Datamonitor’s decision to integrate Butler, Ovum and the Datamonitor Technology business is looking like the major strategic move by one of the analyst firms this year. The integration has not been perfect, and Ovum doesn’t threaten Gartner or Forrester’s leadership. However, it lifts Ovum up in almost every way, and has brought it to the unique position of being the only major firm in the industry to have increased both revenue and profitability.
The reasons for the consolidation were clear. There was overlap between the businesses, both in research coverage and in sales effort. In the current recession, buyers often want to buy from fewer suppliers, so there were benefits to increasing the scale of the business. Because growth in the market is mainly outside the US and Western Europe, a single brand is easier to establish in growth markets such as Latin America, the Middle East and India: all areas where Ovum and Datamonitor Technology had been strengthening for several years.
Fundamentally, however, the integration of the brands consumed by clients reflected the reality of the research operation, which has integrated and is more globalised than any other Datamonitor business. Ten years ago (when I was working at Ovum) research was almost totally centralised in London, although the organisation had a real (if modest) research presence in Australia, Korea and US. Today, the organisation also has several hundred people at a major centre in Hyderabad. Ovum has solid operations in the US, Korea, Japan, Hong Kong, mainland China. It is continuing to hire, especially in Dubai and the US.
That globalisation means that the firm’s reach is different, and that its research methods are changing. Ovum’s substantial scale means that it’s able to introduce more of a division of labour into the research process: data collected by others can be pooled and tested. Analysts might not have to collect their own data and, perhaps, their way of structuring and understanding their research will be structured more firmly by the work done by others (Which potentially trades off some originality for consistency).
The firm’s ability to leverage the vertical market insight of Datamonitor’s other businesses has the potential to shift the firm’s value proposition substantially, especially in custom consulting projects
However, we don’t yet see the possibility for the firm to bring the brunt of that vertical insight into Ovum, either into its sales force or into its analysts.
As Ovum’s recent sessions with Gideon Gartner has shown, the firm has serious insight into both technology and into industry. However, the Ovum analysts are not the source of vertical insights: it’s their colleagues in Datamonitor-branded businesses. That’s a major asset that would be almost impossibly costly for any other firm to duplicate. Bringing that insight into a consulting team is pretty easy: you bring the person in. But what’s harder is to infuse the insight of vertical analysts into Ovum analysts who work largely horizontally across many markets. The CEO personally drives processes such as quarterly planning meetings to ensure co-operation across the organisation; that’s positive, but it also underlines that it doesn’t happen automatically. Similarly, Datamonitor’s account managers in vertical industry now have the potential to cross-sell Ovum, but this only works where Datamonitor is selling to a client of Ovum’s competitors. Getting deep vertical insight into salespeople’s heads takes time and investment: and Datamonitor’s revenue growth suggests that the firm has a lot of low-handing fruit to harvest before it starts retraining Ovum salespeople to work vertically.
Despite these realities, Ovum is exceptionally well positioned to continue to grow by maintaining its existing momentum. The firm’s basic strategy is sound, and it can continue its course with relative confidence. Few other analyst firms can say the same thing.