The Future Of Industry Analysts In The Tech Sector

Jonny Bentwood at Edelman pointed to a recent Wall Street Journal story by Lee Gomes, which probed the opacity and subjectivity of industry analysts in the tech sector. Aberdeen Group was the poster child:

There were many excesses during the Internet bubble; one involved the Aberdeen Group, which passed itself off as a technology consulting and research operation, but which was for the most part a “pay-for-praise” operation. If you saw an Aberdeen report saying that Acme MicroMacro sold world-class solutions, you could be sure that Acme had written Aberdeen a world-class check.

Let me get this out of the way: I’ve been the recipient of Aberdeen sales pitches, a combined effort from both their sales people and analysts. They tried to sell me white-paper authoring services, as well as sponsorships for research. I have no problem with commissioned work, so long as there is complete transparency. But Aberdeen was a special case in how they sold the (”wink”) objective benefits upfront. In fact, the wink was so blatant and delivered so seriously that some of our competitors called to joke openly about it. I never considered them seriously PRECISELY for that reason. Moreover, they never convinced me on the intellectual value-add beyond our existing talent and resources — we knew what we were talking about far more than they did. It’s been about two years since I last heard from Aberdeen, so I can’t vouch for their practices today.

Now, here’s my outlook for the industry-analyst scene:

First, while industry analysts play an IMPORTANT role, and can be very helpful to companies, they’re not the final mark of authority, fact or outcome (though a few would like to think so). They tend to offer intelligent points of view on market futures, and end up one of many voices that inform and shape market perception and decision. They are part of a larger discourse. Of course, there’s a wide spectrum of integrity — and that goes for firms as well as individuals within.

The business models of all the analyst firms are being challenged. For one, similar to the news media, individual analyst voices often are becoming more important and credible than the very firms they affiliate themselves with. This will foster an industry-analyst landscape with many more, smaller players and analyst brands. This outlook is informed by my experience working at one of the most prominent, trusted industry analyst firms, as well as being a collaborator on joint research/analysis, and even a client. Some of the top industry analysts are also close friends of mine, and I’ve talked with them about this trend. Most agree.

Next, industry analysts’ share of voice has much more competition thanks to a lower barrier to publishing — ahem, BLOGS, for example! There simply are more voices of authority in the marketplace. A smart individual NOT affiliated with an analyst firm can offer analysis equally as valuable as an individual WITH an analyst firm, and the market will rate their public authority accordingly.

As alluded to above, the value of most syndicated analyst products on the publishing end (reports, databases and programming) are becoming diluted thanks to smart people who self-publish their work for free online. Additionally, digital aggregation services like Google and manual ones like eMarketer are lowering the price threshold (in many cases to free), and forcing industry analyst firms to redefine their core value proposition and subsequent monetization. They’re fighting a conflicted battle, trying to widely promote some assets while preserving others behind a walled garden.

It’s important to note the recent Web and technology boom, because it is masking the long-term challenges facing the subscription-publishing side of the analyst business, while also bolstering the lucrative events and custom-consulting services. I anticipate the custom-consulting side will grow more significantly in the long run, while the publishing side will become more of a marketing asset, or even turn into an ad-supported deliverable. Look around today: most of the best industry analysts give away massive value simply by publishing openly (again, blogs) and participating on the public speaking circuit (where value tends to get archived openly). To maintain awareness and perceived credibility, I believe industry analysts have no choice but to publish massive value openly — and increasingly so. To not be visible is to not matter — if your core value is being a currency of discourse.

But that’s where it gets tricky. To compensate and move toward higher-margin custom-consulting revenue streams — and away from the syndicated subscriptions — is to make one’s self more vulnerable to the special interests of individual, cash-in-hand masters. As a result, the bar for transparency will rise in analyst firms’ attempt to maintain their public “objective authority” personas.

Indeed, it will be interesting to see what becomes of the industry-analyst sector. I believe it has a future, but it will look much different than it does today. Most notably, its default stronghold on unquestioned “industry authority” is waning. Its contributions will remain important, and stimulate discussion, but monetary growth and relevance will hinge much more on the utility of product. That utility will lie more in professional services and not publishing. The debate about objectivity will become less relevant because the product will increasingly be proprietary client service, less so a currency of public discourse.