Is scale a comparative advantage?

With 650 analysts, Gartner has the largest research team of any analyst firm. Of course, only a minority can be of above-average importance. A correspondent of mine suggests that even if the number of analysts at Gartner is high, it’s more important to track the number of seasoned analysts.

The argument is this: “After eliminating all of the “analysts” in “Measurement” and Dataquest the number is probably close to 450. If you define an analyst as someone who writes, speaks, and interacts with clients: the number of client-facing analysts at Gartner is closer to 250. The business issue for Gartner is that their top producers (in terms of written reports, and client engagements) are getting old and tired. Gartner should be building up the ranks of analysts instead of allowing attrition.”

This suggests that the key challenge for analyst firms is to develop and retain top research analysts. That is sometimes true, but sometimes it is not.

One factor is that analyst expertise has never been easier to source. For example, one of the META Group diaspora – Experton Group – has about 20 advisors. It’s plugged into a wider network called Experture which includes former META analysts like Rich Evans, David Folger, Jack Gold, Doug Lynn, Liz Roche and Craig Roth. It’s very easy for ex-META people to work together: they have predictably similar methods, values and common experience. They also know they can trust each others strengths and anticipate each others’ weaknesses. Although it has a fixed core around the same size as Experton, Experture has a “bench strength” of 200 on tap through its roster of adjunct associates. Experton also works with Evalueserve, the 800-strong offshore research group which purchased The Strategis Group (Indeed, many of the other major research firms also work with Evalueserve, but more quietly).

Furthermore, there are other trends that make raw analyst research more of a commodity, including vendors’ reprints and free research outlets like

However, on one aspect my correspondent is deeply correct: the valuable expertise is in people who can interpret the research and apply it to client problems. This is tricky work, and difficult to both staff and scale: trusted advisors reply on strong domain expertise and need astonishing questioning skills and cross-cultural savvy. These people are hard to find and harder to grow in the tough love atmosphere in many analyst houses. However, these advisors can cold clients problems and push clients towards confident and correct choices. That is worth paying money for.

Of course, few analyst firms are able to focus on that. It’s hard to sell, and hard to scale profitably. There’s some speculations, for example, that Gartner might be better off without its consulting business. We strongly doubt that, but we have to admit that it’s a question of judgment.

However, the reinforces our feeling that the critical success factor for most analyst firms is account management: if sales and operations are tied into meeting clients’ needs, and really adding value, then the volume of the research base is less relevant. Gartner’s scale gives it advantage, but that advantage isn’t rooted in the fact that it has top research producers on its books. The strength of these top analysts is that they know how to listen, question, coach and mentor CIOs. It possibly doesn’t matter if these people wrote all the research, or if they simply leverage it. It could work better either way, depending on the firm and on the advisor.

All of that suggests that “domain expertise” (that’s what non-analysts call “experience”) becomes a little less important, and that soft skills all become more important. Perhaps that’s bad news for analysts, but it’s good news for analyst firms and their clients.

Nevertheless, none of this means that scale is not a factor. At the smaller analyst firms, selling is done by analysts who focus on their own expertise. At the larger analyst firms, selling is done by salespeople who are able to start from each client’s particular problems and try to solve those problems. Of course, selling solutions is difficult at some firms because management and analysts conspire to force salespeople and account managers to focus on research volumes and off-the-shelf services rather than on more valuable offers. The commodification of research, however, will punish firms using those outdated strategies.

The next few years will clearly show that it’s not scale that gives analyst firms their advantage. Analyst firms will flourish only if they start to prove they can really help their clients to unlock greater value in their businesses.

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As the head of CCgroup's analyst relations team, Chapple directs programs that increase the value of relationships with industry analysts and sourcing advisors.