Industry analyst
Encyclopedia
An industry analyst performs primary and secondary market research within an industry such as information technology
, consulting or insurance
. Analysts assess sector trends, create segment taxonomies, size markets, prepare forecasts, and develop industry models. Industry analysts usually work for research and advisory services firms, and some analysts also perform advisory (consulting) services. Typically, analysts specialize in a single segment or sub-segment, researching the broad development of the market rather than focusing on specific publicly traded companies, equities, investments, or associated financial opportunities as a financial analyst
might.
That is not to say that industry analysts do not focus on specific market participants and their product and service portfolios, or that financial analysts ignore industries. Gideon Gartner, one of the industry analyst business pioneers, was a former financial analyst before launching the Gartner Group in 1979. But industry analysts do research in the context of a specific sector or market segment, along with the competitive offerings of the other public and non-public companies that comprise the market. In many industries there is significant overlap between the work product of industry analysts and financial analysts. The information technology and consulting industries, however, are examples of industries where a significant proportion of important market participants are not publicly traded entities with readily available information and highly regulated disclosure requirements.
Most analyst firms focus on one or more market segment
s, such as cloud computing
, wireless
communications, audit
services, or pharmaceutical industry safety monitoring
. Analyst firms and the analysts that work for them are continuously expanding and shifting their coverage areas to keep pace with trends like technological convergence
or media convergence, for example. This is because demand for industry analyst research services is closely associated with the frequency of change in an industry. So the largest analyst firms tend to have extremely dynamic offerings, and the concentration of service offerings of all market players tends to focus on industry areas that are currently undergoing change.
There are three industry analyst firms that have been in continuous operation since 1970 or before. Computer Review is the oldest analyst firm that has been in continuous operation since its inception in 1959, as Adams Associates. International Data Corp. has been providing industry analyst and publishing services since 1964, and continues to be operated as a private company by its founder, Patrick Joseph McGovern. The last of the three, the Yankee Group
, was founded by Howard Anderson in 1970. Anderson ran the firm until 1999.
Many industry analyst firms and analysts trace their roots to one of these three firms, particularly IDC, Gartner and the Yankee Group. http://www.forrester.com/ER/Company/ExecProfiles/Bio/0,,3,00.html George Colony, for example, was an analyst at the Yankee Group before founding Forrester Research. Dale Kutnick was also a Yankee Group analyst and equity holder before joining Gartner and later founding the Meta Group, which was subsequently purchased by Gartner. http://aragonresearch.com/management-team Jim Lundy and Mike Anderson were analysts at Gartner before they founded Aragon Research.
Well-known analyst firms using "traditional" business models include AMR Research
(now owned by Gartner), ARC Advisory Group, Aragon Research Inc., Basex
, Berg Insight, Business Monitor International, Canalys
,Current Analysis, Computer Review, Dittberner Associates, Bersin & Associates, Evaluator Group, Inc., Enterprise Management Associates, Forrester Research
, Frost & Sullivan, Gartner
, IBISWorld
, IDC
, Telsyte,Informa Telecoms & Media, Mercator Advisory Group, Monadnock Research, SNL Kagan, Ovum Ltd, Strategy Analytics, TechSci Research, Verdict Research
and Yankee Group
.
A directory of analyst firms is available from Techra and another analyst directory is available from Barbara French.
Several firms are designing new analyst business model
s based on contemporary technologies, open source
licensing concepts, emerging markets, loosely federated analysts, and/or a more radical and visible emphasis on offshoring. Notable examples of analyst firms creating models based on social media
such as Canada's ConneKted Minds and "open research and analysis" include RedMonk, Macehiter Ward-Dutton, Quocirca, ResearchFarm, Freeform Dynamics] and Cambashi
, all based in or having offices in the United Kingdom
, and US-based Wikibon
, an open source project. Meanwhile, Singapore-based Springboard Research (now owned by Forrester) exemplifies progressive use of offshoring research and Experton and Experture exemplify loose federations of independent analysts. capioIT is an example of a firm that is focused on emerging geographic and technology markets.
, competitive intelligence
, and management consulting
services.
Deliverables take many forms, including publications like research reports, white papers, research notes, and newsletters; advisory services that include inquiries, briefings, consulting projects, and study findings presentations; and events such as conferences, seminars, roundtables, and other speaking engagements at internal client meetings and symposiums. Analyst firms serve a management decision support function at corporations and public service organizations, and for the vendors, regulators and investors serving those industries.
