As an industry analyst, it makes sense for me to keep an eye on events in my own backyard of technology research firms, as well as the mobile industry. So it's fascinating for me to watch the offer this morning by Datamonitor for Ovum.
It's particularly interesting, because in 1991, I was employee #7 at Datamonitor, and was one of the first 2 analysts to write technology research there in 1992. I worked directly for the two founders, Mike Danson and Doug Wilson. (Mike is still there & remains the largest shareholder). Unlike Ovum, Datamonitor covers multiple industries and doesn't just focus research & consultancy on the tech sector - it has analysts watching everything from chocolate biscuits to cardiovascular drugs.
When I left in early 2000, I was one of the directors of the technology business unit - and at that time, we estimated internally that we'd just overtaken Ovum as the 3rd largest technology analyst firm in terms of European revenues, after Gartner and IDC. In fact, one of the strategies I'd been driving during the late 1990s was to specifically target Ovum's telecoms & IT specialism. (I'll also hold my hands up & confess to helping steer DM away from wireless & more towards IP networks & security). However, over time Datamonitor decided to relinquish much of the hardcore techy analyst domain to the specialists, and focus on leveraging its knowledge of other industries to provide vertical market information (IT in the banking industry, telecoms in the pharmaceutical sector and so on). Ovum itself went through a rough patch after then collapse of the bubble in 2001-2, but wasn't as geared into some of the fluffier dotcom areas as many of its US peers, so rode out the storm better.
In the big scheme of things, the combined DM/Ovum technology division is still a relative minnow on a global scale - Ovum has revenues about £18m per year, and I'll guess that about 20% of Datamonitor's £56m was in tech-related areas. So, a total of about £30m / $55m - against Gartner's $800m+ . Mind you, there are still quite a few other decent mid-size firms that could become targets if DM decides to really push towards a global tech analyst position (Yankee, Strategy Analytics, Pyramid, IDATE & Current Analysis spring to mind).
One of the challenges that Datamonitor is going to find is exactly how to blend (or perhaps keep separate) the different identities and cultures of Ovum, Datamonitor and Butler research. My perception is that the gap between them has widened a lot since my time at DM's "palatial" London offices. I suspect that quite a few customers of Ovum will be feeling a bit bemused by this move, as in recent years Datamonitor has had much less of a presence in areas like telecoms. In my view, Datamonitor is a very well-run company from a business & shareholder value point of view - but (certainly on the technology side) has not pushed quite as hard on intellectual thought-leadership and "brand name" industry guru positioning. When I was there, analysts weren't even individually named on reports. When I was at Datamonitor, there was also a real work-hard/play-hard culture, emulating the long hours, ruthless deadlines & bonus-oriented remuneration of some strategy consultancies and investment banks... I remember my boss' favourite line "So...how's your weekend looking?" with a mix of fondness & dread, as you could be certain he'd be in the office on Saturday too.
From a personal & wireless-centric point of view, this acquisition probably won't make any material difference to Disruptive Analysis. DM has never really played much in the mobile area, outside of a few bits on enterprise mobility, and I already compete with Ovum. On the other hand, I still know quite a few DM analysts, and regularly meet my Ovum peers at industry events, so I wish everyone well for the future.
EDIT
Just seen this fantastic comment (not a direct quote I suspect) from Mike interviewed by CityWire, which to me rather sums up the difference between the DM philosophy (create templated business information products & sell the heck out of them) and more conventional tech analysts view (employ knowledgeable but sometimes prima-donnaesque gurus and monetise what they have to say, ideally communicating directly with clients wherever feasible).
"Ovum markets itself as a people-based adviser and consultancy, but Danson says that this is flannel to make it look posh. He argues that, in fact, its services are product-based."
