Market research: Who buys it and why

Market research: Who buys it and why

Tech buyers like market research; tech sellers can't live without it

IT research firms service two separate groups of clients -- technology vendors, which constitute the "sell" side of the market, and organizations seeking advice on technology purchases, the "buy" side of the equation.

On the 'sell' side

Industry analysts help technology vendors decide which products to sell, how to market them, and how to differentiate themselves, size up markets, and identify sales and market opportunities.

Analysts, especially the top tier, are extraordinarily influential and important to vendors in this regard. Companies large and small maintain analyst-relations programs to keep analysts in the loop about their strategies, often giving them access to information months before its release.

"For vendors, there is no influencer community that has more direct impact on revenue than the right industry analysts," according to a report from Knowledge Capital Group (KCG), an analyst-relations strategy firm in Austin. "Not only are they most likely to be asked which vendors should be included on a short list in a technology evaluation, but they also hold unique power to make or break a sale with a simple yes or no."

Vendors pay anywhere from US$25,000 to several million a year to research firms, depending on the type of research and market data they buy (general or custom), the frequency and depth of analyst engagement, and whether consulting services are involved.

On the 'buy' side

KCG estimates that Global 2,000 firms spend an average of about US$300,000 annually on buy-side research. In recent years, the two leaders in the market, Gartner and Forrester Research, have begun offering what's known as "role-based pricing."

Previously, subscribers had to wade though volumes of data and research to find relevant information. Duncan Chapple, managing director of consultancy Lighthouse Analyst Relations, describes this as a "fire-hose" approach that gives every type of IT buyer everything he or she could ever want, but in an undifferentiated way.

Role-based pricing offers the very same data, but organized around specific roles in an IT organization.

Role-based pricing does raise subscription fees -- in Gartner's case, by several thousand dollars, to an annual average of about $23,000, according to sources with knowledge of the pricing schedule. But proponents defend the price increase, arguing that role-based models make it much easier for IT buyers to find the specific information they need.

"Buyers consider these [research] services valuable and worth the expenditure in spite of price increases," wrote Louise Garnett, an analyst at Outsell, a firm that tracks the research market, in an October 2007 report.

In Gartner's case, a person interested in business intelligence or security would subscribe only to those Gartner portals, which include access to data, research, communities and tool kits. The tool kits include how-to papers, best practices, evaluation methodologies and case studies. Annual subscriptions, the sources say, cost between US$20,000 and $50,000 per seat, depending on the level of analyst engagement.

By their nature, smaller research firms are focused on specific vertical markets, and their pricing structure tends to fall into some variation of role-based. Firms such as The Tower Group and Celent provide technical advice specifically to financial services firms.

Back to main feature: Analyze your analysts

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