Analysing the analysts: Can independence be bought?

It's a common rumour which ex-analysts and employees of smaller analyst houses love to spread - analysts are regularly 'bought' by their clients.

The relationship between a client and an analyst is a complex one, but it usually involves two things - the analyst writes about the company, and the company buys research from the analyst. And it means there's room for a possible conflict of interest.

Any analyst will reply with a similar response - if people see them as corrupt, they're finished. As Gartner VP Jane Doorly put it: "If we're not impartial, we might as well go home."

But can they really be impartial if they take money off the people they write about? Who can you trust?

On a basic level, most people connected with the industry who aren't analysts think buying research from a research house makes it easier to get them to tell their story.

One source, from the analyst relations business (PR for analysts), put it like this: "Every time the analysts come to see us they treat it as a pitch for new business. It is terribly difficult to get their time, and if you buy research it's easier, particularly if you are a smaller vendor."

Like most of our sources, however, she didn't want to speak on the record. One exception, however, was Pete Stauvers, former marketing operations manager at Viatel. He used to be responsible both for buying reports and representing the firm to analysts, and he felt that his spending on research bought him much more than just attention.

"I felt that in an unwritten sense we could strong-arm some of the suppliers of market research," he told silicon.com. "I can remember changing, and particularly repressing, things. We might ask 'Could you leave any mention of ATM out of this research?' and they'd say 'Well, we can't leave it out here, it would look stupid, but we can leave it out on page 16'."

Another source, a former employee of a large US analyst house, was able to put his finger on another couple of interesting abuses. He was anxious that no details were mentioned because he's still in the business and was worried he'd be identified.

"On the pure research side of the analyst house, we were once very rude about [a contentious area of IT architecture]. A group of vendors paid a different part of the business $300,000 to write a positive report about the same area. The first the research side knew about it was just before it was published. We wanted to pull it but couldn't."

Looking through research on this area by the analyst house our source worked for it's clear that there was a strange shift in the coverage it gave this particular topic.

He, and several other sources we consulted for this article, suggested this practice was more common five years ago than it is now, largely because many US-based analyst houses were in the process of establishing themselves in Europe. Now they are well established, the need to do so is less pressing.

Clearly, analysts are occasionally bought. It may not be very often, but the perception that this goes on is widespread.

"There is sharp dealing on both sides," said Duncan Chapple, director of analyst relations at communications consultancy Brodeur, and a former analyst himself.

"Vendors who pay analysts to research their market usually get more coverage in reports. However, the only guarantee it will be positive coverage is if vendors sponsor disreputable analyst houses. That's why I think it's a waste of money."

Obviously, the extent to which a company can have its arm twisted varies from analyst house to analyst house. The important issue is where they get the bulk of their revenues from, reckons Chapple. "There's definitely a pecking order. We feel the best research generally comes from analyst houses that get most of their revenues from users, not vendors," he said.

Brodeur surveyed the major research houses and split them into three: User-based companies (which include Gartner Group and Meta Group) vendor-based companies (including Aberdeen, AMR, Analysys, Datamonitor, Dataquest and IDC) and the 'others', such as Forrester Research, Giga, Ovum and Yankee, whose revenue is generated by a mix of the two.

Analysts who depend heavily on vendors for their revenue, producing sponsored research, company profiles and so on, are going to have to think very hard before they write something insulting about their organisation's paymasters (not that there's any evidence that the firms mentioned above are anything but impartial).

So Gartner, for example, which receives a high proportion of its revenues from end users, not vendors, can afford to say that migrating desktops to Windows 2000 won't save companies money - if that were the case. A smaller company - which receives massive sums from Microsoft in commissioned research - might give this a second thought.

At the extreme end, analysis becomes what Chapple calls 'vanity publishing', where companies spend their budgets on getting analysts to write nice things about them, but achieve very little else. "It encourages analysts to behave badly. It's a waste of vendors' money and it generates research which is useless," he said.

It doesn't necessarily follow that analysts who are heavily dependent on vendors for revenue cannot generate worthwhile research. Among other things, their research is often cheaper than the purely user-funded companies, and sometimes even free.

The moral of the story is simple: when buying research, think about who wrote it and where their cash comes from. If a vendor profile was picked up for free, remember it's unlikely to dwell on bad points.

Analyst research, it seems, is like a lot of things in life - if you want to know what to trust, just ask who's behind it.