The same social community models you use on Facebook and Twitter are at work in the world of technology and business research, breaking down barriers between you and research providers, driving new business models and new forms of information sharing.
You can use Amazon and a credit card to buy and deploy business technology faster than you can get it from your IT department. The same consumerization effect has come to research; there is a lot you can access directly, without any need of IT and their contract with Gartner or Forrester. Both effects are changing the way research is bought and sold.
For most people in business, this is good news, with one exception; if you’re a CIO seeing your clients in the business disintermediate IT altogether in their search for technology information, this may be cause for alarm. If you’re Gartner, Forrester, or IDC, it could have implications for your business model itself and the traditional clientele who have driven your success.
In fact, the whole process of information gathering is changing. The very means of finding and sharing expertise is different than it was even 5 years ago. At the same time, the areas where businesses seek expertise are changing as well, as some technologies mature and others are in states of rapid change.
I’ve spent several months talking with people who have been in traditional research roles and are now leading emerging models for research. This is the first of three articles on research in the era of you.
The sources:
Tech research is big business
Doing business better by knowing more is hardly a new idea. Enterprises need information, and companies have grown up to supply research on business and technology. It is a big business unto itself. There is a lot of information for sale: product and vendor comparisons, market share reports, best practice recommendations, advice on emerging technologies and business trends, facilitated peer groups, strategy coaching. Within the big research firms there are benchmarking services, contract negotiating services, conference and seminar divisions.
If you are a research buyer, one thing is not immediately obvious: the research companies also sell a lot of research back to the companies they cover, especially market and purchasing trends.
If you are a vendor mentioned in a product review, especially a favorable one, you will pay handsomely for reprint and distribution rights. This leads to an uneasy symbiosis between those who sell research and those who sell goods and services covered by that research. They need each other, and the success of the relationship hinges in large part on consumers’ continued belief that there is no “pay-for-play,” the ability of a vendor to buy favorable coverage by buying research products.
The research business also supports a shadow business within the tech companies: analyst relations. AR is a branch of public relations devoted strictly to the analyst community, and to the management of the message sent about tech products and services. However, there appears to be little coverage of research as a business. Richardson said, “In 20 years at AMR, I don’t think we ever got profiled as a company. Nobody ever came in and asked about what we were doing.”
In fact, Infrics' research coverage has the highest readership of any topic; the comparison of Gartner, Forrester, and IDC is the most read article since Infrics.com went live in mid-2011. You can read it here:
Evaluating research companies: Gartner, Forrester, and IDC
You can use Amazon and a credit card to buy and deploy business technology faster than you can get it from your IT department. The same consumerization effect has come to research; there is a lot you can access directly, without any need of IT and their contract with Gartner or Forrester. Both effects are changing the way research is bought and sold.
For most people in business, this is good news, with one exception; if you’re a CIO seeing your clients in the business disintermediate IT altogether in their search for technology information, this may be cause for alarm. If you’re Gartner, Forrester, or IDC, it could have implications for your business model itself and the traditional clientele who have driven your success.
In fact, the whole process of information gathering is changing. The very means of finding and sharing expertise is different than it was even 5 years ago. At the same time, the areas where businesses seek expertise are changing as well, as some technologies mature and others are in states of rapid change.
I’ve spent several months talking with people who have been in traditional research roles and are now leading emerging models for research. This is the first of three articles on research in the era of you.
- Bruce Richardson, former Chief Research Officer of American Manufacturing Research (AMR, was acquired by Gartner at the end of 2009.) He is now Chief Enterprise Strategist at Salesforce.com
- Charlene Li, bestselling author (Open Leadership,) former analyst at Forrester Research, now founder and partner at Altimeter Research in San Mateo, CA.
- Lora Cecere, one of the most respected supply chain analysts in the world, who founded her own practice, Supply Chain Insights. Cecere led supply chain research at AMR until it was acquired by Gartner. She has also worked in private industry and as a Gartner analyst.
Tech research is big business
Doing business better by knowing more is hardly a new idea. Enterprises need information, and companies have grown up to supply research on business and technology. It is a big business unto itself. There is a lot of information for sale: product and vendor comparisons, market share reports, best practice recommendations, advice on emerging technologies and business trends, facilitated peer groups, strategy coaching. Within the big research firms there are benchmarking services, contract negotiating services, conference and seminar divisions.
