Dec 2008

Buying IT investment advice

It may be interesting to survey CEOs and CFOs on how much they truly understand IT analysts' influence on their IT spending. IT analysts are often CIOs best friends (figuratively speaking). When asked by the CEO / CFO, “why implement such and such information technology that costs so much money?” The CIOs can usually point to their teams' analysis that is backed by some industry report from some IT analyst to justify the reason.

In the financial industry, people are familiar with the important roles that credit analysts and stock analysts play in the health of the industry. At the same time, abuse of responsibility by either of them can have major impact to the fortune of many people.

How is this relevant to IT? IT analysts like Yankee Group, Gartner, Forrester, Ovum, etc (see IIAR for more), are very different than credit analysts or stock analysts. Indeed, they are different, but IT analysts have only been in existence for a brief period of time compared to credit or stock analysts. If things stay the course for the long term, IT analysts, directly or indirectly, can potentially have similar impact as the analysts in the financial industry. This is not a story out of a science fiction movie; this is real life, particularly in large companies. (IT analyst costs often price out small companies.)

Value added services

IT analysts reports save time and, in some cases, fill in the competency holes that exist in some organisations. Many CIOs and their teams typically use them in several areas, among others are the following.

These value added services are very useful in the right context, but they can create powerful influencing forces. Technology trend reports can influence corporate spending on technology types that are favoured or disfavoured by the IT analysts. Vendors and product assessment reports directly influence visibility for corporate spending. Some enterprise software vendors have seen improved business due to no small part on being favoured by IT analysts. Cost benchmark reports can affect the fate of IT employees, to the benefit of outsourcing companies, and also the fate of IT spending policies, which often has hidden cost implications.

Wrong IT investments can affect the entire company, both short and long term, which can have direct financial impact to the bottom line.

Caveat emptor. There is very minimal, if any, check and balance in the IT advisory industry. IT analysts are not accountable to any governing body. So let the buyer beware and take notice when buying and reading IT analyst reports.

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Some key pointers to pay attention to

Full disclosure

Technology trend reports and vendor / product assessment reports can have financial impact to IT vendors whose offerings are mentioned in the reports, either favourably or otherwise. But there is a lack of disclosure by IT analysts in their reports. Do their companies accept business from any of the vendors? Do they own any share in such companies? Different companies have different policies.

Practical experience

IT analysts are not overpaid reporters; they are analysts first and foremost, and then they write up reports. For these analysis to be worth the cost they charge, the IT analysts not only need to have good analytical and writing skills, but more importantly, they need to have true understanding of the topic at hand and how it applies. Clients need to ensure IT analysts have the practical experience. Many IT analysts (not all) have long track record as IT analysts, but not necessarily as IT practitioners. So if they lack the experience as practitioners, do they explain their process of ensuring their recommendations do not just look good in theory?

Global and local context

IT analyst reports would contain general recommendations on certain areas, areas that have global impact to their clients. Yet in most cases, an IT analyst client is larger, and operates in more geographical areas, than all of the IT analysts combined. Do they demonstrate experience in the complexity of a large global operations and the sensitivity of local cultural and geopolitical issues?

Range of coverage

Having limited resources, most IT analysts focus only on medium-to-large IT vendors and, even then usually, on specific sets of technology only. They cover the mainstream, but not the fringes of technology trends. Unfortunately, this can lead to missed opportunities for innovative solutions that may be just what are needed at some companies.

Track record

Many IT analysts come up with some sort of trends or prediction or forecast on certain topics, quantitatively or qualitatively. Nobody, officially, keeps track how accurate they are from year to year. To draw an analogy from the financial industry again, all mutual fund investment advisors regularly publish their performance, i.e. how they compare against their target performance benchmark. So if there is no performance tracking, what criteria would companies use to choose one IT analyst company over another?

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Balanced approach is needed

IT is becoming more and more intertwined within business processes in the organisation. IT is not just a tool; it is slowly (or depending on industry – quickly, if not already) becoming the core component in many companies' business processes. The right IT investments, done right, can give the competitive edge needed in today's business environment.

External IT analysts – the good ones – have a role to help make sense of where to invest in the fast changing world of IT. At the same time, intimate knowledge of practical internal needs is mandatory before deciding on what, where and how much IT investment should be done.

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