The Sound of Breaking Glass

The Sound of Breaking Glass

Dennis Mendyk

If you work in the media business, you know that you live in a glass house. The Gallup Organization’s latest annual public opinion survey of honesty and ethics in professions puts journalists near the bottom of the trustworthy pile, above only car salesmen, advertising “practitioners,” insurance sellers, labor union leaders, real estate agents, stockbrokers and, of course, lawyers. For the record, business executives rank exactly 1% higher than journalists, along with auto mechanics.

Anyway, back to the original point. You know you live in a glass house as a journalist, but when you find a big old rock, you have to throw it.

Senior Writer Steve Smith found just such a rock, buried deep in the footnotes of Gartner Group’s latest annual report. It turns out that Gartner, a big-time market research house, is a major investor in SI Ventures, a VC fund that holds stakes in at least 13 technology companies that Gartner tracks for its corporate clients.

Think about this, because it does take a while for the ramifications to sink in. Gartner’s researchers write technology reports that their corporate clients pay lots of money for and then ostensibly use to make technology purchasing decisions. Through SI Ventures, Gartner basically owns a chunk of some of the tech companies that it is reporting on. That’s a direct line connecting Gartner’s investment interests with its research reports.

When you add in the Manny Fernandez factor, you can plot that line with a bold stroke. Fernandez is Gartner’s chairman of the board, a position for which he was paid $1.2 million last year. He also is a founding principal of SI Ventures. His main partners at SI are former Gartner execs.

Fernandez insists all these intertwined relationships present no real conflict of interest. He says he is not involved in the decision-making process at Gartner anymore and points to the fact that his office in Florida is far removed from Gartner’s HQ in Stamford, Conn.

That physical distance is enough separation, as far as Fernandez is concerned. Gartner has absolutely no firewalls in place to keep its analysts apart from the companies it backs financially. In fact, on its Web site SI Ventures boasts about its close ties to Gartner’s research resources. Gartner does not return the favor on its site.

For the record, Gartner hasn’t tried to hide its relationship with SI Ventures. It just doesn’t mention it. And also for the record, Gartner isn’t the only research house with investment ties. Yankee Group, for one, has put some money into Yankeetek Ventures, the VC started by Yankee Group founder Howard Anderson.

Like Gartner, Yankee has no formal processes in place to separate its market watchers from its money, although Anderson had sense enough to leave Yankee Group to start Yankeetek. Both insist that such firewalls are unnecessary. Why? Because integrity is a market researcher’s most important asset. It would not be in the best interest of the market researcher to jeopardize that integrity. Therefore, everyone can rest assured that their market researcher would not do anything to compromise that integrity.

Substitute the word “President” for “market researcher” in the last three sentences. Then imagine what would have happened if our last President, another glass-house denizen, made this statement. I imagine Bill O’Reilly’s head spontaneously exploding on national cable TV.

Should Gartner be trusted to keep its research unsullied by its financial interests? That’s up to its paying customers to decide. But don’t be surprised if journalists move up one rung on next year’s Gallup survey on trustworthiness, and business execs move closer to the lawyer level.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.