There are Analysts and There are Analyst Firms … Guess Which One You Really Need to Understand?

Recently Dan Gilmore, Editor of Supply Chain Digest, published a “first thoughts” piece on Understanding Supply Chain Analysts. In it he made a number of valid points, including:

  • Analysts can provide useful information and insight
  • Analyst research / opinions can have a significant impact on how a company views specific technology vendors and options.
  • Technology vendors often change product roadmaps and messaging to match what they think the analysts want to hear.
  • Some analysts are primarily vendor focussed on their client base while others are “consumer” focussed and others still sit somewhere in the middle.
  • Most analysts today will not write any “negative” research/opinions on a specific vendor for fear of the fire and brimstone it would bring.

The last point is both scary and true. Printed negative opinions in the analyst community are going extinct. However, negative opinions are still strong in many of the top analysts in our space. So what gives?

What gives is the analyst firm. Today, most of the top analyst firms frown seriously on quoting or printing any negative opinions and, in some case, have steadfast policies banning the public iteration of a negative opinion about any past, present, or potential client in fear of the fire and brimstone wrath that could result in the termination of funds or, where some of the more successful analyst firms are concerned, a frivolous lawsuit against their flush bank account.

Before you engage an analyst you need to understand, at a minimum, the following about their firm:

  • Revenue Model: Vendor-Driven, Enterprise Buyer Driven, Consumer Driven, or some combination thereof
  • Management Team: Primarily Former Analysts or MBAs
  • Ownership: Management &/| Employees, Private Equity, or Public Equity
  • Clients: Who are they?

Why? Each of these will have an impact on organizational policy and, as such, on the analyst focus and their freedom of speech. For example:

  • Vendor Driven Revenue Model
    The analyst firm will likely be very careful in what it allows to be conveyed about any of its clients.
  • MBA Management Team
    The analyst firm will likely be more focussed on profitability metrics than on quality research.
  • Private Equity Ownership
    The bottom line will likely be the most important success metric the analyst firm is judged against.
  • Vendor X is a Client
    Any “research” produced will likely echo the importance of whatever the vendor says in its marketing and positioning, regardless of what is said.

In comparison:

  • Consumer Driven
    Since none of the vendors being reviewed are clients, and since the analyst firm’s revenue will likely be linked to the credibility of their research, the analyst firm will be less likely to censor itself.
  • Former Analyst Management Team
    The analyst firm will be more focussed on quality research than on profitability metrics.
  • Employee Owned
    The analyst firm does not have to meet external success metrics and can set their own agenda.
  • Vendor Y is not a Client
    The analyst firm does not have to worry about subscription renewal fees.

Essentially, if you understand the firm, you understand the level of trust can you put into an analyst report and, more importantly, the level of openness you can expect if you engage the analyst in a one-on-one conversation. In the second case, a good analyst will likely give you the full monty.

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