If you are a research buyer, one thing is not immediately obvious: the research companies also sell a lot of research back to the companies they cover, especially market and purchasing trends.
If you are a vendor mentioned in a product review, especially a favorable one, you will pay handsomely for reprint and distribution rights. This leads to an uneasy symbiosis between those who sell research and those who sell goods and services covered by that research. They need each other, and the success of the relationship hinges in large part on consumers’ continued belief that there is no “pay-for-play,” the ability of a vendor to buy favorable coverage by buying research products.
The research business also supports a shadow business within the tech companies: analyst relations. AR is a branch of public relations devoted strictly to the analyst community, and to the management of the message sent about tech products and services. However, there appears to be little coverage of research as a business. Richardson said, “In 20 years at AMR, I don’t think we ever got profiled as a company. Nobody ever came in and asked about what we were doing.”
In fact, Infrics' research coverage has the highest readership of any topic; the comparison of Gartner, Forrester, and IDC is the most read article since Infrics.com went live in mid-2011. You can read it here:
Evaluating research companies: Gartner, Forrester, and IDC
I estimate the combined annual revenues of the top players in enterprise research to be in the $2 billion range.
The research landscape is changing
It’s not just new community models that have changed things; the very business topics that once fed millions of dollars of research spend are in flux as well. Here are four things that change what tech research means, and how you use it:
Social
When it comes to research, social networks and social business have broken down barriers between those who have and those who want. Our online social world enables frictionless creation of communities, low inertia in-and-out flow of information, and ease of access to subject matter experts. Lora Cecere has over 3000 followers on Twitter, to whom she can broadcast updates in real time and at no cost. She also gains a research resource of her own. Compared with the old days within a big research company, which would assemble research panels, Cecere said, “now, I’ve got 3,000 people on the other end...and I use people I know for research panels. It’s much more valuable than buying it, and we have accessibility to do that through social media.”
Unlike traditional research models which were primarily a one-to-many publication approach, Cecere can use social tools to work with clients and sources in a different way. “What I have tried to do is build a many-to-many model through my community,” she explained, which allows a different kind of value. “The model is changing from a one-to-one to a one-to-many and a many-to-many model.”
This aspect of social-enabled research fits well with independent analysts, or firms that use the freemium model (see below) to drive sales of consulting services; it is far harder to apply in the case of the large-format research firm in which the business model is based on being the gatekeeper of access to analysts.
What about the social shopping aspect that we see in the consumer space? If you're buying a phone or a television, or deciding which restaurant to visit, product and company reviews are increasingly part of your buying process. Partly that happens through social means like Facebook, but it has also led to the emergence of review sites like Yelp and Angie's List. But so far there is no Yelp.com for enterprise software and services. Why not?
Richardson and I talked about the nature of information sharing in business. He said, “You know, to be honest, I think there are lots of gatherings of CIOs where they get together in various forums and actually sit and actually share ideas. I think it’s one thing to share ideas on ‘what are you going to do about SAP, they’ve come back and offered us a three-year term license where it’s all you can eat. What did you decide to do?’ That’s one thing versus ‘we’re completely changing our supply chain strategy to focus on direct store delivery. What was your experience in that space?’
“Something like that, that has real strategic implications, where you may have retained a McKinsey or a Kearney or another big consulting company, I don’t think you’re quite willing to give away what you just spent millions on, which may be ongoing. I think what people are willing to share differs. If it’s a kind of horizontal issue, or a broad-based issue, like how you manage a vendor, what made you decide to go with vendor A versus vendor B, that’s a lot different than actually changing your strategy.”
“I think really smart buyers go for the formal network where they get together and ask a lot of questions, and then what they might do with a research firm is validate some of the ideas, or look to see if there’s other industries or other companies that are doing something similar that they might be able to talk to.”
Consumerization
It first referred to the practice of end users bringing their own devices into the workplace, but consumerization has broadened to include direct tech purchases by lines of business, bypassing IT. Cecere said, “the buyer of technology has changed, from the software service to the line of business user, so 40%, based on quantitative studies I’ve seen, is really through the line of business, and the power of IT has diminished.” You can see the same thing happening in research, as the research buyers are coming more frequently from lines of business other than IT. Cecere said, “I think Gartner and Forrester serve very different markets, that Gartner’s married to IT and so is Forrester, and I think we haven’t figured out how to serve the line of business buyer yet and there are different research models trying to do that.”