Industry analysts serving buyers of technology-based products and services, where the largest concentration of industry analysts provide services, work with three primary groups of clients:
The subjects of research conducted by analysts include many of the same stakeholders that also buy services from analysts. This has caused the integrity of the research to be questioned, which is covered in more detail below. These research subjects include product and service buyers, users, and implementers; the product and service providers themselves, including their key supply chain partners; and sources of investment capital for the vendors, capital for client purchases of vendor products and services, and regulators. Analysts also perform at least passive sales support for their firms, such as contributing to sales meetings, contracts, project profitability, or lead generation programs. This is necessary because the clients are paying for their expertise and must have an opportunity to assess associated capabilities.
At most firms, analysts set research agendas in close cooperation with clients, design surveys, analyze findings, and write research. They may also conduct the surveys themselves, or they may work with third-parties or interns to perform the data collection. Increasingly, analyst firms and their subcontractors employ online survey tools and offshoring to reduce research costs and turnaround time. In some cases, analyst firms are mining new sources of information from research partners, like consumer cell phone bills, RFID-enabled point of sale data, and analytics on Web traffic.
Typically, technology and service providers work to influence the analyst research agenda and coverage of their firm, and to build trusted relationships with individual analysts. This is done through a specialized marketing function called industry analyst relations or analyst relations
, where some analyst relations staff members specialize themselves in certain product, service, industry, or geographic areas of the vendor organization. This function not only facilitates effective two-way communications between the analyst firm and the vendor, it attempts to concentrate and control spending on industry analyst research and advisory services.
It has become a common practice for analyst firms to assign a central "vendor relations" contact within their organization, to coordinate briefing, reprint and similar requests from vendors. Commercial and public sector client organizations have now assigned sourcing and procurement category managers as the primary contact for research and advisory services firms as well, to concentrate and better leverage spending on related products and services.
Most analyst firms require above-average written and oral communication skills.
This source of revenue is a significant component of the business models of most analyst firms. Individual analysts and teams conduct research on industry segments where a vendor may provide products or services, and that same individual or group may provide research deliverables or advisory services to a vendor serving that segment. The analyst is then expected to provide independent objective advice to buyers of those products and services. This matrix of relationships presents opportunities where conflicts can arise. This is exacerbated by the training many vendor analyst relations professionals receive, where they are advised to focus spending on analysts that have the most ability to influence purchases of goods and services by clients, and to bypass controls analyst firms may have in place to preserve that objectivity by limiting direct access to certain analysts for non-research purposes.
There is also the issue of analyst firms signing boilerplate confidentiality agreements with vendor firms. This occurs when licensing research or performing advisory work, or when conducting detailed briefings in advance of announcements. The language in those agreements often limits the disclosure of certain information that may be disclosed to analysts in the normal course of their research, limiting their ability to fully disclose research findings to buyers of any research deliverable. Some research organizations now refuse to sign confidentiality agreements with vendors or service providers. But there may be a legacy of agreements in place that perpetually limit disclosure for some large vendor clients, so some of the smaller firms have limited work with vendors.
Burton Research, for example, enforces a cap of 20% of revenues to be derived from product vendors or service providers. Burton is now owned by Gartner, and continues to limit its vendor expenditures. Real Story Group is a small boutique firm that performs research on products and publishes evaluations. It works solely for buyers and refuses to accept business from vendors that are subjects of its evaluations. Despite a few exceptions, buy side industry analysts represent a small minority of analyst firms today. Even research firms whose services are tailored specifically to the interests of product and service buyers often derive some proportion of their revenues from vendors and service providers, since that information is important to them as well.
The debate over objectivity and independence has always been an active one, with some firms using independence (in absolute and relative terms) as a source of strategic differentiation. Other factors that affect research integrity include transparency with regard to research methodology
and survey sampling
, theoretical or shallow vs. in-depth or hands-on expertise of analysts, emphasis on qualitative over quantitative research, and the overall efficacy of a firm's research offerings toward the goal of improving the quality of business and technology decisions.
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
, consulting or insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
. Analysts assess sector trends, create segment taxonomies, size markets, prepare forecasts, and develop industry models. Industry analysts usually work for research and advisory services firms, and some analysts also perform advisory (consulting) services. Typically, analysts specialize in a single segment or sub-segment, researching the broad development of the market rather than focusing on specific publicly traded companies, equities, investments, or associated financial opportunities as a financial analyst
Financial analyst
A financial analyst, securities analyst, research analyst, equity analyst, or investment analyst is a person who performs financial analysis for external or internal clients as a core part of the job.-Job:...
might.
