(Guest post by Zia Yusuf, CEO, Streetline, formerly Executive Vice President, SAP)
Over my last twelve years working as a senior executive in the technology industry I have had an opportunity to engage with a broad section of technology and IT analysts and researchers – both from established firms (eg. Gartner, Forrester etc.), smaller more focused firms (eg. Altimeter Group) and of course the more recent phenomena of the blogger/independent analyst.
For the most part the people I have encountered are smart, have a good deal of domain knowledge, are good communicators and care about providing timely and accurate analysis and advice. But with all other things, there is a bell curve, there are some people that have amazing insight and I always learn from then, there are a whole bunch in the middle that are solid and sometimes can add good value and as always there are some that really should look to do something else with their time.
This post is not about the individual analysts it is about the analyst industry.
So the issue is not the people – the issue is the structure of the industry and the inherent incentives that lead to sub-optimal analysis and advice that is tainted by accusations of “pay to play”. This is a topic that is not new, and has been discussed before. The general complaint that analysts play both side of the game, they write about vendors and the industry but then also get paid by the vendors thus tainting their advice is an old one.
The reason I thought this topic was important to revisit is because (1) there have been some structural changes to the technology industry that make the current IT analyst model seem archaic and (2) I have some specific thoughts on how we might try and reform the industry.
Why Change is Even More Relevant Today: There are several important changes that have taken place in the technology industry that will require some rethinking of the traditional IT Analyst Industry.
Lack of Defined Categories: Traditionally we have had very specific functional domain experts – the CRM expert, the BI expert etc. I don’t think customers buy in categories any more – they buy solutions that transcend software category boundaries – thus making research papers focused on these categories less relevant.
Integration of Consumer & Enterprise: This is one of the bigger changes in the industry – the “consumerization of the enterprise”. Now more than ever there is no classic enterprise software play. As such, analysis and advice based on deep enterprise background, without the latest thinking on consumer sw trends (and just focusing on social media does not cut it) misses integrating a fundamental change in the industry.
The Rise of the Consumer as the Buyer: Traditional analyst work has focused on providing insight to the CIO and associated IT teams in enterprises. Analysts spend a great deal of time with vendors and CIO – but the decision makers are increasingly the end users. We still see very little end user based research at traditional analyst firms
Not Enough Focus on Start Ups: Research coverage is still based on large and medium sized vendors. This is partly due to the influence of these vendors, partly because they can afford to pay consulting fees and therefore get more attention. The reality is that startups is where the innovation happening and there is no effective model today to provide customers the timely effective insight on the innovation taking place with smaller companies.
What Can We Do – Some Suggestions: IT/Technology Analysts can play an important part in acting as sources of unbiased and informative research and analysis. Here are some suggestions for the industry to consider.
Focus on Industry Segments not SW Categories: The buyer of software is seeking the solution to a problem. These challenges arise out of specific dynamics of an industry (eg. Retail, Banking etc.). Analyst firms should build up much stronger expertise in industry knowledge to make the advice more relevant and specific.
Rate Analysts and Firms: The financial analyst industry has it partly right (notwithstanding the failure of analysis in the financial meltdown). Equity analysts provide very specific recommendations and then based on their insight and accuracy they get a rating. Top analysts and firms get paid more and have more influence – this seems the right approach. I agree that it is marginally easier to rate the accuracy of financial analysts – but I am sure the industry can come up with a standard rating system that provides customers and consumers some insight on this topic. There are plenty of examples and methods to choose from – Yahoo even has a “Analyst Performance Center” for this purpose. This would be a great business idea for an independent firm to provide analyst ratings for IT/Industry analysts – I bet customer and vendors would buy this research.
Transparency of Relationships: This will help address the “pay to play” topic. I think specific analysts and firms should clearly make transparent their economic relationship to a vendor and this information must be attached to every report and visible on the firms website. I think the preference would be to provide the dollar amount but that is probably going to far. A more radical approach to this problem – use “Buy Side” and “Sell Side” analysts. You either work with customers only to advise them on deals etc. or you work with vendors only to write on their innovations.
Stop Using IT Lingo: I have written about this in a previous blog posting “Why Words are Killing the Adoption of Innovation” Somehow we think that the more complicated the words the more insightful and important the analysis. This could not be further from the truth. The industry would be much better placed if they focused on the clarity and simplicity of the analysis. Vendors already make it impossible to understand what they are really selling – sometimes analysts add to this confusion.
Foster Independent and Small Analyst Firms: The consolidation in the analyst industry has resulted in bigger firms with more market power – this is fine, but it should be balanced with smaller and independent firms that innovate on how they are trying to bring new research and analysis to the market. Constellation Research is a new firm that is seeking to innovate in this area and I look forward to following their progress.
These are just a few suggestions for us to consider. I am sure not everyone will agree with me and I am sure my analyst friends will have a relevant point of view based on their experience – I would welcome the feedback.
Hope this fosters some interesting discussion and “analysis” !
(Cross-posted @ The Right Question)

Nice article, Zia, and you touch on some important issues. There’s a lot more to explore here, especially how social media gives everyone a platform to be an “expert”. It’s all about credibility and trust, two intangibles that are hard to establish in a virtual world.
I’ve been an indie analyst now for 6 years (4 years prior at Frost & Sullivan), so these challenges are pretty familiar. It’s a hard road to follow, but the big analyst firms have their share of issues too. I’ve been writing about these things for a while now, and agree that focusing on startups is one of the better ways to carve out a niche.
Zia, I think your comments flow from your own experiences as a supply-side executive, needing deep insight into industry futures. That is not the mainstream customer for the analyst industry. As a result, while a niche could develop along the lines you suggest, the overall shape of the analyst industry will change as much over the next decade as it did over the last. The existing business model of the analyst firms is far from broken, as can be seen by the rocketing share price of Gartner and the strong M&A market.