Gartner Predicts Own Demise?

Rob Enderle

Earlier this week there was an article about a talk out of Gartner's Symposium that large multi-national tech companies were the new dodo bird and soon to be extinct. It argued that these firms grew through acquisition and not R&D, resulting in mediocre solutions that IT wouldn't accept.


Watching an analyst firm say this at an event that is largely funded by just that type of company suggests either extreme guts or a suicidal tendency. But why wouldn't this analysis apply to Gartner itself since it is an IT company as well, it grew through acquisitions and not R&D and much of what it puts out, which fewer and fewer people actually read in this world of Web-based content, is pretty mediocre? If Gartner is right, doesn't that mean that Gartner itself is also about to become extinct? Let's explore this.


R&D vs. Acquisition


I'm going to start by disagreeing with one of the primary premises of Gartner's argument: that research and development is better than acquisition. Recall that Microsoft bought DOS, which eventually became Windows, and licensed Spyglass, which became Internet Explorer. Office wasn't built; it was largely bought piece by piece, and it quickly eclipsed Lotus, which largely went the R&D route.

This doesn't mean that R&D isn't important. Microsoft has the highest percentage of expense, against revenue, for R&D for any company in its segment. But R&D is best applied at improving an existing product and, because it is mostly miss and little hit, is relatively poor at creating new products.


This is because ideas often have to come up with the organizations that initially support them. Small companies have proven better at initially fleshing out an idea and bringing it to market. A larger firm then buys the smaller company and attempts to integrate the offering. Here is where the problem typically comes up. But it is generally easier to integrate something that has made it to market than to figure out how to market something new and unique for a large company.


IBM and HP are examples of companies that do heavy R&D and acquisitions. They have mixed results with both. But by doing both, they have developed opportunities that otherwise wouldn't have existed. Most of the world's magnetic media is connected back to technology IBM developed and this core technology has helped make it a leader in research into nanotechnology. HP has the same advantage with inkjet printing; that technology has been used in manufacturing, baking and medical industries. HP bought Compaq, which brought leadership in several markets, and IBM's acquisitions have allowed it to remain a leader in services and turn it into the company Oracle is chasing with software leadership.


Both R&D and acquisition have value if used properly, and R&D doesn't assure success or suggest weakness.


Mediocre Is Good


I'm often fascinated about the number of people who seem to be experts at IT who apparently have never worked in an IT department. IT lives on mediocre technology because it can't live on the cutting edge, nor can it deal with the massive problems associated with getting a bunch of best-of-breed products to work together. IT is, by design, mediocre because the ecosystem demands it. It doesn't mean that IT organizations don't want high quality. Yes, certain groups or units want and use leading products. But generally, they can't afford to and have to spread what they have thinly across their environment. We don't live in a Rolls Royce world, we live in a Chevy world, and in most cases, it is a 1990s Chevy at that.


In short, mediocre is what companies are buying because they can't afford to do better. As long as mediocre is good enough, that's fine.

Death of Gartner Group?


One of the most interesting meetings I've ever had was at Sun where the then-CTO presented the future of enterprise computing in the late 1990s. He painted a world of open source and largely free software carried by increasingly commoditized hardware and a world where collaboration was the rule and not the exception. Linux would be the winner and companies like Dell and Microsoft would be far less successful. He was particularly proud about the decline of Microsoft until I raised my hand and pointed out that, in such a world, Sun was out of business. A decade later, Sun successfully executed against that plan and now is a shell that belongs to Oracle. Effectively, it predicted and then caused its own demise.


I think Gartner is doing the same thing here. If you take out the names HP and IBM and replace them with Gartner itself, the same rules seem to apply. Gartner has grown largely through acquisition of companies like Meta; it has no real R&D and has had great difficulty with the concept of the Web and particularly social networking. While it has several high-profile and brilliant analysts, they are generally overwhelmed with publishing requirements, mentoring and consulting, which generally reduces the quality of their work to mediocrity. Gartner is mostly made up of young analysts with little experience giving advice on jobs they have never actually done.


Gartner research has gone from driving decisions-and its clients talk about this a lot-to covering the butts of decision-makers after the fact. That's certainly of value, but far less than it once was. In short, if Gartner drives to the vision that was presented at the symposium, the only sure thing is that there will be no Gartner. I'm not predicting its death, but apparently its head of research is.


Wrapping Up


Ironically, taking a position like the one Gartner research head Peter Sondergaard presented at Gartner's Symposium isn't mediocre. Regardless of whether you agree with it-and clearly I do not-it does open discussions, which should be its true purpose. Just as ironic is the fact that it should also open discussions on Gartner because a process of announcing the death of your largest clients at an event they are paying for would seem suicidal at best. In addition, suggesting that companies that have grown like Gartner has, and provide a largely mediocre product like Gartner does, will fail would seem to repeat Sun's mistake of forecasting its own demise. They might want to work for an alternative outcome.


Sondergaard clearly made some good points, but the right people to listen to them may be in Gartner's own executive management.

Add Comment      Leave a comment on this blog post
Oct 21, 2010 9:57 AM David Homrighouse David Homrighouse  says:

Some parts of this I can agree with, but some not.

Comparing some of MS' acquisitions in the 80's and 90's doesn't seem to have the punch compared to today's acquisition.  I remember some of MS' earlier products, like Office and Exchange, and compared to others IMO they weren't all that great.  IE was not great either, but give it free with an OS that most people are using anyway and there you go.

HP may have bought Gateway, but I don't remember the stock prices going up.

I've had to deal with companies who acquired someone else and their flagship products, and have the support go down the tubes waiting for the aquiring companies to get their people up to speed, compared to those who did the R&D to make the product in the first place.

I will give you the point of mediocre is good enough.  Of course.  It's not that a product is great, but that it's first.

I guess I would lean on the side of Sondergaard, with the thought that a pure aquisition company with no R&D will not make it, and if that spells the end of Gartner, well....

Oct 22, 2010 12:32 PM Rob Enderle Rob Enderle  says: in response to David Homrighouse

I think it really depends, R&D has issues as well because we spent billions at IBM and much of the work never went anyplace out of R&D.  Recall that Xerox R&D created the GUI and the Mouse and they had no clue how to deal with either.  

HP bought Compaq, Acer bought Gateway in order to get Packard Bell in Europe which is why HP is in the lead and Acer is scaring the crap out of everyone at the moment.  

In the end I think the right answer is "it depends" R&D is great for some things and aquisitions for others but to say one is clearly best for all things just doesn't seem to hold up. 

By the way, agree a lot of aquisitions go shouth and the customers of the aquired company get screwed.   Peoplesoft by Oracle is a good example of that. 


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