That is not to say that industry analysts do not focus on specific market participants and their product and service portfolios, or that financial analysts ignore industries. Gideon Gartner, one of the industry analyst business pioneers, was a former financial analyst before launching the Gartner Group in 1979. But industry analysts do research in the context of a specific sector or market segment, along with the competitive offerings of the other public and non-public companies that comprise the market. In many industries there is significant overlap between the work product of industry analysts and financial analysts. The information technology and consulting industries, however, are examples of industries where a significant proportion of important market participants are not publicly traded entities with readily available information and highly regulated disclosure requirements.
Most analyst firms focus on one or more market segment
Market segment
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function...
s, such as cloud computing
Cloud computing
Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a utility over a network ....
, wireless
Wireless
Wireless telecommunications is the transfer of information between two or more points that are not physically connected. Distances can be short, such as a few meters for television remote control, or as far as thousands or even millions of kilometers for deep-space radio communications...
communications, audit
Audit
The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
services, or pharmaceutical industry safety monitoring
Safety monitoring
Safety monitoring of a clinical trial is conducted by an independent physician with relevant expertise. This is accomplished by review of adverse event, immediately after they occur, with timely follow-up through resolution....
. Analyst firms and the analysts that work for them are continuously expanding and shifting their coverage areas to keep pace with trends like technological convergence
Technological convergence
Technological convergence is the tendency for different technological systems to evolve towards performing similar tasks. Convergence can refer to previously separate technologies such as voice , data , and video that now share resources and interact with each other synergistically.The rise of...
or media convergence, for example. This is because demand for industry analyst research services is closely associated with the frequency of change in an industry. So the largest analyst firms tend to have extremely dynamic offerings, and the concentration of service offerings of all market players tends to focus on industry areas that are currently undergoing change.
There are three industry analyst firms that have been in continuous operation since 1970 or before. Computer Review is the oldest analyst firm that has been in continuous operation since its inception in 1959, as Adams Associates. International Data Corp. has been providing industry analyst and publishing services since 1964, and continues to be operated as a private company by its founder, Patrick Joseph McGovern. The last of the three, the Yankee Group
Yankee Group
Yankee Group, a Massachusetts company, sells advice and market-research information relating to information technology.-History:Founded in 1970, the Yankee Group emerged as the first independent technology research and consulting firm...
, was founded by Howard Anderson in 1970. Anderson ran the firm until 1999.
Many industry analyst firms and analysts trace their roots to one of these three firms, particularly IDC, Gartner and the Yankee Group. http://www.forrester.com/ER/Company/ExecProfiles/Bio/0,,3,00.html George Colony, for example, was an analyst at the Yankee Group before founding Forrester Research. Dale Kutnick was also a Yankee Group analyst and equity holder before joining Gartner and later founding the Meta Group, which was subsequently purchased by Gartner. http://aragonresearch.com/management-team Jim Lundy and Mike Anderson were analysts at Gartner before they founded Aragon Research.
Industry analyst business
There is a community of more than 740 analyst firms around the world. Research and advisory staffs at these companies range from one person to more than 1,000.Well-known analyst firms using "traditional" business models include AMR Research
AMR Research
AMR Research, Inc. was an independent research firm, sold to Gartner Research for $64 million in 2009, which focused on the global supply chain and its supporting technologies...
(now owned by Gartner), ARC Advisory Group, Aragon Research Inc., Basex
Basex
Basex is an IT research and consulting firm that focuses on knowledge management, information management, and collaboration issues and technologies within larger organizations...
, Berg Insight, Business Monitor International, Canalys
Canalys
Canalys is an independent technology focused analyst house. It offers its clients market intelligence, analysis and strategic consultancy about trends and activity in a range of high-tech markets, and with route-to-market strategies...
,Current Analysis, Computer Review, Dittberner Associates, Bersin & Associates, Evaluator Group, Inc., Enterprise Management Associates, Forrester Research
Forrester Research
Forrester Research is an independent technology and market research company that provides its clients with advice about technology's impact on business and consumers. Forrester Research has five research centers in the US: Cambridge, Massachusetts; New York, New York; San Francisco, California;...
, Frost & Sullivan, Gartner
Gartner
Gartner, Inc. is an information technology research and advisory firm headquartered in Stamford, Connecticut, United States. It was known as GartnerGroup until 2001....
