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Wednesday, November 15, 2006

Over-sensitivity at the New York Times

Technology journalists have long wrestled with the conflict-of-interest issues inherent in quoting industry analysts. These analysts - IDC, Gartner, Forrester and many others - are a vital source of commentary and perspective on happenings within the industry and they are quoted by nearly every major media outlet.

The conflict is that nearly every one of these analyst firms relies on vendors for their livelihood. Some, like Gartner, actually have a pretty strong user-side revenue source, but the reality is that most of these firms couldn't survive in their current form without vendor dollars. And the big vendors employ almost all of them. You'd be hard-pressed to find any major analyst firm that doesn't do business at least occasionally with IBM, Microsoft, HP, CA and other big vendors.
Reporters and editors know this, but it's an inconvenient truth that has been conveniently ignored for many years. Which is why it was surprising to read this editor's note in the New York Times late last week (registration required) regarding quote attributed to analyst Rob Enderle.

Enderle, who's a veteran analyst and an expert at courting the media, had contributed two positive but rather benign quotes to an earlier Times story on the Microsoft Xbox. Apparently, someone took exception to Enderle being quoted because Microsoft is his client (a fact that is fully disclosed on Enderle's website) . "Had The Times known of Mr. Enderle’s work for Microsoft, it would not have sought out his opinion on the product," the editor's comment said.
Well, had the Times known of every analyst's work for Microsoft, it would never have any analysts to quote. The reality is that it's hard to be in the tech analyst business without crossing Microsoft's path at some point. But the fact that you take money from a company doesn't mean you're beholden to it.

Perhaps the Old Gray Lady is still smarting from the humiliation of the Jayson Blair incident. It certainly went over the line in casting doubts on Enderle's credibility through this belated retraction.

The reality is that tech clients tend to cancel each other out. Analysts who do business with Microsoft are usually also doing business with IBM, Sun, Red Hat or other companies that compete with Microsoft. This competitive tension keeps people honest. It's appropriate for a reporter to ask analysts to disclose their clients, just as The Wall Street Journal now mentions client affiliations when it quotes stock market analysts.

Also, what analyst is his or her right mind would shill for a client? The damage to one's credibility would be devastating. A lot of people in the analyst business are still smarting over the WSJ's 2002 roasting of Aberdeen Group over the firm's now-discarded practice of "pay for praise." Aberdeen's name was mud in tech journalism circles for years following that disclosure.

In singling out one analyst for criticism, the Times went too far. Show me an analyst who doesn't do business with the big vendors and I'll show you an analyst who probably doesn't have much interesting to say.

Labels: mainstream_media

¶ 1:11 PM

Comments:

This episode appears to be the result of either a reader and/or the New York Times editorial staff who are confused about the distinction between Financial Analysts and Industry analysts.

There is a huge difference between a financial industry analyst who touts one company's stock and INDUSTRY analysts who provide competitive and industry analysis across a market full of companies.

A key difference between industry analyst like Enderle and his colleagues in Financial analysis is much of Enderle's economic success is driven by building a client base of companies who compete with one another. If Enderle's analysis appeared slanted toward a single company, his economic fortunes would be severely limited. In fact, Enderle is rumored to be one of the most succesful IT industry analysts in the business. Clearly his clients must value his credibility.

You make an excellent point that any industry analyst who has any meaningful knowledge about a market or vendor will be actively sought out by the vendor or markets in question. The media looks for the same expertise when they seek a quote.

Think about it. Why would a reporter want to quote an industry expert who doesn't have in-depth knowledge of the market and players? The logic behind the concern here is baffling to me. Because Enderle built a business analyzing competitors in a given market, and most of the competitors are clients of his analysis, he is analysis is somehow suspect? Folks, this has a very anti-intellectual ring to it and hardly the stuff of New York Times reputation...

Anyway, thanks for your excellent post.

# posted by

Anonymous : 9:41 PM

This episode appears to be the result of either a reader and/or the New York Times editorial staff who are confused about the distinction between Financial Analysts and Industry analysts.

There is a huge difference between a financial industry analyst who touts one company's stock and INDUSTRY analysts who provide competitive and industry analysis across a market full of companies.

A key difference between industry analysts like Enderle and their colleagues in Financial analysis is much of Enderle's economic success is driven by building a client base of companies who compete with one another. If Enderle's analysis appeared slanted toward a single company, his economic fortunes would be severely limited. In fact, Enderle is rumored to be one of the most succesful IT industry analysts in the business. Clearly his clients must value his credibility.

You make an excellent point that any industry analyst who has any meaningful knowledge about a market or vendor will be actively sought out by the vendor or markets in question. The media looks for the same expertise when they seek a quote.

Think about it. Why would a reporter want to quote an industry expert who doesn't have in-depth knowledge of the market and players? The logic behind the concern here is baffling to me. Because Enderle built a business analyzing competitors in a given market, and most of the competitors are clients of his analysis, he is analysis is somehow suspect? Folks, this has a very anti-intellectual ring to it and hardly the stuff of New York Times reputation...

Anyway, thanks for your excellent post.

# posted by

Anonymous : 9:44 PM

This episode appears to be the result of either a reader and/or the New York Times editorial staff who are confused about the distinction between Financial Analysts and Industry analysts.

There is a huge difference between a financial industry analyst who touts one company's stock and INDUSTRY analysts who provide competitive and industry analysis across a market full of companies.

A key difference between industry analysts like Enderle and their colleagues in Financial analysis is much of Enderle's economic success is driven by building a client base of companies who compete with one another. If Enderle's analysis appeared slanted toward a single company, his economic fortunes would be severely limited. In fact, Enderle is rumored to be one of the most succesful IT industry analysts in the business. Clearly his clients must value his credibility.

You make an excellent point that any industry analyst who has any meaningful knowledge about a market or vendor will be actively sought out by the vendor or markets in question. The media looks for the same expertise when they seek a quote.

Think about it. Why would a reporter want to quote an industry expert who doesn't have in-depth knowledge of the market and players? The logic behind the concern here is baffling to me. Because Enderle built a business analyzing competitors in a given market, and most of the competitors are clients of his analysis, he is analysis is somehow suspect? Folks, this has a very anti-intellectual ring to it and hardly the stuff of New York Times reputation...

Anyway, thanks for your excellent post.

# posted by

Offtoworkwego : 9:49 PM

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