The History and Role of Analysts

on February 15, 2013


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.