Research suggests Karma beats conspiracy

InformationWeek’s Larry Greenemeier and Paul McDougall have written to suggest that the growing contradiction between analyst firm’s obligations to vendors and to buyer is subject to a uncomfortable conspiracy of silence.

They are, in our opinion, largely right and slightly wrong.

Certainly, there is a lot that happens in the relationship between analyst firms and vendors which is indefensible, and quite ugly. The senior AR directors who attend our Master Class are advised to wash their hands on the way out.

However, the good news is that, even from first principles, any high school student of economics can see what the incentives are and how the pressures play out. Read a little on Game Theory, and you can easily work out the dynamics of the game. Or just save some time, and think about Aberdeen Group.

In the late 1990s, Aberdeen Group was a firm whose reputation as n ‘analyst for hire’ went before it: regardless of the reality, industry rumour marked it out as a firm whose opinions could be bought by vendors. Advising a buyer to spend time with them was akin to advising one’s daughter to au pair for Warren Beatty. Sorry, but it’s true. And slowly, Aberdeen’s position in the market has been transformed for the better. Our 2006 end-user survey shows it as being one of the half-dozen firms most used by mid-market firms: in that niche, CIOs use it more than AMR, or Ovum, or Current Analysis. That is an amazing turn around. Aberdeen could be cited in the InformationWeek article saying to customers, “We promised you that … our research integrity was not for sale” — and didn’t get a wise-crack from the journalist.

In outline form, Aberdeen’s story is the same as in every Greek tragedy: pride; error; downfall; insight. Balancing between users and vendors is a difficult and dangerous job: few succeed for obvious reasons. As the Italians say, “He who serves two masters must lie to one of them.”

Indeed, the reality is that very few analyst firms seriously attempt to get similar amounts of business from both users and vendors. IT buyers can smell a rat quickly, since since having strangers trying to mislead them is almost their profession. Our exhaustive research of around 500 firms suggests that almost 90% of analyst firms either get more then 2/3rds of their revenue from vendors, or less than 1/3rds.

The analyst industry is therefore heavily segmented: vendors find some firms useful, but users tend to find other firms useful. For example, end users are much more likely to use a firm like Two Crows Corporation but vendors are more likely to use a firm like Core Competence; and doesn’t make make sense?

So we think that InformationWeek is right to point out the tensions; and we think that most analyst firms that try to serve both buyers and sellers do so at their peril. However, we also think that buyers and vendors both wise up to that reality quickly. As some of our our Californian friends tell us, is all comes down to Karma.

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