Analyst Perspectives

Gartner’s Hype Cycle Indicators

You’ve probably heard about Gartner Hype Cycle – but do you know what it is? Check out this chart that shows the Hype Cycle Indicators.

Saving money on your Gartner and Forrester contracts is a year round activity

SageCircle reports in its blog that it is “handling more and more client inquiries about how to reduce the cost of Forrester and Gartner contracts. One aspect jumps out: too many purchasing managers (e.g., AR, market research, or procurement.) focus on managing costs mainly at contract renewal time. The reality is that saving money needs to be a focus each month of the contract, both to manage incremental spending but to also set the stage for the next contract renewal.”

The post goes on to comment on the sales tactics being used by the “Big Two” account teams:

“What many vendors do not recognize sufficiently is that the Big Two account teams are scouring the vendors for additional budgets to tap with a sale of an Advisory seat here or some Service Units there. In some cases, the incremental purchases can easily add up 50% of the original contract. This can be very wasteful if the individual doing the purchasing does not how to be a good research consumer (very likely), does not use the resource after the initial couple of weeks (more likely) or buys something this already available in other parts of the company (regrettably likely). Because there is rarely a line item in the chart of accounts for analyst services, it can be very difficult to track these purchases.”

Use this link to read the entire post.

Outsell Sees Buyers Decrease 2009 Budgets and Value Perception of Research & Advisory Services

Louise Garnett, Outsell Vice President & Lead Analyst made the following statement in a recent Outsell Insights newsletter:

“IT and Telecom research firms like Gartner, Forrester and IDC as well as 400+ other firms are heavily reliant on the research and advisory business model. This year's research shows a dramatic downward shift in budgets but more importantly a significant decrease in the perception of the value of these services. Outsell believes it is somewhat a knee jerk reaction by the buyers given the current economic turbulence, but also cautions vendors of these type of services to be particularly careful with price increases and/or diminishing the value of coverage.”

What are you seeing at your company? Are you cutting budgets (or have you already reduced budgets) for analyst research and advisory services? What do you think about the value of research and advisory services? Are you looking for alternate sources of research and advice – and if so, what are you considering? Please post your comments below.

Using analysts to cover your *!#

The Analystanalyst’s blog has an interesting thread going on how some decision makers use analysts to “cover their *!#s”. The blog cites a case where a potential customer would not make a purchase decision without having Gartner’s blessing, despite the fact that the potential customer’s technical people had done an extensive in-house evaluation of potential products.

Unfortunately, this seems to be the case in many companies. I experienced this first hand many years ago when I was a Program Director at IBM Global Services. I had the opportunity to work on several new business presentations to Lou Gerstner, the CEO of IBM at the time. When working on the presentation, we were told in no uncertain terms that we should not even bother bringing a proposal to Gerstner without including a slide with Gartner’s view on the opportunity. It was amazing that at a company with over 100,000 talented employees, many of them working full-time at evaluating markets and opportunities, that a decision couldn’t be made without Gartner’s blessing!

There are correct, valuable ways to use analysts, and then there are dumb ways to use analysts. I think that analysts serve a valuable service to the markets, but using them to cover your *!# when making a purchase decision seems like a foolish use of analysts. I believe it’s important to get the opinions of the best analysts at multiple analyst firms that are the experts in your business or in the problem area you are working on. Gartner and the other big analyst firms are not always the best ones for your needs, so spend some time looking for the best talent, and then learn what they have to say and ask them pointed questions about your business’ unique needs. Engage early, often, and with multiple analysts, then make the decision that is right for your company without using them as a crutch.

As the Analystanalyst blog points out, there used to be a saying that “nobody ever gets fired for buying IBM”, but maybe now it should be “nobody ever gets fired if Gartner says it’s okay”…

Forrester Acquires JupiterResearch

In case you missed it, last week Forrester announced it was acquiring Jupiter Research. To read the press release from Forrester, use this link:

http://www.forrester.com/ER/Press/Release/0,1769,1220,00.html

Forrester is buying the firm for $23 million in cash plus assumed liabilities, subject to post-closing adjustments, in a strategic purchase that complements Forrester's syndicated business model. JupiterResearch has 82 employees and 2007 revenues of approximately $14 million. Forrester, with 2007 revenues of $212 million, now has more than 1,000 employees. JupiterResearch joins Forrester's Marketing & Strategy Client Group, which contributed $46.4 million to Forrester's total revenue in 2007.

George Colony, Forrester’s CEO, posted an open letter on the Forrester web site announcing the deal. Here’s what George had to say: “I wanted to give you a heads up on Forrester's acquisition of JupiterResearch that we announced this morning. JupiterResearch, based in New York City with offices in San Francisco, London, and Paris, has long been helping companies understand and profit from the impact of the Internet. It has a rich heritage and a full set of research offerings that will bring value to the Marketing & Strategy roles that Forrester serves. We are very happy to be welcoming JupiterResearch into the Forrester family — and we feel confident that this acquisition will result in even greater value for Forrester's clients.”

