Hands up – I’m an analyst. Except I stopped calling myself that a long time ago. Why? Well, apart from the similarity to the word ‘analist’, which does tend to describe our obsession with detail, the title means so little these days.
Years ago, the industry analyst was an expert that shared best practice, an ideas person that brought in fresh thinking, and an evaluator that brought clarity. Today, everyone and his dog is an analyst and the uncomfortable truth is that much of our industry has gone a bit Emperor’s New Clothes.
For those not familiar with the story, it tells of how two weavers approach the emperor, who is vain and likes to preen in his expensive clothes (think big vendor who just wants everyone to tell them they’re the best in the Mythical Triangle). They promise him the best clothes ever made (at vast expense), constructed from a fabric that is invisible to the ‘hopelessly stupid’ (to sell anything you need to be in our Mythical Triangle, which has magic selling powers).
Of course, lots of people cannot see the clothes (i.e. results), but no-one is prepared to admit this because by inference they are confessing to being stupid. Eventually, a child who does not understand the need to play along shouts out that the emperor is naked. Everyone finally realizes they have been conned all along.
In order to see the relevance of this to the technology industry, ask yourself these simple questions:
- What value are analysts adding to your business? Are they actually helping you make more money and evolve your business, or are they just making you feel better about what you’re doing today? A good analyst will challenge you, tell you where your ideas and your approach can be improved, and bring fresh thinking to your table. A bad analyst will simply recycle what they’ve heard from other players (we have Google for that these days) and convince you that you’re basically doing great (although subscribing to their service will make you do better). A bad analyst doesn’t rock the boat too much, because their living comes from the boat. A bad analyst firm doesn’t admit that since the entire industry is getting the same information, insight and advice it offers you no competitive advantage.
- Who do you think advises disruptors to gain first mover advantage? Did Uber get the advice of an analyst before it disrupted? Did WhatsApp? Analysts all too often write about disruptors after they’ve disrupted, they don’t pre-empt disruption or advise disruptors. They are me-too vendors for second movers and the rump of laggards. Social media is severely disrupting their ability to be purveyors of secret insight into disruptors and first movers – since in the blink of an eye this insight is available everywhere for free.
- Where do you think buyers get their information? In many parts of the technology industry IT spending is fragmenting, IT is loosening their power over purchasing, and end users frankly don’t know their analyst from their elbow. Younger staff don’t recognise analyst brands and are more likely to trust the advice of peers (and Google) rather than a middle-aged guy or gal charging you huge amounts for the benefit of his/her experience.
When a market is stable, it’s perfectly okay for an analyst to benchmark and focus on incremental improvements. But when a market is in flux then analysts need to be more challenging, more creative, more out-of-the-box thinkers, and far more disruptive. In other words, different skills are needed and these skills are in short supply. In the $10 million+ per licence old world, the analyst made sure you had thought through an expensive purchase. But in the easily-disposed-of, try-before-you-buy SaaS market the analyst advice could cost you more than the system.
And this reinforces my point: most analyst information only ever reaches or covers a small subset of the market – i.e. those companies that are big enough to afford it. Ten years ago this frustrated me, and this issue is even more relevant today.
Which brings us to what we all know but few have the guts to say in public. There is an over-cozy relationship between big vendors, big enterprises and big analyst houses that maintains a status quo and is the very antithesis of true transformation and disruption. All three of these entities are focused on maintaining the stability upon which their revenues depend. They ignore small disruptive entrepreneurs, they advocate large, expensive and tediously unwieldy change programmes, and they pat each other on the back at regular intervals.
Now don’t get me wrong, there is still an important role for independent third parties – challengers, devil’s advocates, ideas people, and people who cut through the marketing nonsense to find clarity – but the current analyst business model is so broken and so dated that it’s like paying for digital goods with bullion. We need to create more value and find a new way of delivering it. The current model has resulted in an oligopoly of large, comfortable, over-staffed companies that employ perfectly intelligent but generally non-disruptive staff who follow methodologies and frameworks that are decades old. Within each of these companies are some seriously bright and seriously insightful people, but they are few in number. Intelligence doesn’t scale, and frankly analyst firms don’t pay enough money to attract the seriously bright who can earn millions in Silicon Valley or The City of London, or be seriously pampered by the likes of Google. Which is why when you engage with an analyst firm you are far more likely to encounter a whole gang of also-rans. (Akin to the so-called ‘school bus’ effect.)
My argument here is that change is inevitable. A cozy oligopoly sitting within a mature market is ripe for disruption. And this disruption has already hit another part of the commentator market – the journalists – who are seeing large-scale disruption to their business as the advertising model fails and user-generated content continues to proliferate. By ‘disruption’ I mean redundancies, changes in the way content is written, delivered and renewed, and real fear/pressure about the way in which they are going to generate money from their endeavours.
In my view, although currently insulated from these changes, analyst houses are the next natural target and are even more vulnerable. Much of the information they produce is easy to find today, produced for free by others, or doesn’t create sufficient value to justify the cost. To gain scale they’ve employed a lot of so-so analysts, there’s too much recycling of staff within industry niches, staff have too narrow a focus, and the analyst business model is stuck in the 90s.
I predict that once some mouthy child starts calling out that the emperor has no clothes – i.e. no business value – then the whole house of cards will start to collapse.
But criticism is cheap. The technology industry really needs a sector that prognosticates, critiques and challenges. But in order for this sector to do what it’s supposed to do – and thus for me to have a future role! – it needs to be reshaped and rebuilt to be fit for 21st century needs. I therefore think there are two vital questions that need answering:
- What do we really need this sector to do for us?
- How do we need them to deliver it?
And then we need analysts like myself to listen.
Written by Teresa Cottam, chief strategist with industry analysts and strategy consultants Omnisperience