Oxford insight on how social media anticipates analyst trends

Impact of social media is overestimated in the short-term and overestimated in the long-term: what was the message from the Oxford Social Media Conference last week. I was lucky to be invited to the event, held at its Said Business School. Thinking over the day, and especially comments by Richard Sambrook, I think the four key trends he outlined that have impacted the traditional news media will also start to impact the analysts.

  1. Experts don’t own the opinion any more. There’s a big power shift and cultural opportunity in the public media. It’s not been very helpful to talk about citizen journalism because is a catch-all term to describe a range of roles: eyewitness, submissions from views are more easily integrated and absorbed into the media process, as case studies and ‘vox pops’ can be integrated into analysts’ research. But that’s one aspect. The discussion on twitter and other social media is also starting to integrate into the research process of some analysts (especially those working on social media or in North America), and it can be an active way of working in the user perspective for analysts with few end-user clients – as phone-ins have been for radio stations without reporting resources. Social media are not integrated so well into the media [an exception is the BBC's ‘World have your say’]. But social media is where news is broken because there’s so little news about it other than fabricated stories pushed by PRs. Social media are also real story areas: few papers have a Twitter correspondent. In this respect, the analyst community is ahead of the media: little work is being done by the media to source news from the internet, let alone the other genres.  There’s a number of analysts that do work in this way (we have a controversial early insight into this, which we called ‘crowd surfing’), and Redmonk certainly springs to mind. In the media there is now the notion of ‘network journalism’ which uses the audiences’ insights to develop. Little work being done there by journalists. But there’s one aspect where analysts continue to struggle: The audience knows more than the writer: how can analysts tap that insight?
  2. Transparency is the new objectivity. The trust in higher-quality journalism comes from transparency. There’s little transparency about research methods at some firms, especially vendor-funded firms where the topics under investigation are largely determined by vendors. Accuracy and fairness means showing how analysts made their choices. There’s often issues about how analysts made the judgements, and how they work. Gartner is leading, I think, in reflecting the media trend towards editor’s blogs, readers’ editors, access blogs (like the NNC’s Newswatch): all these developments need to go further in the analyst community.
  3. Information is not insight. Evangelists increasingly get their news from Twitter: gossip, links, marketing, campaigning, discussion… but there’s neither analysis not journalism there because that needs verification, accuracy, explanation, judgement and context. There’s exponentially more information; good analysis and journalism does something with that base data. So that means that the growth of social media should lead to more need for analysis, not less. The value of analyst organisations is in that processing of information. It’s hard for to journalists monetize it, but analysts have an edge.
  4. If you find yourself in competition with the internet, find a way out. The basic culture – link culture and open borders – will probably continue. Perhaps commercial or government borders will be erected to hamper the flow of information. But if you value if being provided also by the Internet then that’s a business to either get out of, or use only as a way to sell something else.

The basis of how the media gather news is changing. Increasingly firms are build a network to share the work needed to source information and gather news. The same approach essential for analyst firms who want to provide a better customer experience by pooling the effort needed to gather information (something which PAC, Springboard, Datamonitor and Experton seem to be leading on).

Is scale a comparative advantage?

With 650 analysts, Gartner has the largest research team of any analyst firm. Of course, only a minority can be of above-average importance. A correspondent of mine suggests that even if the number of analysts at Gartner is high, it’s more important to track the number of seasoned analysts.

The argument is this: “After eliminating all of the “analysts” in “Measurement” and Dataquest the number is probably close to 450. If you define an analyst as someone who writes, speaks, and interacts with clients: the number of client-facing analysts at Gartner is closer to 250. The business issue for Gartner is that their top producers (in terms of written reports, and client engagements) are getting old and tired. Gartner should be building up the ranks of analysts instead of allowing attrition.”

This suggests that the key challenge for analyst firms is to develop and retain top research analysts. That is sometimes true, but sometimes it is not.

One factor is that analyst expertise has never been easier to source. For example, one of the META Group diaspora – Experton Group – has about 20 advisors. It’s plugged into a wider network called Experture which includes former META analysts like Rich Evans, David Folger, Jack Gold, Doug Lynn, Liz Roche and Craig Roth. It’s very easy for ex-META people to work together: they have predictably similar methods, values and common experience. They also know they can trust each others strengths and anticipate each others’ weaknesses. Although it has a fixed core around the same size as Experton, Experture has a “bench strength” of 200 on tap through its roster of adjunct associates. Experton also works with Evalueserve, the 800-strong offshore research group which purchased The Strategis Group (Indeed, many of the other major research firms also work with Evalueserve, but more quietly).

Furthermore, there are other trends that make raw analyst research more of a commodity, including vendors’ reprints and free research outlets like IT-Analysis.com.

