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Tuesday, March 18, 2014

Gartner’s acquisition of Software Advice validates opportunity for Business Software Reviews

By Vinay Bhagat, Co-founder & CEO, TrustRadius

Last week (March 11th) Gartner acquired Software Advice, a privately held company in Austin, Texas. Per Gartner’s press release, “Software Advice offers detailed reviews, comparisons and research to assist organizations in finding products that best fit their current and future needs.” The purchase price is rumored to be approximately $150 million, a 10x multiple to revenue.

I would like to offer the team at Software Advice my congratulations for a great exit. The company was bootstrapped from inception so it’s a particularly strong accomplishment.

My understanding is that Gartner’s interest in Software Advice was predicated on the fact that they are searching for a way to serve the SMB market. In my experience, the portion of the market not addressed by Gartner’s current offerings extends well into the mid-market. But many companies with 500-5,000 employees find that Gartner’s minimum price points are too high and the products covered too large-enterprise oriented.



It's however doubtful that the acquisition will change Gartner’s traditional way of doing business with large enterprises.They remain committed to their model of selling access to expensive internally generated analyst research.

I believe that Gartner does not yet comprehend that large enterprises are also extremely interested in in-depth end-user reviews and online networking. Software buyers in large companies struggle to get an accurate perspective of what it’s really like to work with a product/vendor based solely on vendor conversations and analyst guidance. While many do informal benchmarking or belong to peer networks, business software review communities like TrustRadius offer them a faster, at scale way to access peer insights and to network more broadly. As evidence, 14% of TrustRadius users are from organizations with more than 5,000 employees. Unlike Software Advice, our reviews encompass many large enterprise oriented solutions like Workday as well as mid-market and SMB products.

Moreover, Gartner’s relationships are still mostly confined to the IT organization. As more and more software is selected by functions like Marketing and Human Resources, those functions are more likely to search for new sources like peer reviews. As evidence, 86% of TrustRadius members are from outside the IT function.

As software increasingly powers everything, and the pace of innovation continues to accelerate, it is near impossible for the traditional analyst research model to provide the type of information and insights necessary to make the right technology decisions in real time. People will increasingly rely on first-hand insights from a community of users and practitioners. Since our launch last May, we’ve scaled to serve 75,000 users per month and are growing at 25% per month. The time has come for a new model.

“Successful companies can put too much emphasis on customers' current needs, and fail to adopt new technology or business models that will meet customers' unstated or future needs …such companies will eventually fall behind.”
Clayton Christiansen, Author of The Innovators Dilemma












2 comments :

  1. Gartner's acquisition is interesting. It will be interesting to see how they incorporate user reviews into their analyst model. I'm not convinced Gartner provides impartial reviews all of the time simply because they are influenced by the companies who purchase their services. That's exactly why user reviews are becoming much more critical and valuable to help make an informed purchase decision.

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  2. Brian - thanks very much for your comment. Many people share your concern about analyst bias. I don't think it's intentional, however, analysts opinions are formed based upon who they spend time with. If one vendor has a consulting relationship and another doesn't, it will impact the amount of time spent with an analyst, and therefore does risk influencing opinion. Moreover, analysts opinions are formed primarily based upon vendor conversations and select customer surveys/ calls. Those customers are often cherry picked, which also creates potential bias.

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