The History and Role of Analysts

by Tim Bajarin   |   February 15th, 2013

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Analysts often take a beating by the new media generation. Many simply look at the term analyst and wonder what in the world this community does. More importantly, many in the media use the term analyst liberally and don’t understand the difference between financial and industry analysts. I was one of the first “analysts” that were called computer analysts when I first started. The firm that I am the president of, Creative Strategies Inc. has a deep history in the technology industry as a market intelligence and computing research firm.

Many have come through our company and gone on to bigger and better things. Trip Hawkins was an intern at our company before he was hired away by Steve Jobs and then later started Electronic Arts. One of the founders of my firm went on to start Dataquest, which was later purchased by Gartner. Analysts have and always will play an important role in this industry. Since I often get the feeling that the analyst community is misunderstood, I thought I would take time in this week’s column to explain the history and the role of technology industry analysts.

Doing this job for 31 years has been fascinating. It has allowed me to literally watch the PC industry develop from its birth and chronicle, as well as analyze it, through its major growth phases.

The Early Days of Computing

I joined Creative Strategies in 1981, the year IBM introduced their PC and became one of the first PC industry analysts in the market place. In fact, in 1981 there were no PC analysts when I first started and the few of us who got the title of PC analyst were given this because most of us were mini-computer analysts or IT researchers and were asked to include PCs in our analytical and research coverage.

The first IBM “analyst” event I went to in Boca Raton, FL was not even actually an analyst’s event, as we know it today but could be consider one of the earliest personal computer analyst events. All of the analysts invited, who were 5 in total, were from major market research firms who covered computers in general and all were professional analysts newly saddled with covering the Personal Computer. The event was designed to show us how their PC could help business’s with the goal of us being better informed to help our industry and IT clients understand what a PC was as well as its current and future potential.

Two years later, when Compaq introduced their PC, I was invited to their first analyst event in Houston and six of us analysts were asked to join them at an extremely private event with their president and co-founder Rod Canion, and Compaq’s major financer, Ben Rosen. It turned out to be an intimate discussion about why they decided to build a PC and take on giant IBM and to help us explain to our IT customers why Compaq should be taken seriously.

During the next five years the PC gained momentum and demand for information from research companies like ours rose. During this time I started traveling around 100K miles a year to meet with just about everyone in the PC supply chain, specialized PC sales outfits like Businessland, and even early IT customers using PCs, with the goal of understanding the role and impact of PCs in the market. During this time I also authored industry reports on hard disk drives, desktop publishing, portable computing and multimedia as part of our work to inform our customers about the role of PCs in the overall marketplace whether it be used for business or by consumers.

The Analysts Role

Traditionally, the job of being a PC analyst was defined by professional researchers who were drafted to add PCs to their research portfolios and are today represented by companies like Creative Strategies, IDC, Gartner, Forrester, Strategy Analytics, NPD / DisplaySearch, to name just a few. Our role as analysts is to study the industry and all of its parts. We seek to understand markets, products, solutions, adoption cycles, trends, and core strategies that impact the current and future market. We use this data and information to generate market intelligence and forecast trends related to the overall computer industry. However, we do not recommend or attempt to influence stocks. In fact, most of us on the industry analyst side can’t and won’t hold tech stocks in order to maintain our objective positions on companies we study.

Many tech companies subscribe to the services of industry analysts in order to keep a wide view of the market. Most companies are knee deep in heads down execution. An industry analyst’s job is to always keep their head up, looking and researching everything they can that is related to their core areas of expertise and focus. Their job is to be as informed as possible so that when called upon, they can use their data and research to help customers who need clear and concise analysis related to the markets they care about. This data is often used in companies internal planning process.

The job of researching the market and recommending stocks goes to another important analytical community known as financial analysts. Most of these analysts are also professional researchers whose job is to study specific companies and determine their strategy and growth potential and if their customers should buy or sell stocks in these companies. They play a key role in the overall stock market and are very important to the investment community as they provide the kind of data that is needed to make smart and calculated decisions for those who put money into the stock market. An interesting side note to this is that financial analysts often query all of us industry analysts and they use some of our research and data in their final reports and recommendations.

Analysts seem to get referenced more often in todays times and not always in a positive light. I myself have read some pretty “unique” things financial analysts say out loud but let’s understand one thing about them; some of what they say publicly is a game to throw off competitors at other investment firms. If you read their research notes to the fund managers, many times they are largely different than what is said publically.

Analysts at their best offer insight, perspective, and critical dialogue about key topics in the industry. When done right, this comes from rich experience and a depth of understanding about the areas they are called to shed insight on. This is why the established media outlets often quote industry and financial analysts. The media has often utilized both groups, which have separate roles in the market, as a resource to help add shape, context, and proprietary research to their story. Industry analysts, financial analysts, and journalists will continue to play an important role in the market place. The technology industry keeps getting bigger. The world is moving from an analog one to a digital one. Technology is destined to touch just about every aspect of our business and personal lives. We are all along for the ride and we all have a role to play.

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
  • Glaurung-Quena

    Regarding financial analysts:

    “I myself have read some pretty “unique” things financial analysts say
    out loud but let’s understand one thing about them; some of what they
    say publically is a game to throw off competitors at other investment
    firms.”

