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November 15, 1999

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

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Rather than being usurped by the Internet, analyst firms are moving aggressively to expand their use of the Web to deliver the latest information to clients. For instance, more than 90% of IDC's clients receive information from the company in some electronic format, says Campbell. The firm is expanding its online research databases and offering Web "tele-briefings" to meet the growing demand for fast information, he says. "Making information easier to access on the Web is a big challenge and a key for us," Campbell says. "People don't have much time. The goal is to make it as easy to use our site as it is to use the most popular consumer Web sites."

Indeed, about three-quarters of the managers surveyed by InformationWeek Research prefer to get reports either by E-mail or by downloading them from the research firms' Web sites, rather than by postal delivery or fax. "We can get reports from these companies instantaneously on the Web and do searches for something that happened nine months ago," says Rogers of Mony Group. "You can find the information in five seconds, rather than searching through three-ring binders in the file cabinet."

Says Forrester's Woodring, "The challenge for the research and analysis community is to figure out how to get past paper as the delivery medium and make it a high-value, personalized experience for our clients." To that end, Forrester in March introduced an interactive E-Research service that lets clients customize the firm's research in a variety of ways.

Still, despite the current infatuation with the Web, Gartner's Fleisher says his firm will continue to use every tool available to deliver service to its clients. "Some only want to use E-mail, others want to interact with our Web site, and still others prefer to call and ask us questions or meet with us face to face," Fleisher says. "You can't operate with a single delivery model--you have to be able to provide what the clients want."

Even though competition is growing, the big analyst firms continue to enjoy financial success. For example, Gartner recorded revenue of $734 million for the year ended Sept. 30, which represents growth of 18% over the previous fiscal year; net income rose 9% to $107 million. Giga's revenue last year soared 97%, to $39 million from $19.7 million in 1997. Forrester's revenue for the same period jumped 53% to $61.6 million, and Meta's revenue increased 42% to $72.8 million.

chart U.S. companies will spend a total of about $2.9 billion on IT research and analysis in 1999, according to Outsell. The eight firms detailed in the InformationWeek study will account for about 42% of that, or $1.2 billion, Outsell reports. Large companies are devoting an average of about 6% of their IT budgets on research and analysis services, or about $2.8 million a year, according to an Outsell study of 185 IT professionals.

IT executives say this is money well spent if it means saving resources and getting critical analysis and data in a timely manner. "The key value we get is that we don't waste time pursuing things that have a low probability of success," says Fluor's Benner. "That makes it hard to measure the benefits, since it's more an avoidance of wasted time and effort, and it's impossible to quantify that."

Rogers of Mony Group agrees. "Early on, when we first started using research firms and the cost came up on the budget, it was an issue with senior management," Rogers says. "But we've made the case that for us to replicate this expertise in-house in so many areas would cost us 10 times as much, and I'm not sure we could even do a good job then."

Analyst firms are being forced to respond even more quickly to client needs--a direct result of the frenetic pace of change in technology and the demands businesses are placing on IT. "CIOs need to make decisions more quickly, and that will drive the way we approach consulting," says Meta Group's DeBoever. "We're meeting with executives at Aetna now to talk about how to change their IT infrastructure. They want to do it in three days, not 12 months."

That frantic pace is what will keep the analyst firms in high demand, says Fluor's Benner. "These companies are much more important than they were several years ago, because of the speed of technology change," Benner says. "The only way we can successfully use IT to be competitive in our marketplace is to talk to someone who's making a career out of knowing what this is all about."