The enterprise application market has matured.
The world of networked desktop and laptop computers, of big client-server enterprise applications, of the huge IT department, has only been with us for about 20 years, and it’s growing up.
That era saw the rise of the big enterprise applications like ERP, the ubiquitous presence of e-mail, and the corporate intranet. Later on, we added internet and mobile devices to the lives of knowledge workers. But there are hardly any big ERP deployments that have not been done yet, the large enterprise market is saturated. The market is consolidating around a few very large vendors. The needs that drove the success of large research firms are not the same as the current needs of the marketplace. Many of the big questions that drove people to Gartner and Forrester have been answered.
I asked Richardson what he thought was the highest value proposition today for a traditional research firm. He explained, “I think it’s in areas that aren’t well understood, or are continuously evolving. I think a lot of the classic IT stuff, I don’t think there’s any mystery, I think we’ve figured it out. There’s always going to be issues on integration, because that’s not going to go away. Master data management’s always going to be important. Security, governance, yup. You’ll always need kind of point specialists that know all of that stuff. But the idea of reading another report on 'how to get the most out of your ERP system,' you know, that’s gone.“
“I think every other segment in enterprise apps has also matured so now you’re down to a handful of providers. You look at the software space, you’re down to JDA Software, Manhattan, E2open, and Red Prairie, there’s been so much consolidation. You look at the BI space, all those BI vendors are either part of larger vendors, there’s only a handful of independents--a SAS and a MicroStrategy, maybe a couple of other wannabes. The CRM space is greatly consolidated, you know, PLM, you’re hard pressed to name a big independent company. Dassault is the last big pure play; UGS is owned by Siemens. The market’s consolidated; when I started in the business, it was all about helping companies with vendor selection, so I think the mystery and confusion, there’s just so few choices, you can do your own due diligence.”
Research buyer frustration during those massive ERP deployments has also spilled over as dissatisfaction with traditional research models. Dissatisfaction with one model means opportunity for another; for buyers of research and consulting services, there are more choices.
Freemium: it’s hard to compete with “free.”
The freemium business model has disrupted a lot of businesses, and research is no exception. It’s always going to have a TANSTAAFL “There ain’t no such thing as a free lunch” hook: ad-supported (like e-mail,) or free for a limited number of users but pay for any more.
Some firms, like gigaom.com, have a “some articles are free, but pay a relatively small annual fee (theirs is $295) for a fully-featured product and get it all.” In the case of new research models, there is a lot of free content, offered as a way to build reputation and market for paid engagements.
Traditional research is based for the most part on the sale of “seats,” licenses to access and read research reports, but with very tight controls on that access and the distribution of the purchased content. Freemium turns that inside out. That is good news for consumers, a business model challenge if you are selling research seats.
At Altimeter, almost all of their content is free. Li approaches the competitive market this way: “we realize that to charge someone for research, you have to have a machine, and that a small company having a machine against Gartner and Forrester and IDC is going to be very difficult to do. So do you want to fight the battle on their terms or do you want to choose a different battlefield?” Li believes Altimeter would never have been able to compete on that model. I asked her what she means about having a machine.
“In order to charge a syndicated subscription of even five thousand dollars a year, you have to produce a lot of research. A typical seat for a Gartner, Forrester, IDC is about $20-25 thousand. Hundreds of pieces of research. As a small firm, how much research can you produce? What’s the value of that research? People will typically pay a couple of hundred dollars, $250-500 for a pretty decent piece of research, and if we had done that, played a game against that, it would have reduced the number of people who are willing to pay, people who would actually see it and our ability to influence the market and have a presence in the market would have been close to zero.”
“This is a world class level of research we’re putting out, same level of investment and quality as many of these other firms. Highly specific and pragmatic in terms of offering solutions to people, and we make it freely available, so we get hundreds of thousands of views of our research. So an OK research report will get 40, 50 thousand views, 40 or 50 thousand people will have seen that piece of research. This is fantastic marketing. And then, what people really want these days isn’t a piece of research. That comes with a value, and the value is being able to put that into action, and the value that we can create is to personalize that. Advisory is where we make all of our money at this point.”
The New Expertise: Virtualized, Cloud-sourced
In many ways, the research landscape changes outlined here mirror the movement to the cloud and to virtualized application environments: more choices, from more sources, at lower cost, and with greater ability to scale up and down at will. The traditional big-research contract, like a fixed server in your data center, attempts to be a one-stop answer to your research needs, and like a fixed server, those needs are subject to change over time.
