Saturday, July 04, 2009

A Value Proposition for Industry Analysis

@mcgoverntheory Following my last post on Industry Analysis by Survey, James McGovern asks for a blog entry on other low questions analyst firms ask.

"Low questions" may be an inevitable consequence of the way much so-called industry analysis is funded. What I really want is to find a viable business model in which analysts can ask the "high questions" they should be asking.

Software industry analysis is basically a two-sided market. Analysts provide value (of different kinds) to the software vendors and to the software users. Some of this value is funded by the vendors, for example by sponsorship, commissioning white papers, keynote presentations and other consultancy work. Some of this value is funded by the software users, for example by purchasing reports and training, subscribing to materials, and consultancy work again.

Analysts also receive value from both sides of the market. They get detailed briefings from vendors, and detailed case studies from users. Analysts under tight deadlines may sometimes be tempted to use this kind of material without thorough critical evaluation; after all, such sources of easy material might dry up if the analysts were too critical. As I said in my post on Industry Analyst Coverage, vendors can influence analysts not just by giving them money but also by doing their work for them. Users don't have the same commercial interest, but they typically block publication of wart-and-all case studies.

Software users sometimes seem to want to have things both ways. On the one hand, they want a high level of quality and independence, and complain when industry analysts fail to cover the things they want covered. But they often aren't willing to provide sufficient funding for this to happen.

Two-sided markets always introduce a level of complexity that is not present in single-sided markets. Like a double pendulum.

Last month I asked about A Value Proposition for Enterprise Architecture. So here's a similar question: what exactly is the value that software industry analysts deliver or should deliver, to whom? Given the obvious doubts about the transparency of how some industry analyst firms operate, is there something that doesn't quite add up in the current business model? Is it possible to formulate a transparent and viable business model for rigorous industry analysis?

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