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When Free is the Right Strategy for Analysts

I just ran across this post (via A VC) which discusses the question of when free is a good strategy for your business. It’s a question with no clear right answer, depending as it does on a highly dynamic set of variables that are unique to individual business opportunities. In other words, free for software is not the same as free for hardware, and even within software free for email isn’t necessarily the same as free for databases. But the question has a particular resonance for me, given that RedMonk’s view on free is a bit different than you might find elsewhere.

In much the same way that I view open source to be a matter of incentive, as a small (ok, tiny) firm, our incentive is clear. Free is and always has been a fundamental component of our business model. While it’s only within the past year or two that we’ve been pushing our content in that direction, whether it’s on our blogs or with Creative Commons licensed publications (e.g. (PDFs) here or here), we’ve always been fairly open with feedback during briefings. I don’t mean that we turn a vendor presentation to us into full blown consults, but we’re not coy about citing potential opportunities and threats in the products we’re briefed on.

James (my colleague) describes this via James (McGovern) here:

Paying for briefings – screw that! tell the guys to give us a call. briefings are free. and we also give feedback during briefings – anyone that has an interaction with RedMonk should come away with an interesting insight, whether they pay or not.

I won’t even touch the concept of paid briefings here, since like my colleague that seems to me to a practice rife with both monopolistic exploitation implications and conflicts of interest.

But of greater interest is what the interactivity level is within vendor conversations themselves. In a post entitled “How analysts can help sales while helping themselves” which has apparently been taken offline, our industry analyst colleagues the 451 Group described how they conduct briefings, then offer suggestions at the insights they provide while holding back the insights themselves. Compared to what we hear of some other firms in the business, the 451 Group’s approach seems very ethical, and entirely above board.

Our approach at RedMonk, however, is quite a bit different. How? Well, I can’t recall a conversation where we didn’t at least attempt to give some feedback, or provide an opportunity for questions coming our way. We believe in having two way conversations with everyone we speak with; vendors, enterprises, open source projects, developers, whomever. Just this week alone I’ve had queries from five developers on topics from Ajax to Ruby to Software as a Service. Maybe our feedback’s of value, maybe it’s not, but we’re not about having one way conversations. If people want to hear more from us, we hope they make the transition to customer, but that’s not a prerequisite for interacting with us. To be sure, we do throttle our participation to some extent, giving clients a greater volume of insight (sometimes more than they asked for ;), but we’ll always have something to say even for those that have no intention of ever signing up with RedMonk.

This approach, while often appreciated, has led quite a few people to ask us how we get paid, how we actually make money. To understand that, let’s return to the first post cited, “When Free is the Right Strategy.” In the entry, Tom Evslin cites three justifications for a “free” approach:

Three good reasons for giving things away are 1) to build a large network; 2) to establish a standard; 3) to establish a prospect base (which I’m not blogging about today)

Although I might phrase them differently, I think these are indeed very good reasons for opening the vault – the first and third being most relevant to us, obviously.

There are also less economically tangible justifications for being more open on calls; first, much of the value of industry analysts is derived from perceived value, what Doc Searls might call authority. If all you do is absorb information, outputting that into long and complex reports that only a subset of the community (your customer base) can read, it’s difficult for the person on the other end of the conversation to gauge your relative knowledge level on the subject in question.

Perhaps more important, however, is that fact that real, two way conversations have the potential to lead down new paths, and open new doors. By demonstrating a willingness to give something up, you just may get something in return. That might be a contract down the line, it might be an introduction to an opportunity elsewhere, or it might just be a more insightful conversation that leads to a better understanding of the technologies or industries involved. Either way, that has real, tangible value to us.

So, yes, we do give quite a bit away for free. But just look at where most of our current customers have come from, and I think one would be hard pressed to argue that it’s a bad strategy for us. Would we have the same client base if we had every customer on the clock everytime they picked up the phone? I doubt it. But would our approach be appropriate for, say, Gartner? Much as the vendors would like it to be, of course not – there’s no incentive. But that can change, if enough people want it to.

Categories: Trends & Observations.

  • Nigel Fortlage

    Stephen, I think all related consultant business (ours being international trade) make a credibility statement to our clients by being open to the initial level of discussion and thought without being on the clock. It not only buys credibility but also acts as a great reference vehicle as well.

    One benefit that we see is that the initial conversations answer the easy questions of most clients, that in all honesty you don’t want to go to the hassle of billing for anyway. That leaves the real meat and potatoes that you are paid for in providing your expertise and guidance or the larger projects that really help pay the bills.

  • http://www.redmonk.com/sogrady sogrady

    couldn’t agree more, Nigel, and on that note you’re a perfect example of this, having given your time freely to discuss your PHP experiences. thanks again for that, and i look forward to more discussions in the future.

  • http://marionvermazen.blogs.com/marions_blog/ Marion Vermazen

    Stephen, Your posting was very timely. I always enjoy reading your blog. You have educated me on the analyst business and your approach to it. But I was thinking about it recently and I realized that while I think I sort of get it. I’m not sure I could have explained to someone else what you do and why I might want to hire you or for that matter how you make money. I think after reading this post I get it. So what do you consider your areas of expertise? Do you consider yourselves experts on how to build community? How about blogging? Do you consult on how to use blogging to get closer to customers? I suspect you focus on more technical kinds of consulting but I’m not sure. One other question. You kind of lost me on your last statement. Is there no incentive for Gartner because they already have a customer base paying for the current model? Why wouldn’t the benefits you see also be incentive for them?

  • http://www.redmonk.com/sogrady sogrady

    Marion: i left out that i enjoy your blog as well, and have been seeing it make the rounds more and more ;)

  • http://www-106.ibm.com/developerworks/blogs/dw_blog.jspa?blog=396 Bill Higgins

    Makes sense. I certainly have learned a lot from you and James – even about my own company (IBM)!

    Thanks very much for your insight.

  • http://www.redmonk.com/sogrady sogrady

    Marion: thanks for the kind words. re: what we do, it’s a continuing challenge for us to explain this simply, but as far as building communities or RSS/blogging, i’d say that we have significant expertise in those (versus being experts). we have done several engagements on just those topics, however, in the past quarter. our main beat is enterprise software (i do no hardware), but the difference between us and, say, Gartner, is that we’re broader (but shallower) and more cutting edge/emerging technologies focused. i wish for marketing’s sake that i could put it more simply than that, but it’s probably the most succinct way of describing us.

    on the Gartner question, it comes down to marketshare. free, open and standards are all things favored by laggards (us), not near monopolies (them). take publication revenue as an example; we’re very happy to drive down the cost of publications and research simply because that’s never been where we’ve made our money; not so for Gartner. put differently, the open source model threatens them in much the same way it does Microsoft, and i think they’ll ultimately be forced to adapt just as the folks from Redmond have.

    Bill: thanks for the kind words, and likewise.