Forrester Research, Inc.

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Forrester Research, Inc.

400 Technology Square
Cambridge, Massachusetts 02139
U.S.A.
Telephone: (617) 613-6000
Fax: (617) 613-5000
Website: http://www.forrester.com

Public Company
Founded: 1983
Employees: 442
Sales: $159.1 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: FORR
NAIC: 541720 Research and Development in the Social Sciences and Humanities; 541910 Marketing Research and Public Opinion Polling

Forrester Research, Inc. is not the largest research firm in the world, but it has a reputation of being the most vocal. Since its inception in 1983, founder George Colony’s “one-man band” has grown to be one of the top 75 on Forbes’s 200 Best Small Companies list, with offices in eight cities across the United States, Europe, and Asia. Forrester’s unique product, “WholeView research,” helps businesses understand how technology change affects their customers, strategies, and technology investments. In a competitive market of research firms, Forrester strives to set itself apart by continually looking forward to emerging technologies.

Thinking Outside the Box: 1950s to Early 1990s

Growing up near Keene, New Hampshire, in the 1950s, George Forrester Colony discovered an early lesson about independent thinking and problem solving. In his youth he learned to play the banjo and guitar, not by the standard method of studying music and reading notes on a page, but by improvising. This training would later become the core of his entrepreneurial success. In 1977, Colony graduated from Harvard University and still continued his love of music. After college, he played bluegrass music in a Boston band while he worked as a paralegal. After two years in law, he decided to join a Boston high-tech research firm called the Yankee Group. Founded in 1970 by Howard Anderson, Yankee had a reputation for being arrogant and brash, a style Colony would carry with him throughout his career. He switched from law to market research because “in law, you’re looking backwards. I wanted to look forward in time. I’ve always been intrigued by the future,” he said in a 2002 Business Week Online article. At Yankee he seemed to learn the ropes quickly. He predicted in one of his reports there that the word processing market would change into a PC market, a prophecy that would eventually be fulfilled. By 1983, he was ready to branch out and started his own research firm, Computing Strategy. He initially worked out of his basement “until it got too cold and the hot water bottle he sat on exploded,” said Jane Poss for the Boston Globe.

His firm’s image was quickly depicted as brazen and frank, an objective, tell-it-like-it-is style Colony said his clients appreciate. Poss said Colony has been described as, “bright, creative, and forceful. Opinionated and arrogant. Witty, astute, tuned in.” Colony said in Poss’s article that his ideal job candidate “is the kid who lipped off in third grade.” But, his style did not scare away prospective companies. By 1988 his technology predictions were proving to be accurate and useful for his Fortune 1000 clients. One of his most important predictions at that time was that PCs linked together in networks using client/server computing technology would replace mammoth mainframes linked to slave terminals. He was right, and his pithy quotes and lengthy interviews began to appear in the media. Getting quoted meant that Forrester Research was considered a valuable resource and would ensure that Colony’s opinions were relevant.

Although the market research business was competitive, Forrester carved a niche for itself. Among competitors such as Dataquest Inc. and International Data Corp., Forrester charged lower prices for its products and maintained Colony’s mantra of “looking forward” to emerging technologies while discarding antiquated behemoths like mainframes. In 1990 Forrester Research reported revenues of $2.5 million, twice as much as the year before. Clients such as American Express, Bank of Boston, Eastman Kodak, IBM, Digital Equipment Corporation, and AT&T paid annual subscriptions to Forrester of $1,500 and up.

The Information Superhighway: 1990s

The computing industry had grown in leaps and bounds, but the technology wave of the 1990s would be like no other. The upsurge began when the Internet rose from being a tool used primarily by universities to becoming a household device almost as ordinary as a common hammer. In January 1993 Forrester published a report, “The New Public Internet,” predicting its future. Naming the new communication technology “social computing,” Forrester held a forum in Boston for business executives to discuss their ideas about this new means of communication. They talked about the relationship between businesses and their customers, products, services, sale delivery, distribution, and how it would change dramatically with the coming of a better, faster way of communicating. Companies such as Federal Express and UPS were already using hand-held, wireless computers to encode and track packages, and Forrester said the new technology gave these companies a competitive advantage. The attending executives from companies such as Apple Computer, Motorola, and AT&T agreed it was a good idea to jump on the bandwagon.

