Ovum is a resolutely independent advisory organisation. Here we present the demands you should make of any research or consulting company.
High-tech analysts, who have for many years been highly regarded as the keepers of vital market intelligence, now face scrutiny as details of underhand dealings emerge. Payment for favourable publicity is probably the greatest concern.
The opinion of analysts is extraordinarily powerful. It can effect the performance of a product or a company's share price and the market correction of the last year or so has brought their role into focus.
On top of this, a number of recent cases have exposed the way in which some research companies make their money. It's caused a huge stir for one reason: readers are not always made aware of the source of funding for research pieces. The analysts, it seems, weren't always as independent as they first appeared to be.
Funding
The funding points at issue are two-fold: whether a vendor has paid to gain entry into a piece of research and secondly whether the research, which more than likely will appear favourable, has been solely funded by a vendor. The latter essentially amounts to marketing work, so what's the problem? The problem is transparency - being upfront about who has funded the piece.
Martin Garner, Ovum research programmes director, says the practice of "pay-to-play" - or paying to be featured - has been part of the industry for as long as he can remember. However, it has been increasing over the years. Garner adds: "Lots of vendors see dollars spent on analysts as more effective than dollars spent on advertising - and the practice is encouraged by some analyst firms. In fact, there is pressure on the individual analyst to the extent that there are some who feel they have to write something positive."
Decision makers know that some vendors pay consultancies and analyst houses for certain services. But if a research house is not upfront about sources of funding, these readers are effectively being duped.
Independence charter
At Ovum, all analysts must adhere to the firm's independence charter, which is available at www.ovum.com/about/charter.asp for anyone to view. The company created the document to make clear to clients the way it generates revenue. Independence is at the heart of the company's operations.
Transparency is a key component for users in assessing independence. Garner explains: "Independence is an important buying factor but that's not to say being un-independent is bad. However, this should be explicit to the end reader."
Pay-to-play
While some of the largest and more cash-rich vendors might be able to afford to commission a whole report, there are some that will pay just to get a mention. "Pay-to-play" enables any vendor, regardless of their true market positioning, to be included in a piece of research - for a price. Ovum has a very clear policy when it comes to mapping out the landscape of a market: "We include the people we think will be of interest to customers. People cannot pay us to be included, nor do they need to be clients," says Garner.
The company will not endorse a specific vendor or technology. And that applies to public appearances as well as written research. Every Ovum analyst must play by these rules - it's the only way to ensure the company remains independent.
The issues become even more complicated with white papers. These are often available free of charge - either via the web or in hard copy - and are another way vendors may buy influence. There's also the issue of "Chinese walls" - an imaginary but very solid division between consulting and research departments. The effect is to treat the different divisions as if they were two separate companies. There are companies that have been known to choose their main consulting clients for favourable coverage in their research services in order to generate repeat business.
Ovum's policy is clear: vendors and service providers only get research coverage if they deserve it and if the end-reader needs to know about them. It takes appropriate measures to avoid conflicts of interest between clients and does not take equity stakes in client businesses.
The analyst community will have to work hard to re-build its reputation and an independence charter or similar is the best starting point. Now, more than ever, it's time to lay the cards on the table and be upfront about funding. Any other way is simply not sustainable.
Tips for assessing analyst independence
- Ask how a firm's work is funded to establish the extent to which vendors influence content. Similarly, check if it endorses vendors or their products.
- Be wary of white papers favouring certain vendors. They may have been paid for somewhere along the line.
- Check if the company has an independence charter or similar pledge.
- Find out if the research and consulting groups are independent of each other.
- Know the truth about conference speakers. When analysts appear at vendor events they're probably being paid to present. Ovum has a rule whereby it will offer insight into the marketplace but will not endorse a specific vendor.
Click here to read about Ovum's independence charter.
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