Weekend rant – dealing with the analyst racket

SUMMARY:

Is the old analyst game over? Not quite yet. Ray Wang makes an impassioned plea for change but will he be successful.

pay to playDisclosure: I am on the advisory board for Constellation Research and have been since its inception. I am not compensated for this activity and have never benefited from it. 

I have put this disclosure at the top of the post rather than the bottom (as is usual here) because what I have to say should be seen in this light.

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Ray Wang, CEO Constellation is mad. He’s mad at the industry in which he works – the analyst game – which he characterizes as a flawed ‘pay for play’ racket. Those are not his words but mine. Like Wang, I see it all the time in various guises.

Regardless of what you might think of Constellation’s overall model, you have to admire his open position about how his firm behaves. No pay for play there. But when you do pay, then he’s up there with the rest of the industry on cost. Nothing wrong with that. The difficulty with Wang’s post is that he hasn’t elaborated on the underpinning reasons for the current state of affairs. In missing that, he doesn’t quite nail what is otherwise a sensible argument for a code of ethics.

As someone who has been in and around media for more than 20 years and have both nodding and solid friendships with analysts both past and present, I see everything he does. Only last week, I was approached on what was ostensibly a ‘survey’ but which was really asking for strategic advice. When I said no, the marketing rep got snotty until I firmly said ‘no.’ The problem wasn’t with the request. The problem was that I was being asked one thing while the real agenda was elsewhere and where, if necessary, the marketers were prepared to bribe people like me to deliver an opinion. Therein is part of the problem. Even if you are shocked please understand this is par for the course. Here’s the nub:

Many marketers view media and analyst folk as an extension of their own activities. What else is it when press releases are peppered with analyst ‘quotes’ that you just know are bought and paid for? What else is it when an analyst quadrant becomes part of the sales process? What is it when a media person uses their ‘acreage and ink’ as a platform to promote their own paid for activities with vendors but without adequate disclosure? These are not outlying activities – they are the norm.

Where to from here?

Problems abound

While I totally get Wang’s arguments, I don’t see an appetite for wholesale change. Here is why.

My sense is that much of this has arisen out of the atrophying nature of the media and analyst models combined with old style marketing in a changing world where anyone can publish, free of charge to a world often bereft of even a passing effort at objectivity. The problem for the genuine voices is that of recognition, largely because their personal ‘brands’ are either unknown or get drowned in a torrent of mediocrity.

The other problem is that too many marketers are operating out of a mindset that reflects that past. Back in the day, analyst firms generated a slew of genuinely independent research. Some of them (and you know who you are) were genuinely feared. Much anlaysis was hidden from the public domain behind paywalls that served to ensure scarcity of information. Marketers felt they had to do anything they could to curry favor and if that meant pay for play, then so be it. After all, that’s the free market in action isn’t it?

Today, those paywalls are crumbling but they’ve not crumbled to the point where the business models upon which they were predicated have been adequately disrupted. It is only a matter of time because information wants to be free.

Constellation recognized that several years ago, we recognized that last year. Elsewhere, Phil Fersht at Horses for Sources saw the same problems several years ago. We are all attacking the problem from different angles using evolving business models including ‘freemium models’ and the like for the different audiences we wish to attract and retain.

I would argue that our collective problem is that we’ve not quite figured out how to transform the model to one that is adequately differentiated from the past. Being smart isn’t enough. Having a great rolodex isn’t enough (we’ve all got them these days.) Being transparent is a big step in the right direction but it isn’t enough. There is more to come.

Legacy rules?

So what of the legacy firms? They are not going away any time soon given their combined market value runs billions of dollars while the independents are well and truly in minnow territory. Juxtapose that with large vendors that themselves command billions in market share and you have a match made in hell for those that want to disrupt the market.

There is continued value in much of the quantifying work the legacy analysts undertake, although I am continually amused to see how comparative numbers get ‘updated’ for past inaccuracies. There is continued value in some of the advisory work undertaken on behalf of buyers in evaluations although I see that as less valuable these days than in the past. That’s because the super talent of the 80’s and 90’s have long left the ranch.

