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November 15, 1999

Analyzing The Analysts:
The Knowledge Merchants
continued...page 5 of 7

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Robert Weiler, who was named president and CEO of Giga Group in August, is the former senior VP of worldwide sales and marketing at Lotus Development Corp. Weiler says he often got analyst firms to publish favorable information about Lotus.

"If we wanted a white paper written, we knew which analysts to call," says Weiler. Also, Weiler says, he was personally involved in editing white papers published by analyst firms. "They'd say, 'we found three customers who don't like the product,' and we'd say 'well, you talked to the wrong ones.'"

Weiler declined to identify the analyst firms he dealt with while at Lotus. He says he looks at things differently now that he's with Giga, which has policies in place to maintain independence from the IT vendors it covers. "Vendor clients aren't thrilled with what we're writing, but they appreciate the objectivity," Weiler says.

Some IT managers have had mixed results from the work they've done with analyst firms. American Maplan Corp., a McPherson, Kan., manufacturer of barrels, screws, and other products, was pleased with the service it got when the company hired Ziff-Davis Market Intelligence (which recently sold its market-research organization to Harte-Hanks Inc.) to quickly get up to speed on computer-telephony software products. That resulted in the selection of a Java-based PBX that Ron Relph, head of MIS at the company, calls "the most forward-thinking direction we could take in computer telephony."

But Relph isn't happy with the advice his company got from Gartner Group in selecting an ERP system. The system Gartner recommended--which American Maplan purchased--doesn't include a relational database, something that turned out to be a critical element, Relph says. "In my book, we could have gotten a product 10 times better for one-tenth of the cost."

chart Larry Olson, former CIO of the state of Pennsylvania and now a principal at aligne Inc., an IT management-consulting firm in Philadelphia, characterizes his experience with the leading analyst firms while a CIO as "mixed at best." One firm, which he declined to identify, "didn't understand that we were the customer and that they needed to tell us how they would add value."

A representative from the firm asked for a substantial hike in price for a service--$900,000 compared with $190,000 it charged the year before--without detailing any new benefits. "Needless to say," adds Olson, "we didn't accept their proposal."

There are others who find services from the firms too costly. "We've looked at services offered by the analyst firms, but they're very pricey for what we felt we needed from them," says Larry Hazen, IS director at Granite Construction Inc. in Watsonville, Calif. "There's so much information available today from the Internet, the media, and other resources that's just as good."

About 30% of the survey respondents say their companies spend more than $75,000 on services each year, and 17% spend upwards of $105,000. Some companies shell out as much as $500,000 or more on research and analysis annually.

Another complaint is that analyst firms often don't provide enough detailed information in their research data about specific markets. "Industry analysts that do market analysis add up their numbers at such a high level that if you want to dissect them to find out about a target market, you often don't get a great deal," says Cowan of FVC.com. "They aren't good at documenting precisely what it is they're measuring."

For more granular data, Cowan turns to smaller research firms that focus on specialized markets, and are "much better able to respond to questions and back up data" than many of the large firms.

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