Although others were predicting the rise of the information superhighway, Forrester was one of the earliest, and in his usual style Colony was more vociferous about his comments. By 1995 Colony made predictions that household multimedia PCs and online services would drive the next technology advances. He told G. Christian Hill of the Wall Street Journal in June 1995, 20 million U.S. homes had PCs and predicted in three years “it will be up to thirty-three million homes. That’s a penetration of almost one-third of the homes by the close of the decade.” Colony also predicted the rise of home banking, on-line shopping, and e-books—all predictions that eventually came true.

However, Colony was not always right. Earlier in the decade, he predicted with complete confidence that the operating system OS/2 for personal computers would become an enormous success, overtaking the older MS-DOS operating system. In fact a few years later Microsoft came out with Windows (the user-friendly and more intelligent version of MS-DOS), which was partly responsible for the huge success of the PC market. OS/2, though not obsolete, was relegated mainly to use by the banking industry. His second most notable error came when he predicted, on three separate occasions, the demise of AOL. He, or Forrester Research, was wrong all three times. “Sometimes he puts his foot in his mouth, other times you see flashes of brilliance,” said Dale Kutnick for Business Week Online (January 2002). Kutnick had been director of research at Yankee at the time Colony joined and later became chairman and CEO of META Group, another research and consulting firm.

But, the company’s growth was not affected by such errors in judgment. In November 1996 Forrester Research completed an initial public offering (IPO) on the NASDAQ stock market, selling its shares for $16 each. The IPO earned the company $32 million. In a second public offering in February 2000, shares were sold at $39 each. Also, before the close of the 20th century, Forrester expanded on the international front, purchasing two-year-old U.K. research firm Fletcher Research, a new media and sports analysis group that later specialized in the Internet and became known for providing the first data on online advertising spending. In 1999 Forrester had 1,793 clients, and its European business represented 17 percent of fourth quarter revenue. Forrester’s European Research Center had offices located in Amsterdam and London. The firm offered new research services such as Healthcare Online, Technographics Travel, Technographics Europe, and eResearch Wave II Initiative. The Wave II Initiative included Baseline Research For Internet Entrepreneurs, Power Rankings, and The eBusiness Voyage.

Meanwhile, after a flourishing economy and a ten-year swell in the PC market, the landscape was about to change. Forrester made an accurate prediction that the PC market would in the next few years experience a decline in sales. After reaching its peak in 1999, the PC market encountered less demand, fewer sales, and declining prices, causing a decrease of $8 billion in corporate sales, according to a September 1998 Forrester report called the “PC Industry Roller Coaster.”

The New High-Tech Era: 2000 and Beyond

The approach of the new millennium brought historic challenges and changes to the high-tech industry and the global economy as a whole. Many businesses were faced with Y2K fears that their computers were not equipped to handle the extraordinary date change and other related problems. So for the two prior years, they spent an estimated $50 billion to upgrade their hardware and software to meet the challenges. Some companies exhausted their entire technology budget. Many analysts believed it was an overinvestment in technology. At the same time, dot-com companies grew at record speed, purchasing software and hardware equipment to meet their needs. But the market was quickly saturated with dot-coms, creating an enormous crash. In fact Forrester Research predicted in April 2000 that weak financials, too much competition, and fleeing investors would cause many dot com retailers to go out of business within a year.

Company Perspectives:

Forrester Research identifies and analyzes emerging trends in technology and their impact on business. We provide companies with practical ideas, rigorous research, and objective guidance to help them thrive on technology change. In addition to written research and primary research data, Forrester clients also rely on our Events and Strategic Services, including advisory programs. Forrester focuses on the business implications of technology change. Uniquely, Forrester guides marketing executives, business strategists, and IT professionals to create a unified technology plan that gains business advantage.

