Are Gartner, Forrester and IDC like Moody's, Fitch and S&P?

Word is, we're getting over the current recession and things are going to be just peachy any day now, so naturally it's time to name the guilty and hold them accountable for the fine mess they've gotten us into.

Who to blame? Rarely at the top of the list of black-hearted, no-good, fat-cat swindlers who made all our 401Ks vanish are the ratings agencies: Fitch Ratings, Standard & Poors, and Moody's. But they played a key part in the financial meltdown: these are the organizations that assign credit ratings on banks, companies and others that issue debt obligations such as a bond issued by the State of California or a mortgage-backed security issued by Lehman Brothers. The agencies got into all sorts of trouble this year because of an obvious conflict of interest: agency analysts are paid by the same firms they rate. There's a bunch of hearings going on where various ex-employees of the agencies are saying they had all sort of pressure placed on them to overestimate the worth of otherwise dodgy and unintelligible financial instruments like credit default swaps.

Hmmm.... conflict of interest by analysts paid by the firm they rate.... sound familiar?

Industry analysts the world over derive a good chunk of their revenues – in many cases all of their revenues – from the very technology firms they then write about. When Gartner rates vendors on a Magic Quadrant or Forrester does the same in a Wave, there's a good chance that the majority of the vendors they judge are paying clients.

For sure there's differences between industry analysts and the financial rating firms. First, for most industry analysts, fees paid by technology vendors aren't ear-marked specifically to fund a “ratings report”. Especially for the bigger analysts like Gartner, Forrester and IDC, any fees paid by vendors are for general access to written research and advisory services. Second, most reputable industry analysts have a strong account base among end-users of technology – most large companies around the world have subscriptions to industry analysts so that their IT staff can get informed opinions on products and services. This means that only a fraction of their overall revenues come from vendors – in the case of Gartner and Forrester, perhaps 30-35 percent. That said, a lot of smaller firms are almost entirely reliant on vendors subscription fees to be in business.

All this came to mind when I read Gartner analyst Thomas Bittman's excellent rant on how his integrity is often questioned. Bittman points out that in 14 years as an analyst he's never let vendors unduly influence his reports, although he says he “understands” why the marketplace has the impression that “analyst firms can be bought.”

Responding to Bittman, the good people at Sage Circle, an advisory firm for vendor analyst relations professionals, point out that you don't need to be a Gartner client to get a very strong rating, and that the correlation between payment and judgment is very poor. Shamus McGillicuddy at IT Knowledge Exchange points out the inherent conflicts analysts face when they take money from vendors and consumers.

The problem is that Bittman's argument is little different than the defense made by the ratings agencies. In both cases, no matter the integrity of individual analysts, there is the clear appearance of a conflict of interest. As Bittman himself states, the marketplace will always believe that it is harder to criticize a paying client than a non-paying one.

The Influence Game

Anyone working in IT knows the power and influence exerted by Gartner, Forrester, IDC and the rest: Industry analysts can create markets, shape buying behavior, and even determine the fate of entire companies. They have a direct and measurable impact on the way organizations and individuals buy and use technology, from ubiquitous consumer products to esoteric emerging technologies.

I'm employed by an enterprise software vendor, and working with the analyst community is a central element of our marketing mix. Analysts are uniquely positioned to provide a highly informed yet objective view of our ideas, strategy and product development plans. But more importantly, they also act as valued advisers and translators for consumers of information technology, aka our customers and prospects. And as a breed, analyst can be delightfully quirky individuals that are fun to know. (They can also be infuriating, pig-headed and far too enamored with themselves, but I digress...)

I've run AR programs for a handful of companies, and recently I inherited the AR brief in my current job. It's been a couple of years since I talked to analysts on a regular basis and it feels like the landscape has changed. If you've got experiences you can share – or resources you'd recommend – please get in touch.

Powerpointless

Gartner ITExpo is over, at last. Some 6,000 blameless IT professionals have sat through hundreds of presentations on every conceivable aspect of IT. All these different presentations shared one thing in common - all were delivered using Powerpoint. It's very hard to imagine any presentation being delivered without Powerpoint today - it is ubiquitous. As a result there's many blogs discussing how to make your PP decks better: Creative services offers how-to hints; Indezine takes a design-centric view; Dave Paradi seems to have a broader perspective on presenting effectively with PP.

Death by Powerpoint is a real phenomenom, and PP isn't a very flexible approach to presenting any information, on any subject, as the excellent Edward Tufte makes clear. Often, I'm not even sure what it adds - many presenters seem to use slides as memory crutches, or read directly off the slide as if it where a script. Most slides add little additional information. All this is a shame, because many good analysts presenting at the Gartner event stood in front of gigantic, 20 foot screens that delivered miniscule value and which overshadowed what they actually had to say.

Without question the best presentation of the show was the (ironically) Powerpoint-less interview with Microsoft CEO Steve Ballmer, well summarized in Deal Architect (and a podcast review here). He has an audience of a few thousand, and everyone was paying full attention. Ballmer famously dismissed social computing (aka Facebook and everything down to this blog) as a 'fad', although his recent pronouncements shows a more nuanced view. Microsoft clearly wants to take on Google, the darling of the analyst and Wall Street set: Based on what I saw, I wouldn't want Ballmer after my business, even if he is the guy behind Powerpoint.

Hype Cycle

This week I’m attending Gartner’s ITExpo in Orlando, you can read more about it at their blog. I arrived at the hotel a few minutes ago – it’s strange to see thousands of middle-aged guys milling around with the 2 year-old Mickey Mouse set.

Gartner’s a strange beast, the 200 pound gorilla of the IT industry that can make or break markets, companies, and products. They started out in 1979 and now have almost 4,000 employees, of which about 1,200 are analysts. Forrester and IDC are the only other companies that really compete in terms of size and influence. IT is complex, and there’s not doubt that these companies add a lot of value by providing insight and context on how to make technology effective and productive. And from a marketing perspective, these firms are hugely influential.

Gartner has a concept called the Hype Cycle, which they apply to IT trends and new technologies, but which I’d love to see applied to diets, cars, bands, or movie stars. What’s strange about the Hype Cycle is that is can become a self-fulfilling prophecy – the very act of Gartner placing something on the curve elevates it and gives it new buzziness. Forrester famously got into trouble when the Internet bubble burst, and the Wall Street Journal showed how they’d fuelled positive forecasts for companies and markets right up until they’d collapsed. Some are seeing similar over-hype around the whole Web 2.0 phenomenon, which is a major theme at the Gartner event.