The Forrester Blog for Interactive Marketing Professionals also has a post praising the acquisition and the quality of the researchers that Forrester is getting from Jupiter. To read their blog post, use this link:

http://blogs.forrester.com/marketing/2008/07/forrester-buys.html

We think this is a good move for Forrester, and it should help provide some extra sales and marketing muscle to JupiterResearch. What do you think of the deal? Post your observations here!

Forrester Research Reports Fourth-Quarter and Full-Year 2007 Financial Results

Forrester Research, Inc. (NASDAQ: FORR) today announced its fourth quarter and year ended December 31, 2007 financial results.

Fourth-Quarter Financial Performance

-- Total revenues were $58.4 million, compared with $48.9 million for the fourth quarter of last year.

-- On a GAAP-reported basis, Forrester reported net income of $5.6 million or $0.24 per diluted share, compared with net income of $6.2 million, or $0.26 per diluted share, for the same period last year.

-- On a pro forma basis, net income was $8.7 million, or $0.37 per diluted share, for the fourth quarter of 2007, which excludes non-cash stock-based compensation expense of $2.6 million, amortization of $254,000 of acquisition-related intangible assets, net marketable and non-marketable investment gains of $671,000 and expenses related to the previously reported stock option investigation and restatement of the Company's historical financial statements of $954,000 and which reflects a pro forma effective tax rate of 39 percent. This compares with pro forma net income of $7.5 million, or $0.31 per diluted share, for the same period in 2006, which excludes non-cash stock-based compensation expense of $2.0 million, amortization of $462,000 of acquisition-related intangible assets, net non-marketable investment gains of $43,000 and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $668,000 and which reflects a pro forma effective tax rate of 37 percent.

Year Ended December 31, 2007 Financial Performance

-- Total revenues were $212.1 million, compared with $181.5 million for the same period last year. Revenues related to the Ultimate Consumer Panel business, which was sold during the third quarter of 2006, are not included in revenues but are included as a component of income from discontinued operations for 2006.

-- On a GAAP-reported basis, Forrester reported net income of $18.9 million, or $0.80 per diluted share, for the year ended December 31, 2007, compared with net income of $17.8 million, or $0.77 per diluted share, for the same period last year.

-- On a pro forma basis, net income was $27.6 million, or $1.16 per diluted share, for the year ended December 31, 2007, which excludes non-cash stock-based compensation expense of $8.3 million, amortization of $1.2 million of acquisition-related intangible assets, net marketable and non-marketable investment impairments of $1.0 million and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $4.6 million and which reflects a pro forma effective tax rate of 39 percent. This compares with pro forma net income of $22.5 million, or $0.98 per diluted share, for the same period last year, which excludes non-cash stock-based compensation expense of $7.2 million, amortization of $2.1 million of acquisition-related intangible assets, a net gain from the sale of discontinued operations of $1.4 million, $300,000 of net income from discontinued operations, net non-marketable investment gains of $348,000 and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $668,000 and which reflects a pro forma effective tax rate of 37 percent.

To read the entire financial release, use this link:

http://phx.corporate-ir.net/phoenix.zhtml?c=60569&p=irol-newsArticle&ID=1105003

Gartner Reports Financial Results for Fourth Quarter and Full Year 2007

Fourth Quarter 2007 Results

Contract value, a key leading indicator for Gartner's Research segment, increased 18% year-over-year to a record level of $752.5 million, reflecting the successful execution of the Company's strategy to accelerate research growth. Total revenue for fourth quarter 2007 grew 15% year-over-year to $348.4 million, driven by strong, double-digit growth in the Company's Research and Consulting businesses and modest growth in its Events business. Excluding the impact of foreign exchange, research contract value and total revenue increased 14% and 10%, respectively.

For fourth quarter 2007, GAAP EPS increased 85% year-over-year to $0.37, net income increased 72% year-over-year to $38.8 million and Normalized EBITDA increased 53% year-over-year to $80.0 million.

Full Year 2007 Results

Total revenue for full year 2007 grew 12% to $1.189 billion, driven by growth in all three of Gartner's business segments. Excluding the impact of foreign exchange, total revenue increased 9%.

Full year 2007 GAAP EPS increased 36% year-over-year to $0.68, net income increased 26% year-over-year to $73.6 million and Normalized EBITDA increased 25% year-over-year to $194.1 million. Net income and GAAP EPS include charges and non-operating items totaling ($7.2) million, pretax, or ($0.04) per share, net of tax, which were previously reported in the Company's second quarter 2007 financial results.