Year 2000 also brought an operational change for Forrester. William Bluestein, a ten-year Forrester employee, was appointed president and chief operating officer, reporting directly to George Colony. During his reign he oversaw the acquisition of Fletcher Research in the United Kingdom; joined forces with Information Resources to form Netquity, a service to help predict online shopping success; and, using the measurement tool Technographics, combined efforts with three companies that specialized in audience measurement (Experian, Mediamark, NetRatings) to create more powerful marketing tools. However, Bluestein’s time in power would only last for 18 months; in September 2001 he died suddenly at age 44. George Colony, once again, took the helm.

By this time the nation was experiencing the predicted slowdown in technology sales in the midst of an economic recession. Many companies, especially those in the technology sector, were forced to save costs by laying off large portions of their workforces. Forrester was no exception. In January 2002 Forrester laid off 126 people, or approximately 22 percent of its global workforce, to save an estimated $20 million annually. But according to Colony, technology had historically led the economy out of recession, and it would happen again. “If you look at 1981, the PC was announced then. The PC was a very important way in which we grew beyond the doldrums of the early 1980s. In 1991, it was client server computing,” Colony told Robert Weisman of the Boston Globe in June 2002. The next big technology idea that Colony predicted would drag the economy from the depths of recession was a new software architecture called X Internet. The X stood for executable and extended, providing a more executable Internet that also extended from PCs to Palm Pilots, cell phones, sensors, actuators, and switches in a network. He said there were 500 million PCs at that time, and with the X Internet the numbers would extend to 14 billion devices connected to the Internet by 2010.

But before companies rushed out to invest in new technologies, all information technology (IT) executives carefully monitored these and other research forecasts, which were inconsistent, based on their methodology, trending, research philosophy, and targeted areas, according to Eileen Colkin of Information Week . In studies predicting increases in IT spending, Forrester said spending would increase 2.3 percent during 2002, while Aberdeen Group said spending would increase 3.7 percent during the next six months. Colkin warned that corporations should know and understand the differences among these predictions and others such as those from Morgan Stanley, Meta Group, AMR Research, and Gartner. However, later in the year Forrester concluded in a report that spending the most on IT did not necessarily ensure that companies would perform better as businesses. After surveying 291 companies, the report concluded that top financial performers spent an average of 3.3 percent of revenue on IT, and middle performers spent about 4.5 percent.

However, Forrester also provided services and information to companies to help them overcome their financial challenges and begin to recover. He said that it was the way money was spent on technology that mattered, not the amount. Also, by the close of 2002, Forrester announced “Organic IT,” a means for companies to recover up to 50 percent of their technology investments over a period of five to ten years, a process they called the “biggest architectural overhaul since client/server computing.” Of course, competitive research and forecasts were plentiful. Forrester was up against such companies as Gartner and International Data Group, whose numbers of employees and annual sales were more than triple that of Forrester. But Forrester stayed focused on helping its Global 3,500 clients to revamp their technology and look forward to the future. Only time would tell if George Colony’s unique voice would resound above the rest.

Principal Subsidiaries

Forrester Research B.V. (Netherlands); Forrester Research Ltd. (U.K.); Forrester Research GmbH & Co. KG (Germany).

Principal Competitors

Accenture Ltd.; Corporate Executive Board; Dataquest Inc.; Gartner, Inc.; International Data Group; META Group; NetRatings; NFO WorldGroup, Inc.

Key Dates:

1983:: Company is founded by George Forrester Colony.
1996:: Company goes public.
1998:: Forrester expands into Europe.
2000:: William Bluestein is appointed president and COO.
2001:: Forrester combines efforts with Experian, Media-mark, and Net Ratings to create new marketing tools; Bluestein dies and Colony resumes the role of president.
2002:: Colony predicts a new software architecture called X Internet.