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November 15, 1999

Analyzing The Analysts:
The Knowledge Merchants
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Smaller IT suppliers are perhaps even more dependent on analyst firms. Made2Manage Systems Inc. in Indianapolis, which develops manufacturing applications, uses research from AMR and Gartner to help plan product offerings. "In 1997, Gartner predicted that customers wouldn't buy software products anymore, but would be leasing them," says a research analyst at the company. "It alerted us to the importance of Internet applications, and now we've made an effort to include that in our products."

FVC.com, a Santa Clara, Calif., maker of broadband interactive video networking products, relies on the analyst firms' ability to gather large volumes of data from both users and other vendors. "These analysts have long-term, ongoing relationships with both customers and vendors," says Mark Cowan, director of marketing at FVC.com. Cowan says analyst firms provide perspective from both sides of the fence: what vendors are telling analysts about what they're doing and planning to do, as well as analysis of what customers are buying. "As a vendor, you can't get the information you want from other vendors," he says.

Because of that co-dependent relationship with vendors, analyst firms need to be on guard about appearing to favor certain vendors, particularly those that are clients. IT managers give the major firms high scores in credibility, but at the same time take steps to ensure they're not affected by any lack of objectivity.

"You always have to protect yourself," says Robbins of Conning. "You have to do your own homework and due diligence. If you read enough of the work from the same analysts, you can start ferreting out the bias."

Some believe bias toward vendors is widespread in the analyst community, even among the major firms. "They're totally influenceable, and larger vendors have the most influence," says FVC.com's Cowan. "Some of them are quite literally in people's pockets and will say virtually whatever they're told to say. Others are more ethical and aren't manipulated."

A lack of thorough coverage, rather than favoritism, is the biggest shortcoming of many analyst firms, especially the largest ones, says Anthea Stratigos, president and co-founder of Outsell Inc., a Burlingame, Calif., company that follows the IT research and analysis market and provides advice on how to best use information content. Firms such as Gartner Group don't have a big-enough picture of the entire IT marketplace to represent it accurately to their clients, says Stratigos. "Many IT vendors don't have enough access to Gartner analysts to tell them what they're providing and to give them the information Gartner needs to be aware of what they're doing," she says. "I don't believe that this is something Gartner is doing intentionally, but Gartner needs to represent the vendor community more holistically."

SAP's Milstead also questions the ability of some analyst firms to cover the length and breadth of the enterprise systems market. "In some firms, you'll have one or two analysts who cover the whole front and back enterprise apps space," she says. "It's a huge challenge to know all the players and cover the all the ground. They don't have enough truly comprehensive coverage."

chart The coverage may not be comprehensive, but it's certainly relevant and meaningful, argues Michael Fleisher, president and CEO of Gartner Group. "Our analysts watch many radar screens in their research activities, and rarely miss the activities of vendors with relevance to our clients' IT strategies," says Fleisher, who was named to his posts at Gartner last month. "Our approach is to provide thorough coverage of vendors determined to be appropriate for our clients to consider in their decision making."

Fleisher says maintaining independence from vendors is something about which every firm in the industry must be continually vigilant. "We have one asset to sell: the integrity of our intellectual capital," says Fleisher. "We cover the marketplace the way we see it, regardless of whether a vendor is a client. Vendors are good clients, and we have good relationships with them, but no amount of money would be worth undermining our integrity."

Dale Kutnick, CEO of Meta Group, tells vendors before taking them on as clients: "We will try to help you get your strategy right, but when we talk about you, it does not mean we'll say good things about you." Kutnick says Compuware Inc., the $2 billion software tools vendor, was a big client of Meta's, representing about $120,000 worth of business. "We said some true but not positive things about Compuware, and now they won't even talk to us." Kutnick says Meta gets at least one letter a month from vendor clients that claim they were insulted and threaten to sue.

Still, the conflict-of-interest charge isn't totally unwarranted. Some executives at the analyst firms say there's a common perception among many IT vendors that they can buy coverage from the firms. "Vendors perceive they have to buy services to be covered, says Tony Friscia, president, CEO, and founder of AMR Research. "Then, when they buy services, they want to know why they're not covered."

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