Forrester and Gartner Q4 and full year earnings — Higher prices and emphasis on role-based services

The two analyst firms that are publicly held conducted earnings calls last week, Forrester (February 5) and Gartner (February 6). This 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 CIT vendor analyst relations (AR) teams.

For clients of both firms, one important fact jumps out of the earnings calls – price increases will be a consistent fact to be incorporated into budgets and purchasing decisions for the foreseeable future. Both CEOs consistently mentioned, both during prepared remarks and during Q&A, how well the pricing tactics have worked. There are two basic approaches. First is to gradually raise legacy prices through annual price increases of 5% to 7% and the elimination of discounts. Second is to move clients from the “all you can eat” seats like Core Research and Wholeview to role-based services, which have a higher price. For instance, in response to a question Gartner CEO Gene Hall said that moving a client from Core to the role-centric Gartner for IT Leaders is in essence a 100% price increase. The role-based services will also be subject to an annual price increase of 5% to 7%. While he was not as explicit as Hall, Forrester CEO George F. Colony stated that his firm has been raising prices and would continue to do so based on the competition’s actions. I took that statement to mean if Gartner raises its prices then we will happily do so as well.

Regarding Forrester’s demise of the “all you can eat” services CEO Colony said they hope to have all clients onto RoleView by 2009. CEO Hall also emphasized the success of the role-based services with clients “flying to new products.” Because of the de-facto price increase that a move to role-based seats represents, clients can expect a big push from the firms’ sales reps to move clients off Core or WholeView as quickly as possible.  The movement to role-based also has major implications for broadly-focused AR teams that may have to purchase multiple roles to maintain their current coverages.

A third important fact from the calls is the continued investment in the firms’ sales forces. Gartner had 806 sales reps at 2007 year end, a net increase of 143. Since taking over, CEO Hall has doubled Gartner’s sales force with an emphasis on expanding coverage in the bread-and-butter IT departments at enterprises of US$1bn or more in revenues. As a proof point that the new sales reps are moving up the learning curve and becoming productive, Hall said that Gartner added a net 700 new client companies in 2007, with 400 coming in Q4. Forrester’s Colony was not as pleased with his sales force, indicating that the US had high attrition in 1H07 and that the non-US sales organization had troubles the later part of 2007. Colony expressed confidence that the sales force problem is being corrected. The implication for clients and prospects – again for both end users and vendors – is that the firms’ sales teams will be attempting to penetrate broader and deeper into companies to generate NCVI (net contract value increase, the most important sales metric). This will make it harder for procurement managers to manage purchasing of analysts services.

SageCircle Technique:

• Clients, both end users and vendors, should carefully evaluate purchased services to identify underused or duplicate offerings for elimination
• Clients should assess the applicability and value of the role-based services
• Clients should also explore buying services from small or specialized firms. This will not be easy as many worthwhile firms have low market profiles because of minimal marketing and sales

Bottom Line: Forrester and Gartner are taking steps to increase prices now and into the foreseeable future in parallel with increasing sales penetration into client companies.

Question: Analyst clients – Do you manage your analyst services contracts centrally? How do you audit your contracts to ensure that you are maximizing business value? Other analyst firms – Are you taking steps to increase your sales and client service efforts in order to become the alternative to the Big Two?

Are you getting the most from your analyst contracts? SageCircle can help. Our strategists can:

• Evaluate the usage of your contracted analyst services and suggest ways to maximize business value from your investment
• Train your colleagues with analysts seats (e.g., Gartner Advisory and Forrester Roleview) through efficient and effective distance learning via webinar or teleconference
• Critique your upcoming analyst contracts to ensure you are getting the right services from the right firms to meet your business needs
• Save you time, money and aggravation

To learn more contact us at info [at] sagecircle dot com or 650-274-8309.