To read the entire financial release, use this link:

http://investor.gartner.com/phoenix.zhtml?c=99568&p=irol-newsArticle&ID=1105491

To listen to a recording of Gartner’s earnings call, use this link:

http://investor.gartner.com/phoenix.zhtml?c=99568&p=irol-irhome

To view Gartner’s latest investor presentation, use this link:

http://library.corporate-ir.net/library/99/995/99568/items/260657/February_2008_Investor_Presentation.pdf

New AR Firm Launched – SageCircle

Carter Lusher and Dave Eckert are re-launching a firm that provides AR training and advisory services. The re-launched firm is called SageCircle™ and is located in Bay Area. The following is from an email I received from Carter that he asked me to pass on to Analyst Perspective readers. We look forward to following SageCircle’s progress and we encourage you to take a look to see what they are up to.

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SageCircle will ruthlessly focus on business outcomes versus activities (e.g., looking at using analysts to drive revenues and build brand value). We will help clients, from startups to global enterprises, rapidly identify and resolve critical business issues concerning the IT analysts, while providing a foundation for continuous improvement. Our services will include training (public seminars, webinars and in-house), advisory (annual retainer and blocks of two or five hours), and consulting.

There is going to be a SageCircle: Hot Topics evening event on Monday, January 28th at 6:30 pm at the Cupertino Inn just off 280 at the De Anza Boulevard exit. The AR best practices portion will be a “Case Study on Corporate AR and PR Collaboration.” The case study will focus on a sensitive announcement and how analysts were key advisors to the preparation. Noted independent analyst Rob Enderle and former HP AR manager Dave Eckert will discuss how the analysts provided valuable insights to executives as well as the PR and AR teams. The panel will discuss the use of non-disclosure to gain analyst insight, issues dealing with internal groups such as legal, the timing of press and analyst briefings, and the lessons learned. Wine, beer and appetizers will be provided. Tickets are $10 and attendees must register in advance on the SageCircle: Hot Topics Check back soon to hear about our other upcoming events.

The SageCircle blog has been launched with content that will be of interest to many constituencies that interact with the analysts - from AR to market intelligence to vendor sales to PR to others. The blog replaces the e-mail “IT Analyst Updates” I have been sending out since leaving HP. There will be frequent postings so I suggest adding this blog to your RSS feed.

We also want to let you know that we have a training seminar scheduled. The SageCircle AR Effectiveness Seminar will be held from 12 - 5 pm Monday, January 28th continuing 8-12 pm Tuesday, January 29th. The seminar is a great choice for new AR staff needing a solid skills foundation and for experienced AR pros wanting a refresher. The instructors are sages with decades of experience in the analyst game. Tickets are $995 and include the evening event with case study presentation and networking. Visit the seminar page to see the complete agenda and to register.

Research request. As part of my work to expand the boundaries of AR best practices and tools I am experimenting with several Web 2.0 technologies such as social networks and microblogging (see my signature block below for the various addresses). I encourage you to connect with me via LinkedIn and Facebook. I especially want to encourage you to sign up for Twitter and become a “follower” of my microblogging. Starting on Thursday the 13th, I will be microblogging observations on the analysts as well as asking questions of the AR community so I would appreciate your feedback on the the convenience, content and usefulness of Twitter. A favor – please forward this information far and wide, inside and outside your companies. One of the goals of SageCircle is to build a community of people who interact with the analysts -- whether as AR, market intelligence, spokespeople, IT managers, investors, reporters or others – to share experiences and commentary about the analysts and their research.

Please give me or Dave (831-430-9051) a call with any questions about SageCircle or the events. Thanks for taking the time to read this e-mail. 

Cheers and Happy Holidays, -carter j

carter@sagecircle.com

Outsell Reports That IDC Is Growing Vertically Through Insights Product Line

IDC is the second largest IT research company in the world. Its Insights product line is growing fast, covering six vertical sectors (Energy, Financial Services, Government, Health, Manufacturing, and Retail) as well as the horizontal IT Management Service. Launched over time since 2005, these services are designed to provide information about the space where IT meets business, for CIOs and IT professionals. IDC has invested around $40 million into this product line.

To learn more about Outsell’s Report on IDC (priced at $495), use this link:

http://www.outsellinc.com/store/products/535

Outsell’s Information Industry Outlook 2008

In this report, Outsell forecasts steady and moderate growth for the information industry from 2007 to 2010, with performance varying among segments, and predicts that successful companies will be agile and adaptive solutions providers. The report summarizes metrics and trends for 11 vertical information industry segments and key customer groups that fuel the $362 billion information industry.

To learn more about this report (priced at $895), use this link:

http://www.outsellinc.com/store/products/527