, IBISWorld
IBISWorld
- History :IBISWorld was formed in 1971 as IBIS Research Services. IBISWorld is a market research organization specializing in long range forecasting of industries and the business environment at large, with an emphasis on providing information for strategic planning and research purposes.Phil...
, IDC
International Data Corporation
International Data Corporation is a market research and analysis firm specializing in information technology, telecommunications and consumer technology. IDC is a subsidiary of International Data Group...
, Telsyte,Informa Telecoms & Media, Mercator Advisory Group, Monadnock Research, SNL Kagan, Ovum Ltd, Strategy Analytics, TechSci Research, Verdict Research
Verdict Research
Verdict Research is a United Kingdom-based company founded by retail analyst Richard Hyman in 1984. It conducts research into all aspects of retailing and consumers producing both syndicated publications and tailored consulting projects and is headquartered in London.Verdict specialises in analysis...
and Yankee Group
Yankee Group
Yankee Group, a Massachusetts company, sells advice and market-research information relating to information technology.-History:Founded in 1970, the Yankee Group emerged as the first independent technology research and consulting firm...
.
A directory of analyst firms is available from Techra and another analyst directory is available from Barbara French.
Several firms are designing new analyst business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
s based on contemporary technologies, open source
Open source
The term open source describes practices in production and development that promote access to the end product's source materials. Some consider open source a philosophy, others consider it a pragmatic methodology...
licensing concepts, emerging markets, loosely federated analysts, and/or a more radical and visible emphasis on offshoring. Notable examples of analyst firms creating models based on social media
Social media
The term Social Media refers to the use of web-based and mobile technologies to turn communication into an interactive dialogue. Andreas Kaplan and Michael Haenlein define social media as "a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0,...
such as Canada's ConneKted Minds and "open research and analysis" include RedMonk, Macehiter Ward-Dutton, Quocirca, ResearchFarm, Freeform Dynamics] and Cambashi
Cambashi
Cambashi is an Anglo-American independent research firm, focused on the market for Information Technology in the manufacturing, distribution, energy, utilities and construction industries. The company serves both suppliers and users of Information technology...
, all based in or having offices in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, and US-based Wikibon
Wikibon
Wikibon is a community of practitioners and consultants dedicated to improving the adoption of technology and business systems through an open source sharing of free advisory knowledge. The company was launched in 2007 by David Vellante, David Floyer and Peter Burris and is headquartered in...
, an open source project. Meanwhile, Singapore-based Springboard Research (now owned by Forrester) exemplifies progressive use of offshoring research and Experton and Experture exemplify loose federations of independent analysts. capioIT is an example of a firm that is focused on emerging geographic and technology markets.
Roles and deliverables
Industry analysts provide a combination of syndicated and client-sponsored (bespoke) market researchMarket research
Market research is any organized effort to gather information about markets or customers. It is a very important component of business strategy...
, competitive intelligence
Competitive intelligence
A broad definition of competitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization.Key...
, and management consulting
Management consulting
Management consulting indicates both the industry and practice of helping organizations improve their performance primarily through the analysis of existing organizational problems and development of plans for improvement....
services.
Deliverables take many forms, including publications like research reports, white papers, research notes, and newsletters; advisory services that include inquiries, briefings, consulting projects, and study findings presentations; and events such as conferences, seminars, roundtables, and other speaking engagements at internal client meetings and symposiums. Analyst firms serve a management decision support function at corporations and public service organizations, and for the vendors, regulators and investors serving those industries.
Industry analysts serving buyers of technology-based products and services, where the largest concentration of industry analysts provide services, work with three primary groups of clients:
- Commercial and public service entities that use technology-based products and services.
- Vendors providing products and services to commercial and public service organizations, and the channel intermediaries that resell or aggregate these products and services, including hardware manufacturers, communications companies, software firms, IT services providers, value-added resellerValue-added resellerA value-added reseller is a company that adds features or services to an existing product, then resells it as an integrated product or complete "turn-key" solution...
s, mobile network operators, and content aggregators. - Organizations that invest-in, regulate, or support the vendors and intermediaries, including investment banks, anti-trust regulators, chambers of commerce, and leasing companies.
The subjects of research conducted by analysts include many of the same stakeholders that also buy services from analysts. This has caused the integrity of the research to be questioned, which is covered in more detail below. These research subjects include product and service buyers, users, and implementers; the product and service providers themselves, including their key supply chain partners; and sources of investment capital for the vendors, capital for client purchases of vendor products and services, and regulators. Analysts also perform at least passive sales support for their firms, such as contributing to sales meetings, contracts, project profitability, or lead generation programs. This is necessary because the clients are paying for their expertise and must have an opportunity to assess associated capabilities.