    Well, that’s a very kind way of putting it. Financial analysts are wall street investors first and foremost, which means they are just as venial and corrupt as the greedy psychopaths who drove the world’s economy into the ground so they could get rich selling mortgage backed securities and credit default swaps. It would be more accurate to say that a good fraction of what financial analysts have to say is designed to manipulate the market for their firm’s (and thus their own) financial gain.

    • capnbob67

      You sir, are awarded +100 internets for that comment.

  • mhikl

    Tim, the number of ‘tech’ sites that I visit have been drastically reduced since I began to follow TechPinions and especially after a particularly lucid analysis by Ben on the difference between an analysis and journalist and this article furthers the topic. (The dedicated financial analyst is an even rarer fish I find. ) Of course I had usually gravitated towards good analyses and gave less credence to journalists like John Dvorak, but cognitive awareness, mindfulness and time constraints have brought better focus to my studies and most derivative journalists are not visited anymore.

    The writers at TP seem ever to challenge themselves, and each other, so that what seemed perfect yesterday is even better the next and that is what makes all the difference. John Gruber, John Martellaro, Horace Dediu, Ted Landau all fit well into the category of serious analysts in my opinion.

    • steve_wildstrom

      On behalf of the Tech.pinions crew, thank you.

      As a lifelong journalist, I would just point out that there are good and bad journalists just at there are good and bad analysts. Good journalists, like good analysts, keep an open mind, work hard to keep prejudices and onions from coloring their judgment, and do their homework.

      • mhikl

        Agreed, Steve; but I have to keep things simple in my philosophy and I do see great Journalists stepping past the frontier into the realm of the analyst. And as in any profession, not all analysts bring honour to their kin.
        (and I should have made that clear in my post. dang)

      • pawhite524

        Steve,
        I agree 100% with mhiki about those who write for tech pinions and truly enjoy your work. In your response above you wrote “work hard to keep prejudices and onions from coloring their judgment, and do their homework.”
        Please clarify the “onions from coloring their judgment…” because you lost me on that one.
        As always, all the best to you and your colleagues.

        • steve_wildstrom

          Oops, done in again by autocorrect. That should be “prejudices and opinions.”

          And thank you for your kind words.

          • jfutral

            “onions from coloring their judgment…”

            There’s a joke in there somewhere.

            Joe

    • pawhite524

      Agree 100% with your fine post. For me, I add Jim Dalrymple to your collection of analysts to take seriously for their efforts.

    • capnbob67

      I agree with the premise that there are not that many voices worth listening to in these areas.
      As my rant below would support, I would say only Dediu is a real analyst. The others are interesting and readable bloggers/commentators/aggregators with opinions and frames of reference that make a lot of sense to me (and obviously, you). But they don’t do much, if any, hardcore analysis and don’t really push the ball forward much. Mostly they put the ball back into play on the fields of reality with lots of rapid response to news and events. It’s a useful service which I enjoy.

      • mhikl

        Good points, cap. But I have a wearied mind at times but the analyst who makes thoughtful points, reiterates truths that add nuance to the discussion furthers, reinforces and confirms understanding. Prattle is cheap and that is what so many do making the gems at TP and other sites shine brighter.

        Dediu has a particular focus and with graphs and explanation brings startling understanding. Others take gnarled balls of yarn and make pictures of clarity and both serve valuable functions.

  • def4

    My impression is that analysts have deservedly developed a bad reputation because of the myopic views and stupefyingly unimaginative projections that have been reported by tech blogs.

    It seems to me that just as companies may be too involved in heads down execution, so are many analysts too involved in gathering data and too lazy or uninterested to publish anything except the most obvious conclusions about the past and the simplest extrapolations about the future.

    Initially, I thought the freely available reports were intentionally dumb or obvious, but when “real” reports and notes started leaking onto blogs they weren’t much better.
    Besides the entertainment value offered by misguided analysis and naïve predictions, the most value for me comes from the leaks and rumors their supply chain bribes generate.

    Only techpinions and asymco seem to try to do interesting analysis.

  • capnbob67

    Thanks, Tim. Informative description of the Analyst role and its usage in the real world. As someone who has worked directly with so-called analysts from the big tech data firms (Gartner, Forrester, etc.), on both the production and consumption sides, I would say there is precious little analysis going on and mostly what is, is typically the parroting of info they coerced from people/companies actually operating in and driving the markets they “analyze”. The number of epic and regular predictive misses and effective pay-for-play vendor recommendations gives a lie to the dream that there is a valuable and productive industry of great analysts out there. I’m sure Creative Strategies is amongst many exceptions. The following is my personal rant on the subject of good analysis (and analysts) – not on the quality of Tech-onions ;-) (the clue is in the name).

    I am glad a couple of people have brought up http://www.Asymco.com and Horace Dediu. To me, he is the only person I have found on the internet consistently doing what I would class as real analysis on these markets and companies. I would love to hear suggestions on others who produce similar quality product. He asks a question, develops a theory or 2, tests them, often with some quantitative analytics and then structures an answer to his question within a framework that helps others understand his points. Thus we get “This is why is Samsung doing so well in mobile” not “Oooh isn’t Samsung doing well” or “This is how Apple’s capital expenditure predicts financial performance”, not “Didn’t Apple spend a lot of money last quarter”.