Few would argue that Gartner, Forrester, and IDC are in serious danger, but few would challenge that they are now only one part of a resource portfolio that’s more social, has many more sources, and presents opportunities to access better information at lower cost.
How do you approach expertise and information gathering in your own organization? This series in the Infrics.com coverage of the business of research will continue with two more articles:
It’s not just new community models that have changed things; the very business topics that once fed millions of dollars of research spend are in flux as well. Here are four things that change what tech research means, and how you use it:
Social
When it comes to research, social networks and social business have broken down barriers between those who have and those who want. Our online social world enables frictionless creation of communities, low inertia in-and-out flow of information, and ease of access to subject matter experts. Lora Cecere has over 3000 followers on Twitter, to whom she can broadcast updates in real time and at no cost. She also gains a research resource of her own. Compared with the old days within a big research company, which would assemble research panels, Cecere said, “now, I’ve got 3,000 people on the other end...and I use people I know for research panels. It’s much more valuable than buying it, and we have accessibility to do that through social media.”
Unlike traditional research models which were primarily a one-to-many publication approach, Cecere can use social tools to work with clients and sources in a different way. “What I have tried to do is build a many-to-many model through my community,” she explained, which allows a different kind of value. “The model is changing from a one-to-one to a one-to-many and a many-to-many model.”
This aspect of social-enabled research fits well with independent analysts, or firms that use the freemium model (see below) to drive sales of consulting services; it is far harder to apply in the case of the large-format research firm in which the business model is based on being the gatekeeper of access to analysts.
What about the social shopping aspect that we see in the consumer space? If you're buying a phone or a television, or deciding which restaurant to visit, product and company reviews are increasingly part of your buying process. Partly that happens through social means like Facebook, but it has also led to the emergence of review sites like Yelp and Angie's List. But so far there is no Yelp.com for enterprise software and services. Why not?
Richardson and I talked about the nature of information sharing in business. He said, “You know, to be honest, I think there are lots of gatherings of CIOs where they get together in various forums and actually sit and actually share ideas. I think it’s one thing to share ideas on ‘what are you going to do about SAP, they’ve come back and offered us a three-year term license where it’s all you can eat. What did you decide to do?’ That’s one thing versus ‘we’re completely changing our supply chain strategy to focus on direct store delivery. What was your experience in that space?’
“Something like that, that has real strategic implications, where you may have retained a McKinsey or a Kearney or another big consulting company, I don’t think you’re quite willing to give away what you just spent millions on, which may be ongoing. I think what people are willing to share differs. If it’s a kind of horizontal issue, or a broad-based issue, like how you manage a vendor, what made you decide to go with vendor A versus vendor B, that’s a lot different than actually changing your strategy.”
“I think really smart buyers go for the formal network where they get together and ask a lot of questions, and then what they might do with a research firm is validate some of the ideas, or look to see if there’s other industries or other companies that are doing something similar that they might be able to talk to.”
Consumerization
It first referred to the practice of end users bringing their own devices into the workplace, but consumerization has broadened to include direct tech purchases by lines of business, bypassing IT. Cecere said, “the buyer of technology has changed, from the software service to the line of business user, so 40%, based on quantitative studies I’ve seen, is really through the line of business, and the power of IT has diminished.” You can see the same thing happening in research, as the research buyers are coming more frequently from lines of business other than IT. Cecere said, “I think Gartner and Forrester serve very different markets, that Gartner’s married to IT and so is Forrester, and I think we haven’t figured out how to serve the line of business buyer yet and there are different research models trying to do that.”
The enterprise application market has matured.
The world of networked desktop and laptop computers, of big client-server enterprise applications, of the huge IT department, has only been with us for about 20 years, and it’s growing up.
That era saw the rise of the big enterprise applications like ERP, the ubiquitous presence of e-mail, and the corporate intranet. Later on, we added internet and mobile devices to the lives of knowledge workers. But there are hardly any big ERP deployments that have not been done yet, the large enterprise market is saturated. The market is consolidating around a few very large vendors. The needs that drove the success of large research firms are not the same as the current needs of the marketplace. Many of the big questions that drove people to Gartner and Forrester have been answered.
