It’s time to step into the light

A lot of IT research is paid for up front, effectively sponsored by the vendors

Bruce Springsteen made more than a few dollars singing ‘Dancing in the Dark’. In fact, it won him a Grammy in 1985. Question: how many New Zealand organisations are betting their income — or their functionality — by dancing in their own darkness, as defined by research companies and their analysts?

The IT research and analyst companies make millions of dollars through their opinions, supposedly based on simon-pure research. Vendors are quick off the block to quote the analysts when the vendor’s company features prominently; more importantly, major commercial organisations and government departments in New Zealand use the research to justify buying decisions. But so much research is paid for up front, effectively sponsored by the vendors.

Take, for example, the Gartner magic quadrant. If, according to the research company, the vendor’s product has everything going for it, it is referenced in the all-important top-right quartile. That sounds good and fair, but is it really?

In New Zealand, Gartner grew from perhaps $100,000 in 1996 into a client base of 120 enterprises, generating annual revenue of US$2 million dollars within five years. But because of expectations in the wider Australasian region, the company withdrew from New Zealand and tried to sell its services from Australia. It has only recently reopened an office here. It is generally accepted that the company lost its ability to engage with its customers on a personal basis.

Former employees say that where once the independence of Gartner and other large US-based research companies was totally accepted, there is now a level of discomfort about that same independence.

A little local history. When Gil Simpson of Cardinal Networks was about to launch Jade in the early 90s, he gave a sneak preview to a few IT journalists. Gil liked a cigarette, as do I, and we were subsequently smoking up and chewing the fat outside. Gil was really bullish about the worldwide prospects for Jade and asked me what I thought. I suggested he needed some international backup and that perhaps Gartner might be the right company to talk to.

A few months later Jade was publicly launched, spearheaded by a Gartner analyst who was videoconferenced in from the US. Jade, surprise, surprise, was in the top-right quadrant. I’ve always been a touch suspicious about the magic quadrant since.

Gartner, of course, is now partly owned by investment companies that have stakes in the IT vendors upon whom it’s supposedly neutral about. Silver Lake Partners, which owns 33% of Gartner, has among its owners Michael Dell, Bill Gates and Larry Ellison. The company has acknowledged to the US Securities and Exchange Commission that its owners “may be able to, either individually or together, exercise significant influence on matters requiring stockholder approval”.

International Data Group (IDG), the owner of the Computerworld publishing empire (the New Zealand subsidiary was recently sold to Fairfax) has a sister company, IDC, one of the world’s biggest IT research companies, which focuses mostly on providing hard data but has never been prepared to disclose how much money it takes from vendors.

IDC was set up in New Zealand at the beginning of the 1990s, initially as a one-man band in the person of retired IBM long-timer Jack Webber. Webber used to complain that it was almost impossible to get accurate figures on the PC and printer markets — the main source of income in those days — because of double counting between the vendors and resellers.

But the company grew. I recall one of Webber’s earlier employees putting out a transparently wrong set of numbers on the PC market. I hauled him out of a conference to ask why and got a panicky answer: “If you think you’re right, you better use your numbers.” This was information other people were paying good money for. Dancing in the dark?

Earlier this month, a press release arrived from an Australian vendor, trumpeting its market dominance in a particular industry sector in both New Zealand and Australia, according to the subsidiary of a well-regarded US research company. The numbers were obviously flawed but my subsequent email inquiry was acknowledged only by “I’ll refer it to our research director”. The numbers, I was told, were based on those supplied by vendors. I know for a fact one of the biggest vendors in that market segment was never approached. And one of the biggest deals in that sector done in Australia in recent times appeared to have been totally ignored.

I prefer not to name the company until I get a real response, but the “research” smacked of “these vendors have X percentage of the US market, so I’ll mark it down accordingly for the Australian and New Zealand markets”. Again, people pay a lot of money for such research. Dancing in the dark?

Accurate research and measurement is important. New Zealand, because of its comparatively miniscule size, can’t really afford the US-defined charges the big research companies demand. Inevitably, corners will be cut. But common sense should tell those who build their business cases largely on research that they need to exercise caveat emptor. Spending thousands of dollars to self-justify big-ticket decisions is not the right way to go.

‘Dancing in the Dark’ was the major hit song off Springsteen’s Born in the USA. So much of what New Zealand buys into these days was certainly given birth to there. As Springsteen sang: “This gun’s for hire”. Perhaps a little local independence would be a good thing.

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Tags GartnerIDCresearch

More about BillDellGartnerIBM AustraliaIDC AustraliaIDGInternational Data GroupSecurities and Exchange CommissionSilver Lake Partners

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