Competitive Intelligence

Gartner Buys META: Consolidating Analysts Search for Security

Gartner bought-out META Group at the end of the year and, having failed to blog it right away, just couldn't let it go past withough a few thoughts. The primary implications, in my view, boil down to significantly less choice for IT leaders looking for analytical research and consulting. The $162 million cash acquisition leaves just two big research firms in Gartner and Forrester, with IDC as a lagging third choice, but the real story is that, the squeeze on IT budgets over the past several years, along with the growth of the Internet as an information resource, has led to decreasing revenue for information service companies across the board.

This is primarily an opportunity for Gartner to buy into faster growth, cut operations and admin costs to increase profitability, having reported $638 million in revenue through the first nine months of 2004, up 4% from 2003, but with net income declining 30% to a measily $12 million. But, since IT managers often come to rely on the particular analysts covering a technology sector or business issue important to them, the combined firms' clients will be most concerned about what happens to that person after the acquisition. An exodus of those analysts could scuttle the point of buy-out, if cultures don't mesh, but Gartner says the addition of META's sales team will enhance Gartner's ability to increase revenue in coming years, while also driving operational efficiency given the complementary nature of the two companies. Gartner CEO Gene Hall weighed in with his own (brief) opinion of the deal:

I am delighted to share with you the news that Gartner, Inc. has reached an agreement to acquire META Group. Upon completion of the transaction, the combined company's professional staff of research analysts and consultants will be able to provide an even greater scope of independent, objective counsel to help senior IT and business executives leverage information technology to meet their strategic objectives.

META Group represents an outstanding strategic fit with Gartner. The acquisition of META Group allows us to expand our ability to deliver the broadest, deepest, most timely advice and consulting on information technology.

We expect the transaction, which is subject to customary closing conditions, including regulatory approvals, and approval by META Group's stockholders, to close in the second quarter 2005. We will keep you informed of developments as they occur. As Gartner moves forward, I want to thank you for allowing us to be your partner. We look forward to continuing and growing our relationship with you in the future.

Since both firms are based in Stamford Connecticut, at least there won't be many office changes, but a continued the lack of differentiation - plus the relatively low $162 million selling price (in my opinion) reflects that lack of value many IT constituents find in the advice of such firms, in an age when strategic advice is rather easier to come by.

The Red Herring commented that, $162 million would have gone a lot farther invested in a place like India, shipping those high-priced analyst jobs off-shore, rather than consolidating with a competitor at home. One thing's for sure - if differentiation remains this hard to establish, Indian competitors will continue their march on North American shores, and already rapid price commoditization will certainly accelerate.

Is there any upside? At least the two analyst teams might be able to sync up on growth forecasts - I always found it puzzling the 5-year CAGR on any given component or technology could easily be off by 100 percent, making the reliability with which a client entrusted the analysts to predict the future a bit less certain than they'd hoped.

- Arik