Gartner Acquires Meta - And Then There Were Two
by William S. Hopkins
The end-user IT advisory world got a lot smaller in January when Gartner, Inc. announced that they had entered into an agreement to purchase all of the assets of Meta Group for $162 million ($10/share). The only thing that we found surprising about the deal was the timing. Meta had announced last summer that it had retained investment bank Wachovia Securities to assist in looking at options for its future. We had expected Meta to go in the $150 million range, but had thought that it would be towards the end of the first half of next year. We believe that this acquisition will have a large affect on the marketplace as it narrows the options for technology buyers looking for advice and generates new opportunities for firms looking to supply them.
The 2003 acquisition of Giga, Inc. by Forrester Research had narrowed the number of what we at KCG call Deal Makers and Breakers (DMBs) to a three-horse race – Forrester and Meta at about $120-$125 million in annual revenues and behemoth Gartner at $856 million. Yesterday’s announcement leaves only two real choices for corporate IT buyers to turn to for advice on technology purchases – Gartner and Forrester. This isn’t because there are not a number of firms that offer technology analysis… there are. It is because there are very few firms that have invested the time and effort in building a business model, and most particularly a sales force, that caters and sells to the technology-buyer community. Most of the hundreds of “analyst firms” in the market cater and sell to those who sell technology, not buy it. The DMBs (Gartner, Forrester and Meta) are the only firms that have been successful in building that model.
We believe that this is a very shrewd move on Gartner’s part. Not only does it make it a binary choice in advisory firms, but we believe that it effectively shuts out any outside competitors from entering the DMB marketplace. As long as Meta was in play, a firm without the end-user/buyer business model could have bought one. Now, they can’t. This eliminates one of Gartner’s most significant long-term threats.
There will, of course, be issues with the acquisition. Because in many ways Meta was a near clone of Gartner, there is a significant overlap of clients, coverage, products, services and organization. We think it is unlikely that Gartner retains much of Meta’s workforce. Our bet is that only the analysts (around 100 at last count) and sales force are retained and that this will cause PR headaches for Gartner in their (and Meta’s) hometown of Stamford, CT. We also think that there will be some company culture issues with Meta employees (especially the analysts) that join Gartner because of Gartner’s much larger, more rigid management structure and bureaucratic organization.
Here is what we think will be the immediate impact of the deal:
Meta Clients – Obviously, current Meta clients have the most to lose in the deal. In Analyst Relations (AR), we all know we work with analysts, not analyst firms. Historically, the hardest thing for analyst firms to do when merging is to retain analysts (especially good and/or visible ones); therefore we think that there is a pretty good chance that you won’t be able to just still work with the analysts, for the same reasons. Another issue to be dealt with is current Meta contracts. If you have been following our advice not to enter into multi-year deals with the analyst firms, then you should be OK. We expect Gartner to make public very soon whatever transition plans they have for Meta customers (most of whom are also Gartner clients) to the Gartner fold. Our advice? Start now to work with your Gartner and Meta sales rep to manage the transition and make sure they know what you expect from them, don’t just sit back and wait.
Gartner Clients – Gartner clients should have little to fear. Besides gaining a few more analysts to choose from there should be little short-term effect. There will undoubtedly be some longer-term adjustments to research structure, etc., but we don’t expect much impact. The bigger question to us is what happens to Gartner on a broader scale over the next few years? How do they maximize the value of their portfolio of separate businesses – end-user advisory, vendor market research (Dataquest), consulting and events? Overall, these answers will have little or nothing to do with the Meta acquisition.
Impact on other Analyst Firms
Forrester – We feel that Forrester will be the firm most affected by this acquisition. In order to compete and grow in the face of Gartner’s mammoth footprint, we think they will have to simultaneously execute on two very different strategies. First, they will have to continue to offer competitive coverage and advisory services in core enterprise IT areas (albeit with Forrester’s unique spin), and then they will have to continue to identify and offer vertical and emerging market coverage areas (like retail, transportation, etc.) where Gartner is not as strong.
Point Players - Besides potentially being bought by Forrester or Gartner, we think that the firms that have the most to gain are the Point Players. Because these firms have core competencies in particular vertical or horizontal markets, they will be able to gain market share here where the larger firms may not be abler to react quickly enough. The key issue here will be how prescient they are in recognizing the need for drastic changes to their business models to be able to capture end-user revenue, not vendor revenue. As we mentioned earlier, it takes a dedicated business model and sales force to generate any appreciable end-user revenue. Not only are the buyers and buying centers different, but they would also have to make changes to their business models to encourage and facilitate end-user interaction and advisory.
Overall, we think that Gartner’s acquisition of Meta, though not exactly what would be best for Analyst Relations professionals (we think that more competition among analyst firms is better), was inevitable. We have been predicting this level of consolidation for over two years now. For most of our clients, besides the decrease in choice, we don’t see a lot of potential issues. For some, there will be contract and contact issues; for others, there will be analyst issues. The only way to make sure that the impact on you is minimized is to be proactive in letting your sales rep know what you expect and want. Want to know more? Watch our regular issues of AR Insider for more information and analysis on this event. In the meantime, if you have any questions or comments, please call us at 512.334.5943 or email inquiry@knowledgecap.com.
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