Earlier today I was discussing with an IIAR member about where analyst firms get their money from. As this chart shows, there’s a big difference between different firms. On average, analyst firms get 37% of their revenue from vendors. However, the data are not normally distributed.I used a histogram to chart the data for almost 800 analyst firms which showed their revenue from vendors. More than three hundred firms, shown in the first three bars on the left, get less than 30% of their revenue from vendors. More than 175 firms, those shown in the last three bars on the right, get 70% or more from vendors. As you can see from the dip in the middle, few firms have a balance between the two.
What these data suggest is that vendors’ spending is modestly concentrated, both geographically and in the number of firms (as we commented before). Of the 100 firms with the highest percentage of vendor spending, 85% are in the US. At the opposite end of the scale, the percentage falls to around 65%. Firms headquartered in the US get, on average, 38% of their revenue from vendors, as opposed to 34% in the UK and 28% for firms in the rest of the world.
Non-US firms get a higher percentage of their revenue from end users organisations, especially because buyers are more sensitive to local language and business differences.
What does that suggest about the overall spending by end-user organisations? Gartner sizes its end-user market at $11.5 billion (Of course there are other figures, some as high as $15 bn for the total market and others as low as $3 bn. ). If Gartner’s figure is used, and since the average analyst firm has around 37% of its revenue from vendors, and the rest from end-user organisations, then one could estimate that end-user spending on analyst firms is $7 billion.