Analyzing the Analysts – It’s that time again!

Each summer Lighthouse does a major update of its analysis of the analyst industry. I’m working with my colleague Ahmed Waqas on the project, which involves liaising with over 500 analyst firms to make sure we have a better understanding of their firm.

Of course, we are leveraging the lessons that Lighthouse’s consultants learnt during our own time as analysts. In particular, we learn that firms are much more likely to be open with us if we take the effort to research their firms. So for each analyst firm we have been estimating how its research focus in allocated across different areas, and how its client base is segmented.

It’s a useful activity for the analyst firms, for the ICT suppliers that work with Lighthouse, and for Lighthouse itself.

  • Analyst firms benefit because they often don’t know how they appear from the outside. There’s a lot of media coverage of analysts firms’ research, but that’s very neutral and does not tell them a lot. Generally, analyst firms tell us that our analysis is as accurate, or more accurate, as their own data. Many firms just do not segement their own information in the way we do, and they appreciate the estimates we make. Of course sometimes our estimates over- or under-estimates a firm’s strength in a particular segment; that is also useful informaton because it shows a firm where it is ‘hitting above its weight’, or not.
  • Vendors, operators, services firms and manufacturers find the research very powerful. Because of the low barriers to entry and the trickle-down of new firms like Meton and MWD Advisors it’s easy for them to overlook strong niche players focussed on market segments, as we discussed with Mako Analysis recently. The segmentation also helps them to see if they can tailor the information they give to analysts in a way that reflects that firm’s focus: for example it helps to know if a firm is working closely with network operators or with the public sector.
  • Lighthouse also benefits from a broader view. Analyst-watching firms like Lighthouse find it easy to focus on those with multi-million dollar revenues, partly because those firms actively build relationships with us, open up their events and research to us and ocassionally engage us. But the reality is that the constant merger and acquisition in the analyst industry doesn’t lead to a simple consolidation of the industry or a reduction in the number of players. That that isn’t reflected in many AR strategies. For example, it’s probable that most of the analyst relations effort of the largest vendors goes on two analyst firms; and a minority goes on the rest. For example, many firms put more effort into Gartner and Forrester than into all the rest put together. That is often a mis-allocation of resources. Lighthouse is able to benefit by giving our clients a competitive advantage by helping them to put a little effort into niche players who are under-communcated with but are more influential than most vendors think they really are, especially with analyst firms outside that vendor’s domestic market.

That said, this process is difficult and worrying for a few analyst firm professionals. They are not used to being subjected to the same scrutiny that they give to the vendors they follow, and they are often uncertain about how to respond. That’s one of the reasons that blogs like this are useful, because they also allow analysts to openly exchange comments and questions with us about projects like these — and without having to identify themselves if they don’t want to.

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