Time to rethink the analyst firm?

Zia Yusef suggests a reshaping of the analyst community. It is a thoughtful piece to which I respond with observations about some of the issues around what it means to be an analyst.
Written by Dennis Howlett, Contributor

Zia Yusuf (ex-SAP and sometime sparring partner) brings a timely and well reasoned analysis of what he sees as the future of industry IT analysts firms. I've had my own gripes on this topic but on this occasion Zia's position resonates. He suggests:

Focus on Industry Segments not SW Categories: The buyer of software is seeking the solution to a problem.

This is a fascinating observation and one that, if heard, will send shockwaves around the industry. Functional experts are two a penny but industry specific? Much less so. Vinnie Mirchandani and I have long argued that IT vendors need to get much more serious about solving industry specific problems rather than continuing down the horizontal application cul de sac. That's where bloat emerges.

The top flight industry solutions providers are almost always niche players. Financial markets rarely reward these kinds of vendor and it is often difficult to get a bead on the extent to which their solutions can be proliferated. It takes a brave analyst to put these types of vendor up against the established horizontal plays but perhaps that's what has to happen. Zia suggests championing the startups. I would add the smaller vendors who often have been rendering sterling service for many years. But who among the analyst cadre is going to step up to that particular plate?

Rate Analysts and Firms

Oh boy - this is a tough one. Zia believes the industry can come up with something worthwhile:

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.

Maybe. I do not believe you can equate financial analysts with industry analysts. I would personally find it something of an affront because the financial analyst is there to predict a stock price often based upon a short term view of reported figures. There is a certain mechanistic flavor to what financial analysts do which I don't believe can be replicated in the industry analyst world. What would an industry analyst be measured upon using Zia's criteria? That's one for talkback but there is clearly a place for customers to rate analysts on how well they, for example, understand the practical issues that resonate with (say) professional services firms, discrete manufacture, oil and gas...the list goes on.

Transparency of Relationships: This will help address the “pay to play” topic.

This is in need of urgent attention. Last week I attended a webinar run by outsourcing specialists Horses for Sources. Up front they were open about the extent to which they derive revenue from the buy and sell side. That simple statistic is enough for people to at least know where a firm's broad priorities appear to lay. Let me be clear: there is nothing wrong with taking money from vendors. It is when firms try and message that they're really acting for buyers in those relationships that things get sticky unless it is crystal clear that vendors are paying to understand what the analyst knows from the customers with which he/she speaks. That's never been made clear.

Zia goes on to implore all of us to:

Stop Using IT Lingo:..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.

Anyone want a slice of 'cloud,' 'enterprise 2.0.' 'social anything?' But to be serious for one moment, Zia's observation takes us back to the question of what industries understand by the things that computing offers.

Last week for example I saw an article about 'Social Enterprise' titled: Social entrepreneur profile: Why social business is smart business. It made perfect sense because it was written in the context of a peculiarly British topic called 'social housing.' To date, it is the only example I have seen where the language applied to the whole fits the circumstances in a way that is industry specific. It also has other connotations but that discussion is for another day.

Unfortunately there is another side to this that is much harder to solve. The IT industry has become a mixture of Hollywood and Fashion Week. What is fashionable and can be pimped with lavish production and the halo effect of some reasonably well known media star is where the current action is going. But does that help either customers or the industry?

There is a certain sense in that marketing direction, especially given the consumer direction that enterprise software is taking. But sooner or later enterprise software, however delivered has to to be assessed by someone in the C-suite. If fashion statements are the price we pay for getting apps into the organisation then fine. But don't be surprised if those who sign the big checks are less than impressed by such approaches. That may change over time but at the moment has a feeling of being overdone.

Foster Independent and Small Analyst Firms

Zia name checks Constellation Research, a firm of which I am an advisory board member. On a purely self serving basis, I am not going to disagree. But then there are plenty of other smaller firms out there doing good things that get less attention. Panorama for example is both a research and consulting firm that focuses on implementation success. I mentioned Horses for Sources above which stands alone in its incisive analysis of trends in the outsourcing market. Last year, Computer Economics (a Constellation partner) produced a remarkable piece of research into customer satisfaction among Oracle customers. Elsewhere, Redmonk is the only firm I know that is providing direct analyst support for developer communities.

But when you add it all up, these and other firms represent a financial rounding error on the analyst landscape. That will only change when analyst relations people realise that there is breakthrough value in talking in depth with this type of firm. That is fundamentally different fron the insights offered by the majors.

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