Gartner, of course, tries to do both approaches simultaneously using a volatile mix of gurus and an aggressive salesforce)
Dean Bubley's Disruptive Wireless: Thought-leading wireless industry analysis
6 comments:
nice analysis sir. this was of gr8 help... it was really insightful to read DM & ovum's history in a quite intersting way n that 2 in brief.. u may also like to read a blog on IT research which i found recetly.. u can read it at http://www.rncos.com/Blog/itresearch.html
thx n yeah.. best of luck.
flannel?
whats Datamonibore's renewal rate? anything close to Ovum's 90+%?
My interpretation is that Mike was saying that "people-based" is flannel - ie that the research is much more than the individuals that create it, even if they are "named analysts". Essentially, he is taking the view that analyst reports are "information products" in generic sense, and can be manufactured, sold & marketed in similar fashion to other things.
Personally, I would (and, indeed, did) disagree with this, which is why I now have my own company which espouses a different view.
Renewal rate - dunno exactly, and it's an arcane art to calculate exactly, so I wouldn't put too much emphasis on headline numbers. However, DM is pretty profitable, whichever way you slice it, even if you disapprove of some of its attitudes. Being "not very profitable perfectionists" is a fine strategy if you're a private company, but not if you have external shareholders.
Lastly, I do have to say that calling DM "boring" relative to Ovum is pretty hilarious. Having seen it grow from 7 employees to 550 during my tenure (1991-2000), it was a lot more exciting than most companies I could name. And, apart from a couple of IDC and Gartner analysts who shall remain nameless, DM employees always had the reputation as the hardest drinkers in the industry....
first point: agree with you re: information products
renewal rate: actually very easy to measure. its the % of clients who renew. Datamonitors current rate is appalling.
"boring": read a current DM technology report. Try and get to the end of it. Try and find something akin to an opinion or challenging viewpoint which is actually relevant.
Two points.
(a) I'm not an evangelist of Datamonitor... obviously it was better when I was there ;-) ...and one of my points of contention when I left was around the importance of opinion & thought leadership. Hence my new company's (& this blog's) name.
(b) I'm not keen on debating in a public forum (especially my own) with someone who chooses the weak armour of anonymity.
However, I am keen on debating when people get things wrong. As you are, comprehensively, about renewal.
As it happens, renewal is sometimes given as a % of renewed contract value, not as % of clients. Ovum itself uses this metric: "pleased to announce that we have achieved our highest ever contract renewal rates by value which, due to client upsell, is in excess of 100%" while DM cites "increased the renewal rate as measured by volume to 90%"
You then have to have mechanisms for taking into account repeat business on large custom/consulting engagements (eg Ovum's GSMA contract, or various of DM's). You need to deal with M&A where clients combine. You need to factor in whether different buying points in the same company count as "renewal". Whether you let the volume of lots of small renewals (eg newsletters) outweigh larger advisory contracts. Whether its based on contracts sold or revenue recognised in the period. Personally, I'm glad I'm not an accountant trying to sort all this out. "Easy to measure" it isn't.
I'm not aware that there is a "standard" way of defining renewal rates - so unsurprisingly every company picks the most flattering metric. I suspect you may be right that Ovum's > Datamonitor on most reasonable methods, however.
The key issue, however, is "so what?". The bottom line is that whilst some of DM's "production line" content offends my own personal preference to be "right" and "challenging", it clearly earns money. The fact is that lots of people buy research for reasons other than being challenged.
All of which, frankly, is good news for people like me, as I have a less competitive (albeit smaller) market to target for people who do like to have their assumptions challenged.
Not like you to back down from an argument :-) even if I do chose the rather impermeable shield of anonimity.
I fear that you are nit picking, as you admit in the third to last para: by any reasonable measure, Ovum's renewal rate is better than Datamonitor's.
As for the "so what": the two very differnt business models are now part of the same family, and if any effectivenss or efficiency is to be realised, they will have to be at least partially reconciled. In doing so i fear one the last original voices in the analysis industry will be drowned.
Datamonitor may win, but tech loses.
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