That leaves the ‘pay to play’ element. Over the last five or so years, I have heard from a steady stream of internal marketing people say that their dependency on the legacy firms is diminishing. Rather than paying high level subscriptions as the veiled access cost, they prefer to go to the wider world where costs are lower and where the quality of what they get is much higher, often in an on-demand manner. However, there are plenty out there prepared to put their name to anything that walks for a grubby handful of bucks.

Up and downsides going forward

The problem for everyone operating in this field is manifold. Here are five key issues:

  1. Getting it right is hard work.
  2. Entitlement among analyst firms, tied to the brand are alive and well.
  3. Being prepared to stand up to a multi million or multi billion dollar business is difficult. 
  4. The model might not scale. If it doesn’t scale then what? I am a great believer in loose partnerships that grow and dissolve on demand. 
  5. There is far too much implied pressure from vendors unwilling to hear ‘inconvenient truths.’

The upside is that:

  1. Small firms can be agile and responsive
  2. Specializing is the name of the game in markets demanding micro-vertical or deep function expertise. You want to know about manufacturing ERP? Call up Frank Scavo. You want to know about the ‘new’ outsourcing? Get one of Fersht’s crew on the case. Want to understand project success, give Eric Kimberling a call. Need a leg up on channel partners? Give Brian Sommer a shout. Need deep CRM insights? Paul Greenberg or Estaban Kolsky are yer men. 
  3. On-demand is a more costly model as engagement by engagement pricing has to be different from subscription bases. However, when worked correctly, it provides a much higher value proposition.

Final words

Wang makes a good case for a code of ethics but does so from a position of weakness. I know from experience there is nothing more depressing than calling out egregious behavior only to see it condoned and encouraged. I’m not convinced the market as a whole is ready for the kind of transparency Wang espouses. Money talks and the sad fact is that vendors have the deepest pockets. Buyers are far less willing to pony up until they absolutely need help. Market inertia will maintain the status quo for a long time to come.

Until such times as the vendors as a whole decide what they want from the analyst community other than fake endorsements occasionally peppered with genuine insights then change will be hard to instantiate. Having said that, I am with Wang. If his firm has the cajones to do as he says then who will follow?

Image credit: Do you speak geek?

    Comments are closed.

    1. lukemarson says:

      Good job Dennis and kudos for calling this out. Naomi Bloom has continually made the point that some firms and bloggers are paid to write what they do. Personally I don’t care if someone favors a vendor or product if their opinions are genuine, but businesses are making multi-million dollar/euro/pound buying decisions based on flawed “research” that can have a serious impact on business outcomes, all in the name of the analyst P&L account.
      Regarding the genuine voices, they are at high risk because of vendor favoritism. You can be someone who helps spread information with a genuine objective opinion, but when you get overly-critical they will drop you off their mailing and invitation lists in the blink of an eye. Some people are genuinely positive while others have a controversial side that means they lose out on receiving critical information which can be provided to customers with objective commentary. And as far as I see it, there is room – and a need – for both. But the latter will become less frequent or more biased against a vendor if they are shut out. And we both know that this has happened and does happen in some areas.

    2. rwang0 says:

      Dennis
      A critical but good post.  The underlying platform for change does not exist yet.  However, I think this first attempt to differentiate around change may provide those who wish to play by a higher standard a chance to ban together and hopefully raise the awareness for the industry.  
      For us, it’s worth a fight as we have been operating with this transparency for quite some time. We know of others that have. For those who have not and are willing to change their ways, welcome to the club. this is about moving forward and onward!

      R

    3. says:

      rwang0 “those who wish to play by a higher standard a chance to band together” – count me in Ray.

      Perhaps I’ve had too much faith that quality, transparent work would win out – or if not win out at least carve out a very respectable place in the market. 
      I tend to be pretty skeptical – make that deeply skeptical – about rooting corruption out of heavily-moneyed industries but airing these things out can only help.

    4. says:

      D
      I have seen some behaviors from both analysts and several vendors that are beyond reprehensible – and they have been getting worse over the last year. The business is descending into farce, and even straight-up corruption, in some instances.
      I have held back on outing much of this, as I don’t know what good can really come from exposing several firms and individuals, plus we have a business to run and don’t need the distraction (or the law suits) 😉
      Bottom line, there are individuals and firms out there posing as “analysts” which, simply, are not.  They are pundits-for-hire and marketing support.  Let’s just call these people what they are and highlight the real researchers!
      P.