Forrester Q1 FY08 earnings — Roles roles and more roles, Oh, hired more sales people too.

logo-forrester.gifThis analysis does not look at areas of interest to investors, but seeks to pull out insights that are relevant to clients and prospects as well as communications and IT vendor analyst relations (AR) teams.

Forrester Research (NASDAQ: FORR) announced its Q1 FY08, ended March 31, 2008, financial results. Revenues were up 16% to $55m and GAAP EPS was 21 cents (both in-line with expectations). Cash and available-for-sale securities ended the quarter at $205m. Agreement (research contract) value was up only 13%. Renewals: 76% clients, 87% wallet, 106% enrichment. Headcount: Research +10 to 346, Sales +19 to 327. New metric “roles per client” announced to track transition to role-based research, initial number is 3.2 per client (out of a potential 17 vendor roles and 12 end user roles). 

The earnings press release can be found here.  Comments that jumped out at us include:

  • “1 B plus companies” – These are enterprises with US$1 billion and above in revenues and are a major target for both Forrester and Gartner
  • Roles – There was constant commentary about transitioning to roles, growth of roles, new metrics on roles, sales specialists for roles, and that the analyst role teams are now responsible for their profitability
  • Sales force growth – While not as focused on the sales force as Gartner’s Gene Hall, it was announced that the sales force headcount grew 20% year-over-year with long term growth in the15% to 20% range, increasing the size of sales teams per large account and the staffing of specialists for roles
  • Increased emphasis on Q (syndicated offerings) – Currently 62% of total revenues, long term increase to 70%. New commission structure for sales id designed to push Q 

Implications for clients, whether end users or vendors, and analyst relations (AR) teams:

  • All clients – price increase in July – Forrester has a pattern of raising prices in July and January. If your contract renews in July or August, you should consider an early renewal to get a lower price
  • End user clients – roles – It is important for you to select a role and start doing inquiries with the analyst team to influence their research agenda
  • AR teams – roles – Very, very carefully review whether the AR role is right for you. It is critical that you provide economic support to and get access to the end-user analyst teams that cover your technology
  • Vendors – influence – While Forrester had a good quarter, the lack of granularity in client base breakdowns does not provide any insight as to whether its influence with tech buyers is waxing or waning
  • AR teams – analyst hard sell – With analyst teams responsible for profitability, analysts will likely try to drive business during briefings, consulting days, and such. This could be very irritating to your executives. Ask your executives to defer these discussions to you (and offline). Warn your analysts that hard selling vendor executives is counter-productive and to work through you.
  • AR teams – sales force growth – Alert your field sales force that Forrester analysts might start appearing in new accounts as Forrester expands its client base.

Bottom Line: Forrester’s economic growth shows that it is a healthy business. With the exception of price increases, there is no particular downside in the earnings announcement for end-user clients. For vendors, there are some issues that might cause problems that need to be carefully monitored.

Question: Vendors – Have your sales reps seen an increase or decrease in the number of deals where Forrester analysts are playing an advisory role? Enterprise IT managers – Are you using Forrester more or less when it comes to product and vendor selection?

Do you wonder about the trends in the industry analyst market and the implications for your company? SageCircle can help – SageCircle constantly tracks the changes in the analyst market and analyzes what the implications are for enterprise IT managers and vendors alike. Contact us at 650-274-8309 or info [at] sagecircle dot com for how we can help you succeed in a volatile analyst landscape.