    It may be a little harsh to suggest no-one else is doing this kind of work. Other people may well be but they don’t seem to be publishing it where ordinary internetizens can get it. Fair enough, you get what you pay for. Horace is just getting into monetization of his analysis (beyond monetization of himself) based on building a reputation with his free “channel”. Others like Tim have a whole company to support and paying clients, a 30-yr old model with little room for letting the good stuff out to the public.

    Before people jump on me for an unfair semantic definition of analysis, I’ll suggest an example of what I mean. When we get an article on whether RIM (now BB) can “make it” we typically get a lot of personal opinion on how compelling is BB10 or the Z10, how big (small) its ecosystem is and massively indeterminate commentary on consumer vs. enterprise markets. What I would call great analysis would include:
    1) Something data-driven about RIM’s BES vs. BIS penetration over time, relative revenues and prospects under future demand scenarios
    2) Something data-driven about BYOD progress in the key BES-using segments and how this is driving device decisioning for and/or against RIM
    3) BB user-base analysis – some attempt to separate Bolds from Curves, Developed vs. developing market sales, loyalty within those segments, prospects vs. competition, etc.
    4) Financial analysis of the RIM P&L and BS trends beneath the surface. How do they keep accruing cash on collapsing device sales (services revenue, device margins, SG&A rates, , R&D as a % of sales, etc.), how sustainable is their financial model at what levels of user base, etc.
    5) Carrier economics vs. RIM – what it takes to incent carrier push in a world where Samsung offers massive spiffs, MS subsidizes Nokia and Apple drives intense customer pull.
    6) As for Ecosystem, what can be said about how many apps you need to succeed? Most people just spout opinion e.g. “You only need 10,000 great apps”, others will say that “800,000 is a huge advantage to Apple/Google”. Where is the analysis? Beyond the 80:20 rule stuff about most people use a small set of apps most of the time. I would say that there are many small, specific apps that I hardly ever use but when I infrequently need them, I really appreciate it which helps keep me loyal to a platform. Again, that is just opinion. We need analysis to try to draw some supportable conclusions.

    Anyway, I’m not suggesting this is one article but would be a good series and deliver strong analysis and insight to its readers. It would also be a ton of hard work in research and analysis. You can still jump on me for setting a high bar but I think I’m just putting it where Horace has implicitly set it.

    As others have said, financial analysts have no interest in informing the market or interested bystanders, just in making money for their employers and (usually but not necessarily), their clients. What we are left with is a small range of interesting commentators and pundits pontificating on

    I would say the majority of content on most of the internet blogs is commentary and opinion, typically not highly fact-based or analysis-driven. There is a lot of (re)interpretation of the past, repeating or summarizing historical analysis that is already out in the public domain or applying weakly supported logic to strawman positions. There is much useful punditry on the news of the day, leveraging the authors’ long (or not) industry experience to give their (valued) opinion on it. Sometimes solid and balanced, sometimes a very personal rant about Apple, Amazon, Google, Microsoft, etc. Not to say it isn’t good summary or interesting opinion but it isn’t the same as true analysis.

    Note, this is NOT a criticism of Techpinions or the esteemed authors here as much as an acknowledgement of the reality of trying to squeeze out interesting content daily (even across a handful of authors who also have day jobs). Big blogs have their bloggers deliver several articles per day, mostly just a repeated press release with a dash of opinion. Horace does well averaging a meaty piece every few days, weekly or fortnightly. That said, few people have the combination of the analytical skills and inquisitive and creative nature to actually pull this off or the insight to put the inspired hours and hours into research and number crunching that leads to strong analysis. Almost no-one has the time, interest or incentive to put the results out there (for free).

    As always, all this is just my opinion. As an example, supporting analysis about the state of internet tech industry punditry would have been at a minimum to go through a year or 2 of Techpinions or months of BGR or The Verge’s output and classify, crunch and interpret the results into valuable conclusions within a framework that helps people to understand it. Analysis, a rare art.

    • benbajarin

      You bring up a lot of good points. Tim and I, and the others who hold the analyst title that we publish, have the good fortune of being independent and thus control our own content. My colleagues at IDC, Gartner, Forrester, etc., would not be allowed to do the kinds of things publicly we do with our columns. Tim’s focus and mine when I joined has always been about the future. To predict the future, as best as physically possible, does require quite a bit of good data and research. Although we don’t give the full monty of the data and analysis we sit on, we do use that to form and shape our opinions and the kind of content we write here at Tech.pinions. Thus we hope it comes off as opinion, but also as a credible one since it is backed by our market and trend data.

      Tim and I believe there is room for business model evolution in the analyst business and we have ideas and will experiment. To a degree what we are trying to do with Tech.pinions is an experiment in one of those directions.

      I also agree with you that Horace is doing a great job on the free side and I hope he continues to monetize himself and his site well so he can keep doing it.