Tuesday, May 15, 2007

Thoughts on Informa and Datamonitor

Yesterday we had the news that Informa is to acquire Datamonitor. As Dom says, this is the “biggest industry analyst story of the year so far.”

What can we read into this purchase?

Informa is a provider of specialist information and services for a variety of academic, scientific, professional and commercial business communities. A firm like Datamonitor fits nicely into its business model.

However, I don’t think we should start to get excited about Informa suddenly becoming a significant rival to Gartner in the technology research and advisory business (at least not in the traditional manner, but more on that later*).

First, the numbers don’t stack up. Last year, Gartner had revenues of $1 billion (USD). Even without consulting, its revenue is still over $700 million.

In comparison, Informa may have revenues of over £1 billion (GBP) but technology research isn’t that big a part of its business.

In 2006, Informa’s telecoms and media products (ie its technology offering) had revenues of £64.7 million. That’s everything – events, magazines and newsletters, and research services.

Datamonitor will bring in some additional technology revenue – but its total revenue in 2006 was £70.4 million and a significant part of that isn’t from technology research.

When you start doing the sums (even allowing for the dollar / pound exchange rate), then Informa’s technology analyst business is going to be a whole smaller than Gartner’s. (Although, interestingly, it’ll be of a similar size to Forrester’s – again, exchange rates permitting).

And it's not just the money. Informa’s existing research business specialises in the telecoms and media markets. By acquiring Datamonitor (and Ovum and Butler and Computerwire), it is broadening its coverage out – but it’s still got some way to go before it can effectively compete with Gartner’s breadth and depth of coverage of the technology sector.

If Informa plans to build an analyst business of a scale to rival Gartner, then there’s a lot of growth needed. Some of that must be organic but acquisitions will have to play a part too. Think Forrester and Yankee for example, perhaps with some boutique firms thrown in to provide coverage of more specialist market niches.

But I think we need to consider whether this is Informa’s plan at all.

Both Informa and Datamonitor have successful businesses outside of technology research. There’s plenty of low-hanging fruit that can be gathered as a result of this acquisition. And most of it’s not in the technology analyst market.

* There is another side to this acquisition that potentially poses a more interesting long-term challenge to those of us in the analyst relations market. I’ve got to go out now so that will have to wait - probably tomorrow.

10 comments:

Dom Pannell said...

This is useful, David. I haven't taken the time to go through the numbers properly, so thank you, especially for picking up on the size of Informa T&M compared to the whole.

A European behemoth to challenge Gartner is certainly not here yet (but given the way this is panning out, I wouldn't be surprised if Informa in turn became an acquisition target, then who knows what we'll be looking at?)

David Rossiter said...

Thanks Dom. If this goes through, Informa will be a major industry analyst firm. There's no doubt about that.

Will it suffer from Informa's lack of industry focus or benefit from being part of a global information services provider - well, that is what will dictate its future success.

If Informa is planning to put more resources into making its tech research business a powerhouse, then Gartner will need to be looking over its shoulder in a few years.

If not, then the risk is that this business unit starts to lose momentum, management, analysts and reputation.

Barbara said...

I think Informa could get an advantage over Gartner/Dataquest telco services today -- not too difficult.

Must admit, in the tech/media/entertainment space, I'd like to see Informa now focus on media and research acquisitions that add spark to their brands, methods and audiences -- M:Metrics or Telephia, JupiterKagan, GigaOm, KenRadio, Engadget or Gizmodo, etc. This sort of business strategy would redefine Informa and give it a unique footprint in market influence.

Jonny Bentwood said...

My view is slightly more long term. If you consider what the key elements are of a successful analyst business model are, and then apply them to the Informa Group you can see that they 'potentially' fare very well.

1) Research (Informa and Datamonitor have great scale here)
2) Events (Informa and to a lesser extent Butler have expertise here)
3) Advisory (Ovum, Butler and [a few Datamonitor analysts] are great here)
4) Market (Ovum have positioned themselves superbly within the Telco space, DM within Healthcare)

Obviously success is not guaranteed. Informa must retain the key analysts as well as ensure that they don’t change what works well at Ovum and DM (ie Consulting and Reports). Where does this leave us? I still believe that handled correctly the sheer scale and size of Informa enables them to be a credible competitor to Gartner. In a world where I am regularly hearing the demand to speak to someone else beside Gartner this is a welcome move.

My post backs up this point.

Anonymous said...

This acquisition should put IDC and Forrester on the defensive as both have a lot of cash, have not been investing in their key employees, and have not had a coherent strategy. IDC's insights is mixed and Forrester's role strategy has been awful for clients as we still can't find anything on the website.

Anonymous said...

One would hope that the Informa group make a better job of the integration than Datamonitor has done with Ovum. What a mess.

Jim said...

True. DM seemed to forget that the value of what they were paying for in Ovum walks out the door every evening. Pity the poor PR person who needs to keep the team profile page up to date (www.ovum.com/media/biogs.asp) :(

Those who can have already left, those that can't ...

Anonymous said...

They are leaving Ovum almost every day now. Most of the good analysts have gone - and all the best consultants were given the push!

DM's handling of Ovum was a case study on how not to do it - question is whether Informa can still extract sufficient value and recruit replacements - I doubt it.

Anonymous said...

At least the Informa acquisition of Datamonitor gives what is left of the Ovum consulting business a bit of a reprieve.

The subscription information services are a nice safe business model with a high level of repeat customers giving predictable revenues and costs. This part of Ovum was a nice fit into Datamonitor and now into Informa.

Consulting, however, involves variable utilisation levels with unpredictable revenue flows (even on projects that have been won) and the potential for cost overruns and losses on some projects.

The Informa acquisition comes at about the time the consultants would have been expecting to hear from Datamonitor about their future. This decision will now pass to Informa delaying any action.

HOney said...

Hi!

I just wanted to update you regarding a rather shocking decision from Informa PLC in which they have closed down Dubai,India and Manchester offices. In the process they have fired about 500 employees.

This news could have a massive impact on their stock value and thus they've kept it under wraps. I would request you to investigate and publish a full report on the same.