The black hole of industry analysts… SMB

08Aug07

For many years I have complained that the major analyst firms do not take the SMB market seriously. They have little inclination to put the necessary resources behind what is undoubtedly a very tough market and give solid advice.

When Dale Vile at Freeform Dynamics conducted on online survey with The Register, I think he may have found the reason why. What’s more, the data that he has captured fundamentally changes what the perceived impact of Tier 2 analysts are.

I should point out at this stage that Dale sent me his findings from his barometer study (complete with raw data) and allowed me to make any conclusions I see fit. This study was largely UK/US with 500 corporate respondents, 500 mid-market and 900 SMB.

What I like particularly about this research is that it provides some metrics behind what many people have previously ‘knew’ but without having any substantial facts to back this up.

The first conclusion is that in small and mid-market companies, the head of IT controls the purse strings.

Not a massive shock I understand but if you take into consideration a further point regarding access to analyst research, you can make some interesting deductions.

What does this show?

IT Managers in small and mid-market size companies, who largely control the decision making, have virtually no access to analyst research.

This is quite startling for two reasons.

Firstly, it shows that customers of Gartner, IDC and Forrester etc. are not maximising their use of their subscriptions. The statistics show that only 60% of the IT management within organisations that subscribe have access to the research – let alone all the practitioners who are also involved in the decision making. My message to companies that do subscribe is ‘make good use of your research and send it throughout your organisation’.

Perhaps the most important conclusion is that two thirds of IT managers in the corporate sector don’t have access to big analyst firm research so are relying on other information sources to keep them informed and help them with decision making. It is this point that brings me back to my initial rant.

Small and mid-market companies have no access to ‘Tier 1 analysts’ so use online methods to help them make a decision. Analyst houses that give away their research online (e.g. Quocirca, Freeform Dynamics), get it republished through online channels (e.g. Freeform Dynamics, MWD), use social media effectively (e.g. RedMonk’s use of blogs and twitter) or are regularly quoted in the media (e.g. Dean Bubley) hit these people and influence their decision making.

The SMB market spends a huge amount of money each year but large companies cannot expect them to subscribe. What the smaller firms have realised is that the route to these firms is via the channels they are influenced through already. These smaller ‘Tier 2’ firms are routinely dismissed by some vendors as not being important – no doubt because they are viewed as being unable to influence enterprise buying. Without going into this argument again, I believe that this evidence gives extra weight as to why it is important for companies to work with Tier 2 analyst houses if only to understand how to hit the SMB market.

Personally I can think of $4oo billion reasons why analyst houses should pay a bit more attention to the SMB market.

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10 Responses to “The black hole of industry analysts… SMB”

  1. SME(s) and middle manager dont have access to subscription based service or dont have time to see long reports. perhaps a free decision making tool with 360 view can assist them better?

  2. good article .. raise very important questions — if sme(s) anf middle manager have no access or no time to see subscription based analysis then who will give them 360 view???

  3. spot on mate — very good analysis.

  4. I lost your trail after “likes of Gartner, Forrester, or IDC”? Are they accessing the free content available from the “big 3” companies?

    Did the survey show that MBs and SMBs are using the smaller research houses you mention? What supporting data do you have?

  5. Hi Barbara

    The survey did not look at the questions you ask as its main purpose was to understand the broad landscape of current initiatives and commitments to different technology and business areas among the IT buying and using community. We just threw the analyst subscription question in there as so many people, AR pros included, seemed not to have this information – i.e. any view of where subscription services are actually being used. As I said to Jonny, this isn’t the definitive research study on the topic, but the contrasts it throws up are so marked, and the sample size large enough, for this to be taken as a reasonably good indicator of the general picture.

    I won’t comment on Jonny’s interpretation of the data directly, but the thoughts that occurred to me were that Gartner et al are obviously highly successful businesses operating in a strong market and have achieved superb (and very enviable) penetration. Their focus (presumably on premium margin accounts), however, still leaves a lot of space that subscription services don’t touch, so other sources are clearly being relied on for decision making purposes.

    We have conducted research into which information sources are used in different segments and among different professional groups on behalf of various clients on numerous occasions, so this is a topic we are very familiar with. I cannot share this data directly, but in general terms, online news and information sites typically figure as one of the top three most used sources of information for decision making purposes. This is the category into which public facing Tier 2 analyst content often fits.

