Ovum responds to yesterday's post

I'm pleased to provide a response from Ovum to my post yesterday. Anthony Parslow, Ovum's MD and I had an interesting and fruitful discussion on the points raised in the post. Rather than edit Anthony's comments, I'm reproducing them here in full.


Duncan,

Following up on our exchanges last night on your recent post re: Datamonitor / Ovum I thought it would be helpful if I provided some additional facts and insights.

The IT industry often swirls with rumours and intrigue and I would like the opportunity to address some of the points made. While it is definitely not appropriate or possible to comment on every rumour or blog I think you will find that I and the senior management team at Ovum are quite approachable. I would encourage you or others to interact with us in order to get a more accurate or balanced story... if vendors or enterprises have to brief and touch the analyst firms then the bloggers and analyst watchers should be briefed and touch the analyst firms :-)

Moving onto the key points in the blog post yesterday...

IT Research
a) We feel we have actually potentially shown more focus on the IT side of the house than the previous management team as evidenced by the recent move to appoint David Mitchell as SVP for IT Research (which by the way was an internal promotion from within Ovum and is a role focused on IT than didn't exist previously)

b) We should have 35 people in our IT Research team at Ovum by year end not 6. We are close to that number right now though there are a few open positions at present e.g. hiring to backfill Ian whose very valid reason for leaving is that after many years of great service to Ovum he is retiring. Additionally, we have several associates who are working with us on a contractor basis and we are in discussions with Ian to keep him on as an associate as well. We have had some turn-over but have also hired well including Cornelia Wels-Maug (an ex-employee and long-time associate who rejoined the firm in Germany) and Ian Brown (who came from Gartner where he worked closely with both vendors and end users on their infrastructure technologies and related services).

c) We currently have invested almost all of Datamonitor Group's development resources in building a new client content delivery platform for 2008 for both IT and Telecoms. This is being done at the expense of almost all other development projects in Datamonitor and is a big investment in Ovum.

d) We have re-organised the analyst teams so that they will work together more closely and more collaboratively, breaking down some of the service and geography structures between them. The intention behind this is to create a more consistent and barriers-free offering for our clients which we will launch shortly... and yes to go-to-market with this in a more commercially focused way. We are not a charity and one of our value propositions has always been to help our clients from a commercial perspective so I am not ashamed to say that means we need to perhaps protect our own interests a bit more too.

e) In contradiction to what outsiders may say on blogs very few people's jobs have actually changed at all as the restructuring post-acquisition was focused on the support services and not on our analyst organisation. Acquisitions are of course difficult transitions and there is no doubt that some changes have occurred and I am probably not as cuddly as the previous management team. However, I think it is fair to say that Ovum went from being an employee owned private company to an IPO to acquisition in less than 12 months and I think many are finding it convenient to shift the difficulty for people in adapting to the implications of being a public company rather than a largely employee owned one onto Datamonitor. I do acknowledge that this is something as a management team we need to take on-board and work with our employees on and it is a large change management exercise.

f) We have also added / invested in additional sales people and added completely new business development teams in the US and EMEA.
That is not to say that we can't do a better job and we are working on ensuring Ovum is both a good place to work and a place that people are proud to work for. I suspect that is an ongoing challenge for most companies.

Ovum Acquisition

a) Ovum has been a strategic acquisition for Datamonitor and was on the potential list for a long time. We paid £42m for a business that had an annual profit for the last trading year before purchase of £0.4M and which was also a very large premium above the share price they are trading at which I think would tend to support a push for growth strategy!

b) Yes, we did feel that Ovum was not run as efficiently as it could be and have made changes to increase its profitability but the main focus of those have been on management and support services and not in the analyst area. In fact, including the team we have brought on in India, the telecoms side of the house will have more research staff by the end of this year not less.

c) We made a conscious decision not to integrate Ovum into Datamonitor for a long series of reasons which were actually carefully explained to the company during the 3 internal global monthly briefing calls (we host EMEA, US and AP calls each month to keep our teams up-to-date on what is happening). One of the prime drivers was to protect the brand values, approach and advisory nature of Ovum rather than risk damaging that by integrating into other brands. Butler, Datamonitor Technology and Ovum are focused on different audiences and different segments of the market and, after looking at this in depth, there would not be much advantage in merging them but there would be significant risk of "blanding" them all together.

d) The Informa acquisition was not even on Datamonitor radar at the time we approached Ovum in late summer of 2006. The Informa offer came in early Q2 of 2007 and was based on them seeing DM as an attractive and complementary business. If you look at the share price of Datamonitor between those two periods you will see a significant upturn which is a) due to the swift execution and confidence by the market in the acquisition of Ovum and expectation that we would drive growth there but b) is also very much due to strong performance by the core Datamonitor business. However, the share price had risen rapidly in the previous year as well and was part of an ongoing approach to drive growth, profits and our share price. This is further supported by the recent Informa investor meeting where they talked about Datamonitor outperforming expectations in the 1H of 2007.

f) Datamonitor was not on the market or actively being touted for sale but the offer price and the fit between the two businesses (DM and Informa) meant that the bid was supported. The offer to close period was quite interesting with speculative outside investors driving the price above the Informa offer price before accepting the bid. We would have been perfectly happy to continue operating independently if the deal had not gone through and had previously turned down several approaches. Ovum wasn't part of an exit strategy or a stock pumping exercise.

Thanks for being approachable and open towards some additional input.

Anthony Parslow
General Manager, Datamonitor Group
Managing Director, Ovum

Trouble at t’ Ovum mill

Last week I celebrated (?) the departure from Ovum of two of its diehards, Ian Wesley and Gary Barnett. Ian recruited me to Ovum in 1995 and was hugely influential in my learning the analyst ropes. Gary joined a couple of months after me and quickly established himself as a bright, opinionated and insightful chap. His insights were usually correct, unlike mine ;-)

What was interesting, during the opportunity to catch up on gossip, was the apparent demise of Ovum, especially its software/IT services (SITS) analysis capability. In essence, it’s evaporating quickly. I’m told that Ovum only has 6 SITS analysts left, from a core team of 17 prior to the acquisition by Datamonitor.

There are two reasons for the demise. Firstly, the obvious clash of cultures has been too much for some Ovumites. Ovum was a nice place to work, with nice people in a nice environment. (Perhaps it was too nice, from a commercial viewpoint, but that’s another story.) Datamonitor has a much more aggressive commercial strategy and, I’m told, a less-than-cuddly approach to staff welfare.

The second reason is that Ovum was acquired largely to beef up Datamonitor in anticipation of its own acquisition by Informa. DM needed to increase its book revenues to reach the share price at which it wanted to sell. It also needs to hit the profit targets on which the sale was agreed. DM is therefore reluctant to invest in anything that impacts profitability. This includes merging the analysis capabilities of DM, Ovum, Butler and ComputerWire, which would make more long term sense, but impact short term profits.

The long term future for Ovum is uncertain, and the short term levels of service look set to be affected. There was once a time when Ovum analysts were proud to work at the firm (despite the silly name). This ethos is disappearing fast. Which is a pity.

[Updates: Firstly, I need to make it clear that, although I met Ian and Gary last week, my comments are my own syntheses from various discussions and not necessarily those of Ian or Gary or any other individual employee. Secondly, Anthony Parslow has provided a response to my comments which I've posted here.]