Given the current FIFA scandal, it’s interesting to note that it is a year since the most serious call yet for the regulation of industry analysts. Phil Fersht argues against the growing demands placed on vendors by analysts’ requests for data. He raises the argument that analysts who beseech such information must have reduced access to the market. He also makes the point that “these vendors are forced to help fund these analyst firms so they can ensure they can monitor the analyst research and get enough face-time with the analysts to get them to portray them as accurately as they can hope ”
Phil’s answer is “it’s time for government to step in and demand these “research” processes are run fairly, and these analysts are doing their research appropriately.”
It’s worthwhile comparing this with the current case by the US Department of Justice against FIFA. The government alleges “fraud, bribery and money laundering (…) for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks.”
But even in this context, there is no suggestion that the federal government should produce additional regulation unique to FIFA. It only enforces existing laws against racketeering. No-one is suggesting that the US Congress should legislate on the rules of world soccer.
Certainly there are practical objections. The US Congress is not a world government, and its ability to legislate for the industry is limited, given that only half the analyst communist is in the United States. Enforcing common quality processes would, perhaps, standardise outputs and remove the space for competition and innovation. In terms of building a head of steam behind these demands, it’s hard to imagine a weaker central plank than the notion that analysts are asking for too much data. Many people will think that it’s a strength of researchers if they look for data they do not already possess. Isn’t it good that they try to cross-check proprietary resources with those provided by major authorities?
Most importantly, it is hard to imagine how to design an efficient organisation to perform quality management for the global analyst industry, and even more difficult to explain a funding model for it.
Empirically, there is also ample evidence from economists that supervisory bodies can lead to less efficient market, especially to what is called regulatory capture (explored by Harvard professors Carpenter and Moss in their new book – pdf here). Capture is the process whereby regulation leads to greater corruption. FIA, of course, is an example of exactly that. There has not been a less likely time for the Federal government to set up a FIFA for technology analyst firms.
Even so, if we can dismiss the possibility of regulation there remains a reputational risk. These are real, as cases like Netscout have shown. In particular, the role of marketing agencies in the FIFA cases suggest to us that any legal assessment of issues in the analyst industry may focus on marketing communications agents. For this reason, it’s well worth reading David Robertson Mitchell’s article aimed at the clients of sports marketing agencies. He says that companies have only three options:
- Put your head in the sand, carry on with business as usual, and hope this all goes away very soon.
- Be loud, vocal and bold in your demands for reform and change – use your position of influence positively and leave no doubt where you stand.
- Terminate your relationships, refuse to pay any fees, and let them sue if they want to. Be loud and bold about why you have terminated, and do it quickly. The first brand to walk away will be praised; the second will hardly be noticed.
Tech vendors are not at the point where they need to act in this way. I recommend that agencies discuss now to agree on their red lines for future ethical issues, so they can work cohesively and promptly if they find themselves getting pushed close to the line.