Saturday, 9 December 2006

Reviewing Gartner's Top Predictions - who will step up?

One of the common comments about Gartner is the poor quality of the analyst work. However, it is rare that anybody actually does the work of analyzing any Gartner research: as we have commented before. So, dear readers of ARmadgeddon, do you want to do commentary on Gartner’s predictions?

To provide an example, please see the “Comments” for an analysis of a Gartner prediction “In 2005, AT&T will be acquired by BellSouth and MCI will be acquired by SBC” which proved to be completely wrong in a very short amount of time.

If you think this is waste of time, please say so.

6 comments:

theARpro said...

Below is a prediction(1) from Gartner Research Note G00124887 “Our Top Predictions for 2005, and Beyond” which is part of the annual Predictions series that got it big time wrong on telecomm acquisitions. A number of interesting points about this prediction:

-Qwest was never even mentioned, but ended up as a major competitor to buy MCI
-Verizon was dismissed as a potential buyer of AT&T or MCI
-BellSouth never made a public play for AT&T or MCI
-It was SBC that bought AT&T, not BellSouth
-It was Verizon that bought MCI, not SBC
-This prediction was wrong within only a couple of months
-Research note published on November 17, 2004
-SBC announced purchase of AT&T on January 31, 2005
-Verizon announced purchase of MCI on February 14, 2005

Of course, this year we also saw SBC swallow up BellSouth, which was also not anticipated by the Gartner “Top Prediction.”

What does the analyst being so wrong mean for clients relying on the recommendations of the analysts?

(1) I am not violating Gartner's copyright by including this extract from a Research Note. When the Research Note was published it was freely available to non-clients for several months as part of Gartner's marketing efforts. The larger firms (e.g., IDC, Forrester, and Gartner) usually put out a series of "Predictions" papers every year in November or December and post them free of charge for several months.

Prediction: In 2005, AT&T will be acquired by BellSouth and MCI will be acquired by SBC.

A number of forces are coming together to make this prediction possible, and then improve the likelihood that it will occur.

Regional Bell operating companies (RBOCs) such as BellSouth, Verizon and SBC no longer have regulatory restrictions concerning what network services they can offer. In the past, they were unable to acquire interexchange carriers, such as AT&T, MCI and Sprint. The RBOCs wish to be leading fullservice providers.

RBOCs have the financial strength to conduct mergers of this size. AT&T is more likely to be acquired by BellSouth due to past relationships and negotiations. The direction and financial situation of Verizon — and the apparent lack of interest of its key executives — make it less likely that Verizon (compared to Bell South or SBC) will make a major acquisition. Therefore, MCI is more likely to be acquired by SBC. AT&T and MCI are No. 1 and No. 2 in market share in long-distance services to the Fortune 1000, respectively, but their long-distance revenue has been declining more than 10 percent per year, primarily due to RBOC inroads in consumer long-distance voice. AT&T and MCI are financially constrained to grow or acquire new businesses to offset the revenue declines. Although the RBOCs would rather wait for such mergers, other companies' interest in MCI and AT&T will compel them to move quickly rather than later.

Anonymous said...

I predict Gartner's predictions will suck. I was amazed, recently, at how wonderful most Gartner analysts actually think they are. They seem to be a pretty inwardly-focused bunch living in their ivory towers with little connecting them to reality. Most of their competition are forced to be more friendly, outgoing and thought-provoking 'cause they don't have every vendor and their dog kissing up to them to get into the top-right-nahd corner of their "magic" quadrant.

Silicon Valley Guy said...

Ok, I’ll give a swing at this challenge. The Gartner Top Prediction I’ll review is:

“Gartner Says Three of Top 10 PC Vendors Will Exit the Market by 2007” from 11/29/2004.

http://www.gartner.com/press_releases/asset_115083_11.html

Here are some predictions with my commentary:

“With slower growth rates and reduced profit margins, the PC industry will face vendor consolidation, with three of the top 10 PC manufacturers exiting the market by 2007.”

Reality – Only one vendor, IBM, has exited the market. And that occurred in December 2004. In the two years since, no other vendor has come close to exiting.
Rating – Gartner wrong

“PC unit growth is forecast to average 5.7 percent annually from 2006 through 2008, half the 11.3 percent average of 2003 through 2005.“

Reality – Gartner now says actual growth will be 10.5% in 2006. This represents an 84% error from the 5.7% prediction.
Rating – Gartner wrong.

Reality – Gartner is now predicting 2007 growth at 9.6% and 2008 growth at 9.2%. Again this represents significant change (68% and 61%) from the 2004 prediction.
Rating – Gartner wrong

“The PC divisions of HP and IBM are vulnerable to being spun off if their drag on margins and profitability are deemed too great by their parent companies.”

Reality: IBM did exit the market, selling its PC division to Lenovo
Rating – Gartner correct

Reality -- HP had already been improving its margins at the prediction and continued to improve margins since then. It has grown market share, taking over the #1 position from Dell. Rather than spinning off its PC division, HP has been hailed by the marketplace for keeping it.
Rating – Gartner wrong

"Global vendors will be forced to continue maximizing supply chain efficiencies and, finally, abandon any efforts to differentiate other than on price and service levels"

Reality – All PC vendors have continued to increase supply chain efficiencies
Rating – Gartner correct, but this is obvious, all vendors inside and out of IT are improving their supply chain efficiencies

Reality – Vendors have been very successful in creating differentiation through innovation in areas such as enhanced security, flexible communications, increased manageability, personalization, design, user experience, display technology, graphics capabilities and others
Rating – Gartner wrong

= = = =

It is safe to say that Gartner’s errors far exceeded its correct predictions. Also, many correct predictions were easily predictable, which the errors were significant. IT managers or vendors that chose to use these predictions to make strategic purchasing or product decisions would likely have found themselves at the blunt end of many criticisms.

Anonymous said...

Thanks AR Pro and Silicon Valley Guy for the effort to dig up the facts. Let me see if I can come up an example with the backing facts.

On the other hand, I feel that Anonymous' comments were less than useful. It is fun to rant, but ultimately a rant is easy to ignore. While it is difficult and requires real work to actually uncover the facts, it will be much more difficult for Gartner to ignore.

Something that would be useful to leverage this work is get this in front of reporters. If anybody has any press contacts, please direct them here.

Jeff

Anonymous said...

Jeff,

You're 100% correct - I was ranting uncontrollably. Here's one of their predictions:

"Business process outsourcing is a dynamic market. Buyers and providers need to address immediate BPO issues and understand the likely market dynamics that will face this market in 2007 and beyond."

Can someone explain what "insight" is that telling me before I have to spend $695 for the rest of the story?

Bob.

Anonymous said...

Third-party analysis of Gartner research is a huge waste of time, with no clear benefit for the analyst - save for bragging rights. Whoop dee doo.

If a business wants to base its decisions on Gartner's predictions, by all means let them do so at their own risk.

If you want to analyze Gartner's predictions for the entertainment value, knock yourself out amd enjoy.

If you want to engage in armchair analysis, have at it but don't expect any of us to take your results seriously.

For the rest of us...we'll continue to read Gartner's analyses through our home-built BS filters and take the information with a grain of salt, and move on.