Do software vendors feed analysts for their success?

Green River Media


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September 30, 2015 | 5 min read

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In the 1950’s and 60’s nearly all business software systems were bespoke, but then gradually the idea of software as a product began to emerge. Customers no longer commissioned a piece of software from a developer, instead they purchased a piece of standard software which was then often configured to meet their specific needs. The economics of scale forced developers into creating software which could be reused and resold many times and not just developed around the needs of a single client.

Purchasing software in this way can be a costly and time consuming business. It is very often a one-off activity, separate from the day-to-day running of the customer business. Customers needed advice on which system would best meet with their specific needs and which would be cost effective. A whole army of consultants began to emerge to advise clients on their software purchases. Economies of scale came into play yet again as the consultants metamorphosed into what we now call market research companies or analysts.

As the market for these analyst services has matured, we have seen their role diversify into a set of fairly standard services such as competitor analysis, market reports, market predictions and insights into the various vendor’s offerings and status. We have also seen the analysts segment their offerings by industry or software type; for example into CRM, CMS or ERP. Here we are focused mainly on CMS, but the following applies equally to the other industry sectors.

In the intervening years the relationship that exists between software vendors and the analyst community has become somewhat incestuous. What we see happening is that the clients, especially the larger ones, go to the analysts for advice, the analysts have to go to the vendors in order to understand their product offerings, meanwhile the vendors feed off of the leads that the analysts are able to provide through recommendations and referrals. In part, this is driven by the blame culture. What was it they used to say “nobody ever got fired for buying IBM”. The mantra now seems to be that “we bought it because such and such an analyst company recommended it, so don’t blame me if it doesn’t work.”

This mutual dependency which has arisen between the analysts and the software vendors has in our opinion lead to a distortion in the way the market for software product in general, and CMS systems in particular, works. In the cosy relationship that exists between vendors and analysts, the analysts will typically ask the vendor about their roadmap. “We are adding something to our CMS which will differentiate it from all of the competition” the vendor will say. At his next meeting, the analyst will let slip that one of the competition is working on the same thing. And so this vendor too will start to develop one. Of course the process works across all of the vendors and in all directions. The result is that software vendors have developed a set of more or less identical products by treading on each other’s coat tails, aided and abetted by the analysts leading them on their merry dance.

You could argue that this process represents an essential step in the process of creating a standard product offering, but you could equally argue that it stifles development by placing it in a sort of competitive straight jacket leading to a lack of organic product development and innovation.

It is not just at the technical level that this incestuous relationship exists. It also exists on a commercial scale only here it is much more subtle and certainly not explicit. The vendors depend on the analysts for leads and referrals. The analysts depend on the vendors for information and insights which are their stock in trade and which information they repackage and sell on to their customers who are the vendor’s clients.

Again you could argue that this is just a part of the process whereby success breeds success. Those companies that impress the analysts win more business and as a result pay more attention to looking after their relationship with the analysts. Equally you could argue that this system is unstable and does not necessarily mean that overall the best product is the most successful, just the one which maintains a close working relationship with the analyst community.

So where does this leave the client wishing to purchase a CMS? How much faith can they put in the advice being offered by the analysts?

Of course it is useful to get a second opinion and the analyst firms do have the connections and the information necessary to provide one, but they should not be seen as the be all and end all. Simply making a choice based on the ranking of an analyst is far from sufficient in ensuring that the best solution is identified for any particular organisation or need.

Norman Graves, CTO, Green River Media

Tel: +44 (0)203 397 4155



Twitter: @greenrivermedia

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