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Enterprise 2.0, All The Kings Men, Gartner, and The Coase Theorem

By John | March 17, 2008

While reading another Gartner Smartner article this evening, I started thinking, “What went wrong over there? How did they become so insignificant? When I first started in IT, circa 1977, Gartner was basically the Huey Long of the IT analyst group (AG) business. I worked at Exxon at the time, and I was always amazed at the strength of their predictions. I remember one of the old timers at Exxon, literally a computer god, who was hell bent on going to work for Gartner and failed their interview process twice. At the time, I couldn’t fathom that a guy like that could fail at anything. All the old timers at Exxon, and anywhere else for that matter, wanted to retire at Gartner. For those who made it through Gartner’s rigorous interview process, it became the pinnacle of their career. Gartner had to be very selective back then because they were the cream of the crop and had all the marbles. As brilliant as these potential Gartner candidates were, the economics were not there for them to go anywhere else. The rise and fall of Gartner can be best described by Nobel prize winner Robert Coase in his Coase theorem. Back in the 1980s, the transaction cost of analysts were far to high for any one person to go it alone, and the barrier to entry for an AG startup really didn’t make economic sense. According to Coase, and with a little help from Don Tapscott of Wikinomics, the transaction costs back-in-the-day favored large corporations. Although capitalism afforded everyone his own personal royal flush, the truth was that the deck was stacked in favor of the big corporations. The larger corporations had an economies of scale advantage. In the case of Gartner, the collaboration tools at the time were all physical, and research basically had to be done on a premisis like IBM libraries. Any quality relations time had to be done in person, and travel costs were enormous back them.

Today, most of those cleaver old timers could have gone it on their own or chosen from a greater list of choices than just Gartner. Awhile back, IBM and SUN were making a big announcement, and they decided to run the press release on an audio feed. I played a game that day called “Beat the Analysts” just to see who would come up with the most useful information a few hours after the press release. Out of the ten groups/bloggers I followed, only seven had posted blog information three hours after the pres release. Out of the seven, four were bloggers, and thee were analysts. Gartner never made their analysis of the story public. In the end, no one group gave any better information than the others. I am certain that I am not the only one who is mind-bogglingly amazed at how easy it is to research any topic with the advent of Google. Ever since the late 1990s, the internet has opened up a Pandora’s Box of opportunities for would be entrepreneurs.

There appears to be a reverse Coase law that is in effect, and companies like Gartner are taking the brunt of it. I am certain that the old Gartner interview process is nowhere near as hard as it used to be because they no longer get the best of the best. What they are probably getting is the laziest of the laziest and just plain old Type B personalities. In fact, they still do not let their analysts blog, and many have left for that reason alone. The good “old timers” today are not going directly to Gartner, and, even if some are, they certainly don’t go back for second interviews. The new old timers are starting their own blogs or going to work for “The 451 Group,” Redmonk, or other AG companies. The tools available to an individual to become an analyst are overwhelming with today’s internet. Robert Coase’s original question relating to his theorem was, “In a capitalist society, why wouldn’t everyone just go out and start their own business? ” With Enterprise 2.0 they probably will.

Topics: 7core, enterprise 2.0, gartner, other, robert coase, tapscott, wikinomics | 4 Comments »

4 Responses to “Enterprise 2.0, All The Kings Men, Gartner, and The Coase Theorem”

  1. marc farley Says:
    March 17th, 2008 at 9:32 am

    John, Its not like Gartner was ever a think tank with all the 4.0 Harvard grads. They had good people and great discipline as a company. The business model was based on vendor-customers paying a high price for information. In addition, these customers needed Gartner to validate their technologies and products. If you didn’t pay the piper’s pizzo, you would not receive your validation.

    As you point out, times have changed and Gartner no longer has the leverage it once did on either the information or validation. Furthermore, with so much more information available, their good people can only come across that way, not as the gods of technology – as they once did. I don’t agree that Coase’s theory applies much here. This is not about negotiations among businesses competing to utilize scarce resources. Instead the resource in question here (smart people who can analyze and write about technology) is not scarce, as your example of the bloggers and analysts points out.

  2. John Says:
    March 17th, 2008 at 10:04 am

    This is what I love about blogging. When someone who is clearly a lot smarter than me reads by blog and makes a great comment. It makes this all worth while. Thanks :)

    My thoughts…

    I agree with you in the early days of IBM commercial business processing (e.g., late seventies and early eighties) Gartner had all the kings men. From my perspective I was a Jr systems programmer and they all seemed like gods to me. However, you are right in retrospect they were just guys that had been doing it for a while and knew how to speak the speak.

    In all honesty most of what I know about Coase’s theory came from Tapscott’s Wikinomics however I did do a little research before I wrote this article. As I understand it, and trust me I am all ears if I am wrong, the rise and fall of Gartner might be related Coases’s theory because Gartner like the Ford’s of the 1930′s had a strong supply chain and this alowed them to be strong grow and maintain their employees. In the case of Gartner their supply chain is IT knowledge. It just didn’t make sense,in most cases, for someone to try and do what Gartner did back then because Gartner had leverage to key contacts, their own research libraries, and almost exclusive vendor face time. Today anyone can show up at a AG meeting however back then Gartner was the 1k Elephant in the room. Part of Gartner’s fall, IMHO, could be possibly related to what Tapscott refers to as a reverse Coase law. In other words the supply chain to IT knowledge is much more affordable and therefore gives individuals choices to be entrepreneurial IT analysts.

    I am definitely interested in your thoughts.


  3. marc farley Says:
    March 17th, 2008 at 10:47 am

    Well, I’m no economist, so your perspective on Coase might be better than mine. My understanding puts his work in the context of regulated industries – where resources are scarce and competitors find ways to equalize income derived from the use of those resources. I don’t know what reverse Coase is, but it sounds more like basic supply and demand.

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