    Against this background, I’ll share some insights with you from our own impact analysis. We can easily reach between 10,000 and 40,000 IT professionals with a research and analysis piece on some major news sites over the course of a couple of days, and a six figure audience with a running programme or series of linked deliverables. The average consumer of this stuff, however, tends to think of it more as premium content from the news site itself, rather than “research” or “analysis” by an analyst firm.

    We actually think this is a huge strength, as our material (and that from many other Tier 2 firms) is being consumed as part of the daily diet of news and information, which makes it much more natural and palatable. Of course the way you present research and analysis is often a little different to the traditional analyst output formats when using these media, e.g. you tend to reach far more people if you write as a “well informed peer” rather than preaching as a superior analyst being, but the quality, depth of insight and objectivity that separates analyst from journalist output is still there in the substance.

    The upshot is, however, that if you ask about “Industry Analysts” or “Analyst Research” in surveys, you miss most of the Tier 2 activity because the online media context means people don’t explicitly think of a lot of our output in that way. If there is any doubt we are reaching people though, happy to share some example stats with people offline.

    Anyway, I know the phenomenon I have been discussing is confusing things in AR circles quite a bit – some even deny that it is legitimate to think of reach through mass media and social media as representing analyst influence. We don’t particularly care that much to be honest – to us, it is influence that matters, not how it is categorised, and as I said before, I think the Tier 2 long tail reaches a lot of decision makers that would either not have access to or not even think of looking for traditional analyst reports.

    One last thought. IT vendors are often thought of as important and trusted sources of information to help with decision making (really!), so, product review “puff pieces” to one side, it is important not to dismiss the influence of commissioned white papers and other educational and advisory material that Tier 2 analysts often author on behalf of vendors. We do less of this kind of thing ourselves (though a lot of our best practice oriented community research is sponsored), but if you are a big IBM site, then you will take an MWD report on how to get started with SOA very seriously when IBM makes this available to you.

    I would be interested in your own views Barbara – and obviously any others – as we are all learning at the moment in this rapidly changing influencer domain. What we are doing at the moment seems to be working and complementing the activities of the larger more traditional analyst firms pretty well, but we all need to keep moving with the times.

  6. Dale,

    I was hoping Jonny had some research on the use or awareness of smaller industry analysts (other than subscribers to Gartner, Forrester, etc), especially from among Reg readers. Thanks for sharing interesting data and observations.

    I’d like to add my take one of the points you raised — on the markets that the big 4 — CEB, Gartner, Forrester and IDC — leave on the table. If I understand you, you’re talking about mid-sized IT decision-maker markets. I agree that there’s tremendous growth opportunity there. But, as they would say in New England, most analyst firms can’t get there from here.

    Winning in the mid-market means adopting a business model far different than the tried and true analyst formula — i.e., delivering niche services to a handful of the Fortune 500, year after year. In the mid-market, the margins are much lower, and the customer churn/renewal rates are less predictable.

    Several younger companies are attacking this market with new business models, mostly with mixed results. Everyone else seems to be watching from the sidelines for the first big run-away success stories.

    Whatever happens, the analyst ecosystem has been in place for a long time. As you said, keeping up with the times is vital.

  7. I really appreciate your observations on media penetration/influence and the “tier 2 analysts”. There’s genuine upside in these media relationships for analysts — as you said, reaching 10K+ readers in a day is powerful.

    FWIW, I don’t buy into “tier 1, tier 2” pecking orders. I have no idea which lunatic got everyone questioning the power of analyst influence via the media, be it traditional, the read/write web, or the writing on the bathroom wall.

    Unlike you, I find cold comfort in the increasingly blurry lines in the trade press between editorial staff, analysts, and other content providers. I have trouble spotting analyst columns and blogs and online “community” leaders from editorial staff and other contributors, and — well, I’m looking for it. Me and your Mum, we care. Who else does?

    Too many analysts are bartering away their brand identity in exchange for online exposure. This is downright idiotic from a marketing/PR standpoint. If this continues, it will put the entire analyst community at risk — either by ceding share of the influencer role to the media, or by setting a very low market price for analyst content among online publishers.

    Dale, I’m not whaling on you. If anything, you’re like one of those Extreme Sports guys — you make the near-impossible feats look easy…


  1. 1 People Over Process » links for 2007-08-28
  2. 2 Keeping Tabs » Blog Archive » When the medium becomes the message
  3. 3 James Governor’s Monkchips » Carter and The Devil in the Detail: a mammal’s eye view of industry analysts

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