At most firms, analysts set research agendas in close cooperation with clients, design surveys, analyze findings, and write research. They may also conduct the surveys themselves, or they may work with third-parties or interns to perform the data collection. Increasingly, analyst firms and their subcontractors employ online survey tools and offshoring to reduce research costs and turnaround time. In some cases, analyst firms are mining new sources of information from research partners, like consumer cell phone bills, RFID-enabled point of sale data, and analytics on Web traffic.
Typically, technology and service providers work to influence the analyst research agenda and coverage of their firm, and to build trusted relationships with individual analysts. This is done through a specialized marketing function called industry analyst relations or analyst relations
Analyst relations
Analyst Relations is a corporate communications and marketing activity in which corporations communicate with ICT industry analysts who work for independent research and consulting firms....
, where some analyst relations staff members specialize themselves in certain product, service, industry, or geographic areas of the vendor organization. This function not only facilitates effective two-way communications between the analyst firm and the vendor, it attempts to concentrate and control spending on industry analyst research and advisory services.
It has become a common practice for analyst firms to assign a central "vendor relations" contact within their organization, to coordinate briefing, reprint and similar requests from vendors. Commercial and public sector client organizations have now assigned sourcing and procurement category managers as the primary contact for research and advisory services firms as well, to concentrate and better leverage spending on related products and services.
Skills
Companies participating in the industry analyst profession have not adopted universal standards for employee education, skills, or professional conduct. Some firms adhere to standards set by competitive intelligence, market research or other professional associations. Overall, this situation results in competitive differentiation among analyst firms.Most analyst firms require above-average written and oral communication skills.
Integrity and transparency issues
Analyst objectivity and accuracy is an issue that is frequently debated. Much of the criticism appears to focus on the business relationships between analysts and the technology providers that are the subjects of their research. In short, analyst firms often rely heavily on revenues from the technology providers they cover (e.g., Darwin magazine, March 2001).This source of revenue is a significant component of the business models of most analyst firms. Individual analysts and teams conduct research on industry segments where a vendor may provide products or services, and that same individual or group may provide research deliverables or advisory services to a vendor serving that segment. The analyst is then expected to provide independent objective advice to buyers of those products and services. This matrix of relationships presents opportunities where conflicts can arise. This is exacerbated by the training many vendor analyst relations professionals receive, where they are advised to focus spending on analysts that have the most ability to influence purchases of goods and services by clients, and to bypass controls analyst firms may have in place to preserve that objectivity by limiting direct access to certain analysts for non-research purposes.
There is also the issue of analyst firms signing boilerplate confidentiality agreements with vendor firms. This occurs when licensing research or performing advisory work, or when conducting detailed briefings in advance of announcements. The language in those agreements often limits the disclosure of certain information that may be disclosed to analysts in the normal course of their research, limiting their ability to fully disclose research findings to buyers of any research deliverable. Some research organizations now refuse to sign confidentiality agreements with vendors or service providers. But there may be a legacy of agreements in place that perpetually limit disclosure for some large vendor clients, so some of the smaller firms have limited work with vendors.
Burton Research, for example, enforces a cap of 20% of revenues to be derived from product vendors or service providers. Burton is now owned by Gartner, and continues to limit its vendor expenditures. Real Story Group is a small boutique firm that performs research on products and publishes evaluations. It works solely for buyers and refuses to accept business from vendors that are subjects of its evaluations. Despite a few exceptions, buy side industry analysts represent a small minority of analyst firms today. Even research firms whose services are tailored specifically to the interests of product and service buyers often derive some proportion of their revenues from vendors and service providers, since that information is important to them as well.
The debate over objectivity and independence has always been an active one, with some firms using independence (in absolute and relative terms) as a source of strategic differentiation. Other factors that affect research integrity include transparency with regard to research methodology
Methodology
Methodology is generally a guideline for solving a problem, with specificcomponents such as phases, tasks, methods, techniques and tools . It can be defined also as follows:...
and survey sampling
Survey sampling
In statistics, survey sampling describes the process of selecting a sample of elements from a target population in order to conduct a survey.A survey may refer to many different types or techniques of observation, but in the context of survey sampling it most often involves a questionnaire used to...
, theoretical or shallow vs. in-depth or hands-on expertise of analysts, emphasis on qualitative over quantitative research, and the overall efficacy of a firm's research offerings toward the goal of improving the quality of business and technology decisions.