On top of those staple offerings, analysts firms sell consulting days (SAS or Strategic Advisory Service in Borg speak) that vendors use for speaking engagements and pre-launch product messaging sessions. Users use consulting services from analysts for contract review, vendor selection and generally speaking to cover their backside when they’re making a politically charged decision. In the industry it is sometimes referred as to the BACS –Borg Ass Covering Service. Some firms also make good money from their events business (although this is more cyclical).
The clients for the services described above are both IT vendors and IT users, in variable proportion. Examples of IT analyst firms operating on a RAS model include Gartner Inc. (IT), Forrester Research, Inc. (FORR), AMR, NelsonHall, Ovum, Yankee Group Research, etc…
Those firms and some others have also sussed out that by speaking to all vendors, they could reverse-engineer their business model and work-out their market shares: this is what spreadsheet jockeys at IDC and GartnerDataquest do for a living. Note that since most journos have no clue whatsoever on the market, IDC and DQ enjoy a high SOV with their numbers being quoted by IT and business press day in and day out.
The clients for number crunchers are IT vendors (market shares tend to be quite useful for those strategic planning exercises at the end of every fiscal, and sometimes also for setting performance goals, at which point it usually goes pear shaped when a product manager calls up on AR to know why is product’s share is not doing great).
This is nice and simple, even if you add quite a large numbers of independent analysts, trying to make a living of selling white papers, consulting and speaking engagements to vendors.
However, two trends are changing the face of the IT Analysis industry: Open Source Research and Web 2.0. We’ve discussed open source research in this post and there have been great discussions on Jonny’s praise of open source analysis. Not to start over the conversation again, but we’d agree with Duncan that free at the point of delivery is not the result of a collaborative and transparent process where producers and consumers are the same. The lack of wikis (check also here) does not mean that James’ thoughts are not shaped by his interactions with the community nor than there’s not a vibrant community of independent analysts working loosely together –see The Enterprise Irregulars and the BritsGang for instance.
However, free does not mean valuable, rather plentiful and it makes sifting through bloggers and wannabe-analysts difficult for the AR professional trying to figure out who’s influential and who’s not. In that sense, the Rebels contribute to aggravate the “internet clutter” as expressed by Joseph Martin. Noise doesn’t equate with influence and this is why IT buyers like “reference libraries” –repositories of a single version of the truth. Gartner provides this and it partially explains their success.
Librairies are fine but someone to show you around is even better. Richard puts elegantly (or not?) here that the value of analysts is in the conversations more than anything else, that reports are only an entry ticket to the "inner sanctum". Egoes aside, a conversation with a good analyst is always the best way to cut through that clutter.... James would surely agree with this point on conversations but gives the research away -at no cost.
Redmoonk seems to be doing fine even though we see no Porsche in front of their offices, so one can wonder why doesn't everyone switch to open source research? The software and web markets are full of successful examples like at Linux, Wikipedia, surely the analysts can make a living from support (consulting) revenues just like Jboss, Red Hat, etc…?
There are two fundamental issues limiting the options for new entrants:
1. There’s a big difference between direct analysis (commentary) and in depth reports requiring primary research. At one end, there can only be so many James (thank God!): there’s intense competition, low barrier to entries but a given community has a finite attention span and number of relationships that can be established. On the other hand, primary research is expensive and needs to be syndicated –except if one relies on self-selecting samples and e-polls (see this honest comment from Dale here.
Few can comment eloquently on the issue of how different are sponsored research and open-source research. Dale, take this as an invitation: we’d love to hear your views on this very fine line…
2. Skip makes a really good comment when he says that monetizing new media is something we all are struggling with. Tough question, but the ones that will figure it out will make some serious dough and probably also crack the black hole of industry analysts… SMB. Ahem.
Bottom line: The industry is changing fast on the surface, yet IT analysts still have to figure out which business model will allow them to deliver something close to a collaborative “reference library”, containing one version of the truth rather than many in-compatible open-source distributions. Other factors limiting the adoption of open-source research are the delivery mechanisms (frankly, sifting through blogs to gather intelligence is as tedious as resolving Linux driver issues). On the other hand, the enthusiasm of the Rebels and their innovative use of Web 2.0 tools generate a huge deal of goodwill in some communities and some are already making a living of the brand they’ve built.
Stay tuned for the final post in the series: Rebels vs. Dinosaurs: So What Does it Mean for AR?
Will the Borg be dis-intermediated?
The Governor, ancient Iraq and Gartner
Open source analyst business model?