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Thursday, February 09, 2006

World Of Analyst Firms Or One Without Them

The institution of analyst firms has an important role in the business ecosystem – particularly the tech world where changes are very rampant. The maturity the industry has achieved in segmenting the marketspace – ranking the players quite regularly all deserve definite praise. Stumbled upon this Informationweek article on my return from down under.

I think that the article is too light on the analyst firms – half the analysts across the analyst firms, in my view lack the depth and understanding needed to provide well thought out advise to customers and vendors – Proof, look at the state of the consulting revenues of the analyst firms(where the expectation is direct focused, actionable results). One analyst firm had thirty researchers contributing to top 10 predictions running to less than 1000 words ( am not questioning the brevity here – eight out of the ten predictions figured in the previous year list as well). A CEO of a 200 million USD tech product company told me very recently how in his space, several organizations align most of their initiatives to secure rankings in analyst reports. I have seen in many cases reports published based on reproduction of what was told – we are seeing in this industry happenings like research budgets getting slashed while sales budgets keep increasing, some analyst firms are seen to be accepting sponsorships frequently – those who speak aloud that their research are not sponsored, actually force substantial investments for hosting their analysts in events/happenings in the industry. Most of the flawed analysis makes funny reading after events predicted unfold- mostly the opposite to what is written. I am looking at a dream situation when analyst firms are able to declare every year their prediction success rates ( in analyst world – qualitative results/lead indicators etc). The CEO of an analyst firm sometime back wrote a near PR article favoring Google- made me laugh to my bones. In general what applies to analyst firms also apply to investment research firms - except that investment research firms are more accountable and in general, these firms are lot more dynamic. Fear & Apathy are also to be blamed to an extent - when ombdusman reports that there are very few complaints received - we have to sit and take note. Analyst firms publishing frequency on specific themes is anybody's guess - I have received draft reports from leading players much after the publishing note date -not talking about the delay in getting the review done - but the delay in even initiating the review preocess. Yet with all this, I firmly believe the world would look less endowed without the analyst firms/ research in action – not withstanding concerns of credibility & effectiveness. One will have to chug along hoping that like other services, the analyst firm too would improve over time.

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