful commercial organisation. Well done, Chris Dines.

Katy's choice is interesting. NelsonHall is very old school and houses perhaps the two most unpopular analysts in the world.

Anonymous said...

Has Katy left NelsonHall yet? Can't see that one working out for long...

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