However, on one aspect my correspondent is deeply correct: the valuable expertise is in people who can interpret the research and apply it to client problems. This is tricky work, and difficult to both staff and scale: trusted advisors reply on strong domain expertise and need astonishing questioning skills and cross-cultural savvy. These people are hard to find and harder to grow in the tough love atmosphere in many analyst houses. However, these advisors can cold clients problems and push clients towards confident and correct choices. That is worth paying money for.

Of course, few analyst firms are able to focus on that. It’s hard to sell, and hard to scale profitably. There’s some speculations, for example, that Gartner might be better off without its consulting business. We strongly doubt that, but we have to admit that it’s a question of judgment.

However, the reinforces our feeling that the critical success factor for most analyst firms is account management: if sales and operations are tied into meeting clients’ needs, and really adding value, then the volume of the research base is less relevant. Gartner’s scale gives it advantage, but that advantage isn’t rooted in the fact that it has top research producers on its books. The strength of these top analysts is that they know how to listen, question, coach and mentor CIOs. It possibly doesn’t matter if these people wrote all the research, or if they simply leverage it. It could work better either way, depending on the firm and on the advisor.

All of that suggests that “domain expertise” (that’s what non-analysts call “experience”) becomes a little less important, and that soft skills all become more important. Perhaps that’s bad news for analysts, but it’s good news for analyst firms and their clients.

Nevertheless, none of this means that scale is not a factor. At the smaller analyst firms, selling is done by analysts who focus on their own expertise. At the larger analyst firms, selling is done by salespeople who are able to start from each client’s particular problems and try to solve those problems. Of course, selling solutions is difficult at some firms because management and analysts conspire to force salespeople and account managers to focus on research volumes and off-the-shelf services rather than on more valuable offers. The commodification of research, however, will punish firms using those outdated strategies.

The next few years will clearly show that it’s not scale that gives analyst firms their advantage. Analyst firms will flourish only if they start to prove they can really help their clients to unlock greater value in their businesses.

Experton reels in more ex-META leaders

More former META executives are popping up at Experton Group. Former META Group Geschäftsführer Jürgen Brettel is now listed on the firm’s web site as its Chief Executive Officer, while former META Vice-President Rüdiger Spies has joined the firm’s advisory team as a partner.

Experton’s strategy is is the subject of wide-ranging discussion [not the least here], especially as their alliance with US name-sake Experture and the global offshore research firm Evalueserve deepen.

Praxmarer, Schmeiler and Bachmann join Experton

Experton Group LLC has a new CEO: Luis Praxmarer, one of the key figures in the German IT market. Luis was formerly led META Group’s EMEA business, and owned and founded META Group Germany, which was acquired by Gartner in spring 2005. Praxmarer will be CEO of Experton Group LLC in USA and Dubai and will lead Experton’s global research business. He has bought a major stake in the business, becoming one of three key shareholders.

Two more coworkers strengthened Experton Group today, both from TechConsult.

In Research and Consulting Frank Schmeiler has joined, while Nils Bachmann, a key account manager, has also joined. This gives the Munich-based firm more than 25 coworkers in Germany.

Experton Group launches Investment Advisory service

Experton has pinched former TechConsult analyst Carlo Velten to start an Investment Advisory service for holding companies and IT enterprises.

Velten is an investment specialist who will be Experton’s senior advisor responsible for the development of Investment Advisory services. Experton Group will offer professional support with transactions in the IT market to holding companies, investment banks and strategic investors.

After a fundamental slow-down in investment transactions in the European IT market during 2001-2002, a new momentum is rising. Since January this year approximately 900 transactions and 25 IPOs of IT enterprises have taken place on European stock exchanges. The engine for this dynamic is the private equity and venture capital industry, which is under high and systematic pressure to maintain high returns in a softening market.

Last year European holding company acquisitions totalled around 27.5 billion euro, which reflects strengthening interest in companies from the IT-and telecommunications markets. Additionally US enterprises aim more at the European market since there are innovators here, and even market leaders in some segments. The prime example is the assumption of Skype by eBay. Furthermore, large IT enterprises are returning to strategic investments in growth segment companies. On the other side of the table, some ‘parents’ are actively marketing their IT ‘daughters’, e.g. ThyssenKrupp’s Triaton and SBS from Siemens.

Experton Group seems to have made a wise hire with Carlo Velten, who understands both the investor’s needs and the entrepreneur’s interests. Velten has several years professional experience in the IT market study and consultation. Since joining TechConsult in 1998, he has consulted to some renowned IT companies, handling all research and consulting activities about Linux and open source as well as researching a wide range of ebusiness and emerging technologies. Carlo is also a visiting lecturer in entrepreneurship and technology market research at the University of Kassel, where he studied for his masters diploma in economics.

P.S. Carlo is even busier than I thought. It seems that he is also a doctoral candidate at Kassel, researching venture capital.