German views: The analyst spider’s dense web

I recently discovered a useful article drawing together the views in several German-language publications about analysts and analyst relations. Few people who read this blog can read German, so I though it would be helpful to give readers a flavour of the paper, since it gives a good idea of how AR is viewed by many in the vendor community in Germany.

Marco Pister, a reader of this blog who has worked for many years in the IT industry and is a doctoral researcher with the Faculty of Economics and Management in Nitra, uses the paper to relate AR to evaluation more broadly. That’s an approach which is increasingly found in academic work around Valuation Studies. He nicely frames analysts as being the business-to-business parallel to consumer reports such as Stiftung Warentest and Ökotest in the German-speaking countries (or Which? in Britain).

The paper emphasises how analysts pride themselves in their independence and, as a result are trusted by the media, buyers and sellers of solutions in a way that influences both the broad flow of the market, new technology development and specific purchasing choices. “The role of an analyst can be pictured as that of a spider in the centre of a dense web” says Pister, quite delightfully.

The review also describes AR as especially a priority for larger firms which are listed: that’s an interesting idea, and one worth considering seriously. Are private firms less likely to spend on AR than public ones the same size? Marco says he has “the experience that privately-held companies (vendors) are spending less money on AR” than public companies. Of course scale is part of the difference: He says that on the buyer side, large or enterprise companies spend more money on AR than SMBs. His paper is focused on the “D/A/CH” region (Germany, Austria and Switzerland) where this is certainly true in his experience.

Perhaps the most distinctive strength of the paper is the linking together of evaluation with goals. It says “Measurement of results of the IAR Program according to economically comprehensible criteria. For an effective use of the limited IAR resources and a measurement of results a  previous target definition is indispensable.”

Pleasingly, the paper also notes the value of analyst relations consultants, explaining that vendors ” have the choice to contact the analysts directly or to make use of a consultant to establish analyst  relations. Consultants like that have the advantage that they know a lot of the analysts already or have a very good network in place. In addition they help you to avoid mistakes or misunderstandings. Mistakes and misunderstandings can happen very quickly, because analysts and IT providers often have a different understanding and interpretation. ”

The strength of the paper is also the weakness. The paper summarises much of the most respected writers on analysts and AR in Germany, including my co-author Ralf Leinemann and DARA, the Deutscher Analyst Relations Arbeitskreis. An introductory paper like this doesn’t have the space to test or validate those writers.

The analyst industry changes fast and, because the works being summarised were written over several years, a few anachronisms flow into the paper. Given the pace at which our industry changes, there are bound to be changes in the market during the long process of academic reviews, where years can pass between the drafting of a document and its final publications.  These don’t change in any way the document’s value.  So, for example, readers will know that AMR Research, which Gartner bought in 2009, no longer exists. Darwin magazine‘s estimate that 55% of US CIOs use market research, in 2000, and a 2002 estimate by Brodeur that analysts influence up to $125bn of IT spending in Western Europe, are both much earlier than the DARA’s 2008 book, to which they are attributed.

He also touches issues of ethics which are increasingly important in the context of the unwise Gartner-Netscout case.  “For manufacturers the accession to analysts ratings is often connected with high financial costs, though and is very time-consuming. For a lot of companies the costs for the consideration in analyses such as the Gartner Magic Quadrant  or the Forester Wave lie in a six-digit range per year.” Of course there is no cost to be considered in these reports, although firms can spend as much as they want to try to inform analysts as well as they might like.

In an email to me yesterday, Marco said if you want to be in the Leaders Quadrant or the Forrester Wave you have to work very closely with the analysts: “This is a full-time job for one or more people out of the vendor organization.” In his opinion, analyst relations should be managed professionally and therefore vendors have to spent some money indirectly too. Touching on one of the most polarising discussions in AR, he says it makes no sense to try to get into reports and not aim “for a Leader position – critical comments from an analyst could lead into a revenue reduction instead of growth.” There are plenty of people who agree with him, although I have seen the benefit to companies of getting into the Magic Quadrant even in the least favourable position. That’s something Ed Gyurko and I discuss in our podcasts on the MQ.

Including these nuances, the paper draws on most of the key work in the German language on analysts and analyst relations, and give it an overview for the first time. And for those who are trying to expand the academic conversation on analysts and analyst relations, it’s encouraging to see academic journals publishing articles about it.
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