I asked Richardson what he thought was the highest value proposition today for a traditional research firm. He explained, “I think it’s in areas that aren’t well understood, or are continuously evolving. I think a lot of the classic IT stuff, I don’t think there’s any mystery, I think we’ve figured it out. There’s always going to be issues on integration, because that’s not going to go away. Master data management’s always going to be important. Security, governance, yup. You’ll always need kind of point specialists that know all of that stuff. But the idea of reading another report on 'how to get the most out of your ERP system,' you know, that’s gone.“
“I think every other segment in enterprise apps has also matured so now you’re down to a handful of providers. You look at the software space, you’re down to JDA Software, Manhattan, E2open, and Red Prairie, there’s been so much consolidation. You look at the BI space, all those BI vendors are either part of larger vendors, there’s only a handful of independents--a SAS and a MicroStrategy, maybe a couple of other wannabes. The CRM space is greatly consolidated, you know, PLM, you’re hard pressed to name a big independent company. Dassault is the last big pure play; UGS is owned by Siemens. The market’s consolidated; when I started in the business, it was all about helping companies with vendor selection, so I think the mystery and confusion, there’s just so few choices, you can do your own due diligence.”
Research buyer frustration during those massive ERP deployments has also spilled over as dissatisfaction with traditional research models. Dissatisfaction with one model means opportunity for another; for buyers of research and consulting services, there are more choices.
Freemium: it’s hard to compete with “free.”
The freemium business model has disrupted a lot of businesses, and research is no exception. It’s always going to have a TANSTAAFL “There ain’t no such thing as a free lunch” hook: ad-supported (like e-mail,) or free for a limited number of users but pay for any more.
Some firms, like gigaom.com, have a “some articles are free, but pay a relatively small annual fee (theirs is $295) for a fully-featured product and get it all.” In the case of new research models, there is a lot of free content, offered as a way to build reputation and market for paid engagements.
Traditional research is based for the most part on the sale of “seats,” licenses to access and read research reports, but with very tight controls on that access and the distribution of the purchased content. Freemium turns that inside out. That is good news for consumers, a business model challenge if you are selling research seats.
At Altimeter, almost all of their content is free. Li approaches the competitive market this way: “we realize that to charge someone for research, you have to have a machine, and that a small company having a machine against Gartner and Forrester and IDC is going to be very difficult to do. So do you want to fight the battle on their terms or do you want to choose a different battlefield?” Li believes Altimeter would never have been able to compete on that model. I asked her what she means about having a machine.
“In order to charge a syndicated subscription of even five thousand dollars a year, you have to produce a lot of research. A typical seat for a Gartner, Forrester, IDC is about $20-25 thousand. Hundreds of pieces of research. As a small firm, how much research can you produce? What’s the value of that research? People will typically pay a couple of hundred dollars, $250-500 for a pretty decent piece of research, and if we had done that, played a game against that, it would have reduced the number of people who are willing to pay, people who would actually see it and our ability to influence the market and have a presence in the market would have been close to zero.”
“This is a world class level of research we’re putting out, same level of investment and quality as many of these other firms. Highly specific and pragmatic in terms of offering solutions to people, and we make it freely available, so we get hundreds of thousands of views of our research. So an OK research report will get 40, 50 thousand views, 40 or 50 thousand people will have seen that piece of research. This is fantastic marketing. And then, what people really want these days isn’t a piece of research. That comes with a value, and the value is being able to put that into action, and the value that we can create is to personalize that. Advisory is where we make all of our money at this point.”
The New Expertise: Virtualized, Cloud-sourced
In many ways, the research landscape changes outlined here mirror the movement to the cloud and to virtualized application environments: more choices, from more sources, at lower cost, and with greater ability to scale up and down at will. The traditional big-research contract, like a fixed server in your data center, attempts to be a one-stop answer to your research needs, and like a fixed server, those needs are subject to change over time.
Few would argue that Gartner, Forrester, and IDC are in serious danger, but few would challenge that they are now only one part of a resource portfolio that’s more social, has many more sources, and presents opportunities to access better information at lower cost.
How do you approach expertise and information gathering in your own organization? This series in the Infrics.com coverage of the business of research will continue with two more articles:
- Walk this way, talk this way: pioneers reshape the research business model, and how that impacts traditional research vendors
- Thanks, I’ll do it myself: a hands-on guide to tech research in a social world
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