Analysing the analysts

They can make or break a business, and they should be regulated.

If someone told you to jump off a cliff, would you do it? Probably not, but that is exactly what analyst groups with their 'independent' research get the IT industry and investors to do repeatedly.

Analysts have a lot to answer for. They have a remarkable ability to avoid holding the smoking gun when one of their hotly tipped technologies fails. It is the vendors and channel that, more often than not, are presumed guilty until proven innocent.

I know this only too well from my own experience within the ASP industry.

IT analysts predicted the market would be massive, then admitted that it would not, and now state - with the same verve they showed two years ago - that it is going to be the Nurofen for IT headaches.

In the interim, the fluctuating predictions sent tremors through the investment community, ASP share prices plummeted and businesses suffered as a result.

The problem with IT analysts appears to be that while their statistical expertise is first class, they do not really understand the IT business dynamic. The result is that they ask industry players all the wrong questions.

If you ask a business person if they think their company will grow, the answer will, nine times out of 10, be yes. From what I have witnessed, this appears to be the key question asked when devising the well-known (and now parodied): "By 2005, (insert any technology) will be worth $Xbn."

As I mentioned to one analyst: "Why don't you speak to one of my customers and not me? They can tell you far better than I can how much the industry is worth."

And if other businesses are regulated, why are IT analysts exempt? In an industry that wields the power to make or break a technology, shouldn't there be some kind of industry watchdog that regulates analysts' activities?

I think this would be welcomed by most of the IT community. When they are on your side, analysts are a chief executive's best friend; but as soon as a technology wind changes direction, the fall from grace is an unpleasant one.

If IT was not so hung up on analysts' reports, we would be able to realise it is customers who make a technology successful, not analysts. Yes, they have their place, but as the past two years have shown (dotcoms RIP), they have been known to get it wrong, and badly.

Yuri Pasea is managing director of Centia