Our article called 'Warning: Don’t use guesstimates of analyst firms’ revenue' is a useful compliment to Joerg Kerler's article below. Click the button above to find out why AR people can be misled by guesses of analysts firms' revenues.Click here for the article
In this passionate defence of the need for analysts to focus on their core research competency, Jörg Kerler argues that the imperatives of digital transfomation require excellent and neutral research. Analysts’ buyers are absurd if they think that neutrality can come from firms that vendors use as sales influencers.
Thoughts on the true value of analyst research and the impacts of digitalization on the analyst industry
Research buyers should not expect analyst firms to provide them with brand new ideas and recipes for success, and to supply them with information they do not already know all the time. The true value of analyst services lies elsewhere, and it might become more obvious and evident as digitalization progresses.
Supplying customers with unique, actionable formulas for success conflicts with the analysts’ core business model to sell their syndicated research to everyone willing to pay for it. Exclusive, bespoke advisory services are the domain of consultants (whose services are far more expensive) and represent only a secondary income for an analyst company in the true sense of the word.
It is also quite absurd to hear that many research buyers expect, on the one hand, analyst firms to positively impact or even influence their marketing and sales efforts while, on the other hand, they require them to be objective, unbiased and strictly vendor-neutral, especially with regard to the evaluation and recommendation of products and services.
Instead of judging analyst firms merely by the amount of influence they might have on their clients’ customers (e.g. technology buyers) and sales leads, and by the amount of singular insights and tailor-made strategies they provide to their clients’ management, research buyers should consider a few other levers that justify analyst research investments, namely workforce education, empowerment and efficiency.
Analysts are observers – much like journalists – that report on the things they hear and see. They analyze, aggregate and condense information. Their core merit is to supply clients with concise, digestible, on-point, structured, well-formatted, fact-based insight and data. That analysis helps knowledge workers to avoid duplication of cumbersome information gathering, data modelling and analysis work. It allows them to focus on creative work and innovative approaches departing from the solid foundation delivered by the analysts. Analysts excel at identifying patterns, an area in which human intelligence is still far superior to artificial intelligence.
Knowledge workers also depend on analyst research as an authoritative source for quotes, charts, market data and forecasts, as well as a place where to find inspiration, food for thought, evidence and confirmation, but also warnings, challenges, objections and arguments against their own assumptions.
Digitalization and the digital workplace provide a set of new arguments for justification of analyst research investments, working for the analysts in three different ways:
- As a result of the digitalization and automation of routine tasks, more and more work is producing complex, high-profile knowledge. To stay agile and competitive, organizations need to equip more and more employees with autonomous decision-making competency and adequate tools to make the best possible choices in the shortest time possible. This is exactly where instant and consistent access to analyst research can make a great difference.
- It has to be acknowledged that in the digital age most innovations and even disruptions are created through combination and re-combination of already existing knowledge, products and services from different domains, and not through completely new concepts and ideas. Many analysts are quite good at accumulating trends and insight from very different disciplines, industries and geographies.
- Thirdly, within the scope of digitalization, IT and the business are getting more and more closely and inseparably interlinked: A growing number of business functions is in need of IT research, which opens up great opportunities for IT analyst firms and especially for those (larger) research firms that integrate IT, management and industry-specific research on a global scale.
Taking into consideration the above arguments, digitalization should impact the analyst industry in the following ways:
- Further concentration within the analyst industry is likely, as broader user audiences require a broader scope of content.
- The production of written research reports and the good old research library, that recently seemed to lose ground against the provision of analyst inquiry and bespoke advisory services, might regain territory as it is difficult to deliver personal analyst support to a massively growing number of users.
- As a result of “democratization” of access to (IT) research within analyst buyer organizations, the seat-based access license models of leading analyst firms might be challenged by less restrictive content licensing models such as departmental or corporate licenses.
Surveys show that increasing workforce productivity, improving knowledge management and collaboration and fostering innovation are among the top goals of organizations’ digitalization and digital workplace initiatives. Consequently, research buyers should first and foremost regard analyst subscriptions as a means of increasing process efficiency, avoiding the recreation of insight that already exists and removing cost and complexity from in-house knowledge work through outsourcing to analyst firms who offer their research as a relatively affordable shared service to multiple clients.
The larger analyst research firms provide their client organizations with a rich platform (content library plus direct analyst access) of outsourced knowledge. They free the clients’ employees from lengthy research, information aggregation and analysis tasks and enable them to spread their wings and soar by pursuing value-added, creative, innovation-centered activities and forging new strategies. In this context, it should also be mentioned that according to management guru Peter Drucker, most innovations are not derived from flashes of genius but from hard analytical work.
As knowledge process outsourcers, larger research firms ideally offer a vast yet concise, structured, focused and quality-assured inventory of data, insight, analysis, opinion, trends, forecasts, curated news contents and evaluations of companies, technologies, products and services. That inventory cannot be found in comparable richness, density, organization and formatting; neither on the free Internet nor inside even the largest analyst buyer entities. The price of analyst subscriptions may appear very high compared to that of other syndicated information resources. However, it is very moderate compared to the cost, effort and amount of time that would be required (or wasted) to recreate the analyst research contents – and in particular compared to the analysts’ massive contribution to fostering a knowledge-empowered workforce.
ORBIT Gesellschaft für Applikations- und Informationssysteme mbH (member of T-Systems)