Conflicts of Interest (continued)

The problem is the same, isn't it? There are two businesses at these organizations. One makes money from the vendors (like the investment bankers); the other makes money from the people who give money to the vendors (like the analysts).

Of course, Chinese walls are a lot more difficult at industry analyst firms, because the same people work on both sides of the wall. An analyst at AMR or Gartner will make money speaking at a software company event, then give advice to some of the attendees.

At the banks, at least, they can separate out the groups, even forbid them to talk in the lunch room. But what are you going to do with an industry analyst? Tell them not to talk to themselves?

I'm not sure what the answer is, so I thought I'd look at what the leading analyst firms are saying about the problem.

First stop, the AMR web site. AMR is "working with both users and providers of technology to ensure that we have a clear, objective picture of a market or industry." Apparently, the lack of a Chinese wall actually promotes objectivity.

Gartner acknowledges that there might be a problem, publishing a Q&A about Gartner's objectivity and a "Principles of Ethical Conduct," for employees, which has an "Avoid Conflicts of Interest" section.

Unfortunately, the issue covered by this section is not what I'm concerned with. The first sentence is, "You must avoid situations where you have an actual conflict of interest with Gartner or where the appearance of a conflict of interest may be perceived." There is no mention of conflicts of interest between customer groups. The only rule specifically covering analyst conflicts of interest says, "You must not own stock in a company that you follow on behalf of Gartner."

In the Q&A, Gartner says that the objectivity of the research is ensured through a rigorous review process and a standard methodology.

Straightforward, but it isn't the leadership I was looking for. It doesn't address the very real conflict of interest issues that I ran into constantly when I worked for analyst firms. And there seems to be no acknowledgement of the problems that have occurred in industries where the same kinds of pressures are experienced.

I'm disappointed. As you know, B2B Analysts, Inc., solves the problem with a meat ax. We don't take money from companies that we cover. I think it's possible to address the problem in other ways. But it seems to me that the first step in any of those ways is to acknowledge that there might be a problem.

David Dobrin                August 25, 2004