We’ve written a lot about Forrester recently: on finances, pricing, timing, performance and valuation. While that reflects many of the discussions we are having at the moment, it’s time to give this thread of comment to a concluding summary, and move on to other matters.
These are our four key thoughts on Forrester’s evolution.
- Forrester is becoming a duopolist. Gartner’s purchase of META has made Forrester its partner in a duopoly of sorts, especially outside Europe. Industry consolidation clearly helps Forrester. It is sharing with Gartner with budgets formerly paid to META. It also has some advantages as a supplier: it is easier to work with than Gartner, and its research better meets the needs of marketing and business managers, if not of technologists. Our view is that Forrester probably picked up a greater share of META’s vendor clients than of its end-user clients, partly because vendors want to promote a second voice in the market. However, this has been a mild boost, reflecting Forrester modest hunger. The ‘Miss META’ campaign was a whimper. They won, perhaps, 10 to 12 META accounts in Q4, with an even balance between the US and Europe.
- Forrester market penetration is rising. The firm has 17% penetration into its target market, selling to 800 of the 4,700 firms with revenues over $1bn. However, customer turnover can become an growing concern. Budget will often be as issue, and this will bite harder as Forrester’s price rises are implemented.
- Forrester could rebound outside the US. While the US administration continues to favor an increasingly weak US dollar, many US headquartered firms are turning their interests away from export markets. Forrester’s percentage of international revenues are falling, from 34 % in 2004, to what we estimate will be 28% this year. Forrester’s costs of repatriating profiles and dealing with foreign currency transactions have been substantial. Over the last year, the euro weakened more than the dollar, meaning that Forrester really suffered there. This turned into faster growth in the US last year. This year, the flow could turn around. The firm should grow in Europe and Japan, partly because of new strategies but also because of currency movements.
- Forrester faces complex competition. Forrester’s growing interest in leadership communities and replicable consulting projects do more than drive up contract value. They also square the firm up against its two key competitors. One of these is Gartner, which is also focusing on the $1bn plus market. However, the Corporate Executive Board is also a key competitor, especially as Forester has aggressive goals for its leadership boards. All of this is a long march ahead. However, Forrester has take one giant stride in the right direction: a new compensation plan for sales people.