the umbilical. They are an integral part of the high tech landscape.
There is a lot of common ground between analyst firms and high tech
vendors. The myth in the vendor vs. analyst world is that analyst
companies predict, but do not experience, downturns. But keep in mind that
analysts are vendors too, and if they are unable to run their companies effectively,
then you will be the one who is affected. Usually, the result will be in the form of
poor research and analysts that know little about you. Not only will this downturn
affect the quality of their work, it will also impact their product offerings and their
coverage focus.
For most of the analyst firms this has not been a good year. Part of the problem has
to do with lost focus related to advising corporate America on how to use technology
as a competitive advantage. In these tough times, analyst firms will have to focus
on the more practical advisory services because that is what sells and will continue
to sell. Strategic advisory services and research will not be as popular or as
lucrative. It is time to put away the crystal balls and get practical. Some of these
firms will need to rethink their strategic positioning and product direction. And any
firms will need to rethink their strategic positioning and product direction. And any
analyst firm that doesn't trim the fat, and focus on its core competencies will face
an uncertain future.
The downturn in the fortunes of the analyst firms should come as no surprise to
anyone familiar with how closely tied the analyst community is to both corporate
America and the technology industry. The firms that will succeed in the coming
months and years are those that take this opportunity to align their core
competencies with the requirements of the market and develop a value proposition,
that differentiate themselves from their competition and that communicate a solid
return for the money spent. It is imperative for those firms that do not have the
size and resources of the "big boys" to focus their coverage on the key enabling
technologies that can offer the best return on investment to both the major
corporations and the small-to-medium business sector.
While strategic predictions are an integral part and core offering of market research
firms, those who have emphasized this type of offering have lost momentum. These
firms have touted their domain expertise and used this expertise to predict market
directions and growth rates of current and emerging technology markets. These
same firms offer strategic consulting based on these predictions. When times are
good, the vendors and the major end-users will purchase this type of market
intelligence and consulting. When the markets are down, the funds for such
information are considered discretionary and dry up. Consequently the firms that
have realigned their practices away from the practical services, the so-called nuts
and bolts offerings, have struggled to make revenue and operate at a profit.
So what does this portend for the vendor community and other users of the analyst
firms' products, subscriptions, and services? First, all of the analyst firms are
restructuring and realigning their organizations and their offerings. Consequently,
coverage areas and the various services offered are in a state of flux. This means
that it will behoove current and potential clients of said firms to keep abreast of the
changes being implemented at these firms and how they will impact both the
analyst firm/client relationship, as well as the relationships they have with specific
analysts. If the emphasis on market coverage is substantially reduced or eliminated,
a vendor should rethink the value of the relationship at contract renewal time.
Building a relationship with an industry analyst requires a considerable investment of
time and trust. It would have a significant impact on a company's market viability if
it were to deteriorate or be lost completely. There is always the possibility that,
given the staff reductions, some analysts will be given additional coverage areas
that can negatively impact and dilute their ability to thoroughly cover a specific
market. It is also conceivable that the senior analyst responsible for a particular
coverage area could be reassigned to a different coverage area altogether - and a
very junior analyst could be assigned to cover their particular market. Either
scenario should raise a red flag for vendors in this market who utilize the firm's
services. At contract renewal time, these vendors should think twice about how they
might want to structure the contract and what products/services will be cost
effective and useful.
It is also important to monitor the impact of poor financial performance on an
analyst firm's prestige and influence with both its end-user clients and the media.
Vendors rely on the analyst's visibility and influence to help them gain the exposure
and credibility needed to win market share. If an analyst firm's influence and
prestige is damaged or diluted by poor financial performance and/or a reduction of
services offered, it will negatively affect the vendor's prestige and credibility. The
economic slump everyone is currently experiencing doesn't just impact the end-user
community and the technology vendors. It affects all parties, analysts included. Be
aware of how it impacts the influencers and thought leaders in your space and you
will be better able to cope with the changes.
