Analyzing companies of any size is hard. Analyzing large ones, however, is harder yet.
- I get (much) less substance in an hour on the phone with a megacorp than I do when I talk with a smaller company.
- What large companies say is less reliable than what I hear from smaller ones.
- Large companies have policies, procedures, bureaucracy and attitudes that get in the way of communicating in the first place.
Such limitations should be borne in mind in connection with anything I write about, for example, Oracle, Microsoft, IBM, or SAP.
There are many reasons for large companies to communicate less usefully with analysts than smaller ones do. Some of the biggest are:
- For reasons of internal information flow, the people I talk with just know less than their counterparts at smaller companies. Similarly, what they do “know” is more often wrong, since different parts of the same company may not hold identical views.
- That’s when we talk about real issues at all, which can get crowded out by large companies’ voluminous efforts in complex positioning, messaging, and product names.
- Huge companies have huge bureaucracies, and they hurt.
- A small company C-level executive can make smart decisions about what to say or not say. A large company minion doesn’t have the same freedom.
- Just the process of getting access to even a mid-level spokesminion at a large company is harder than reaching a senior person at a smaller outfit.
- Large firms are clearest when communicating with their existing customers and those organizations’ key influencers. They’re less effective or clear when opening themselves up to competitive comparisons.
- If a company wants to behave unethically in its analyst dealings, there are economies of scale to doing so.
Different analysts, of course, have slightly different experiences. Mark Smith of Ventana wrote (emphasis mine):
… nowadays one insidious factor is having a pernicious impact on not only the timeliness of the research but its honesty as well. The dirty secret is that some of the largest technology vendors have forced industry analyst firms to contractually agree to the right to review, edit and approve any written research that references their name or products before it is published.
Technology vendors claim this is because they want to fact-check industry analysts’ work before it is published … vendors, even the best-intentioned, cannot escape the biases they bring to reviews of their products. Vendors’ heavy oversight has led to less research from industry analysts being written that offers a useful level of detail or analysis, let alone opinion. Moreover technology vendors use their influence to control access to their executives, offering interviews to those who agree to play this game and leaving out those who do not while leaving executives in the dark about the decisions about who is being scheduled.
The “edit and approve” part doesn’t exactly match what I’ve seen:
- IBM is a current client, and has made no such request; indeed, they haven’t even asked for a right of review.
- Ditto Sybase, which has now been owned by SAP for a while.
- Oracle’s request was more for a right to review and comment. I’ve turned that down for a variety of reasons. But they never portrayed it quite as an official right to edit and approve.
- Microsoft was briefly a client, in a relationship inherited from acquiree DATAllegro, and made no explicit oversight request. On the other hand, they did cut off the relationship for years after I wrote something they didn’t like.
But while I wonder whether Mark is overstating the matter a little, directionally he’s spot-on.
I am generally appalled by the behavior of certain companies toward analysts, and their efforts to control what analysts say. Practices include:
- Demanding a review cycle on anything the analyst writes about them, sponsored or otherwise.
- More generally, heavily tailoring access not just according to an analyst’s importance (by whatever measure of importance or influence makes sense to them) but also pliability.
Note: This post is substantially lengthened from the original version that went up a few hours earlier. (To make up for that, I shortened the excerpt from my own 2010 blog. )