Disclosure: 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.
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?
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.
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:
- Getting it right is hard work.
- Entitlement among analyst firms, tied to the brand are alive and well.
- Being prepared to stand up to a multi million or multi billion dollar business is difficult.
- 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.
- There is far too much implied pressure from vendors unwilling to hear 'inconvenient truths.'
The upside is that:
- Small firms can be agile and responsive
- 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.
- 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.
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?