The Great Analyst Dilemma

I just read an interesting article by Infoworld’s Bill Snyder, examining what he describes as an inherent lack of neutrality among technology analysts that hinges on “the common practice of selling research and consulting services to the very companies whose products it evaluates.”  Snyder argues that analyst firms should be required to reveal potential conflicts of interest by disclosing their list of clients and associated spending. (This would be akin to the new regulations imposed on financial ratings agencies.) 

In the column, Snyder interviews a small company, ZL Technologies, that recently filed a lawsuit against Gartner, claiming the research firm inflicted significant economic damage by bestowing upon it the kiss of death—the lowest ranking in the “Gartner Magic Quadrant”—allegedly based on nothing more than the company’s lack of financial clout and marketing muscle. (You can read the text of the entire lawsuit here.)  Though obviously biased, it’s a fascinating read and offers a blistering indictment of a business model that has raised the ire of both vendors and end-users alike ever since research analysts first appeared on the scene. (For a good chuckle, here’s my favorite excerpt:  “At the core of this action…an economic model championed by Defendants that elevates marketing puffery over serious technology.” Wish I could claim credit for that one!)

On a more serious note, here’s my personal take on all of this: From time to time, during the many years Express Metrix has been in business, we’ve considered the idea of investing in an analyst relationship. The “Big Three” (IDC, Forrester, and Gartner) all devote a portion of their consulting business to covering the IT asset management space, and their analysts offer clients competitive intelligence, research about current IT trends within enterprises, and insight into unique market dynamics that presumably guide a more informed market strategy and decision-making.  And let’s not overlook the potential added bonus of securing favorable treatment—or at least heightened visibility—in their vendor coverage and technology rankings.

Ultimately, I don’t know the extent to which companies are able to curry favor with analysts by becoming clients of their consulting divisions. But even if we could influence analyst coverage of our company, we continue to come to the same conclusion: Our target customers are way too savvy—and far too skeptical—to buy into the widely-coveted Analyst Endorsements. (If you doubt this, just read through the comments following Snyder’s article.) And although we occasionally get asked by larger prospective enterprise customers, for example, where we are ranked on Gartner’s Magic Quadrant (the answer: we aren’t even included in the Magic Quadrant!), when we explain that we don’t choose to invest resources in analyst relationships, people generally understand and appreciate the sentiment.

As a relatively small company in a very fragmented market, it’s a constant challenge to maintain our visibility among some of our larger, more global competitors, as well as smaller ventures funded by investors with bottomless pockets.  But we believe that our company will continue to succeed based on the strength of our own merits; after all, we’ve grown and thrived in this business for over 13 years without seeking validation from the analyst community.  And we’re darn proud of it.

Article written by Kris Barker, CEO

As co-founder and CEO of Express Metrix, Kris focuses not only on business strategy, but also leads a team of passionate developers responsible for planning and executing on the product roadmap. Kris also enjoys competitive sailing and debating the finer points related to proper use of the English language.