Forrester Research Inc

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FORRESTER RESEARCH INC.

With roughly 2,500 business clients, nearly 745 employees, and sales of $157.1 million in 2000, Cambridge, Massachusetts-based Forrester Research Inc. is one of the leading market research firms covering the Internet and related technology. Its early focus on Internet technology, which began in 1995, helped to bolster the firm's image as an Internet industry expert capable of predicting future trends in technology, business practices, and customer behavior. Unlike its rivals, the firm's projections are based on surveys of major corporations rather than statistical data analysis. Forrester gears its services, which cost anywhere from $5,000 to $10,000, toward senior managers, marketing and technology executives, and business strategists at major corporations.

Forrester offers a wide variety of services and products, including two types of strategy research: Market Focus and Core Skills. Clients who opt for the Market Focus package receive reports and briefs that analyze the trends and industries related to a particular topic, as well as forecasts based on that information. Core Skills customers receive reports and briefs regarding the issues inherent in operating an e-business. Forrester also offers Technographics Data. To obtain its Consumer Technographics, the firm queries more than 400,000 households in North America and Europe to gain insight into how consumers are using technology for entertainment, shopping, and money management. Business Technographics data is obtained via interviews with executives at more than 2,500 corporations with annual sales exceeding $1 billion. Interview questions relate to technology procurement.

The Advisory Services component of Forrester's offerings includes four programs: Web & Commerce Site Review, Web Site Review Boot Camp, Research Inquiry, and the Partners Program, which assigns a team of analysts to work with a business to develop and monitor some aspect of its corporate strategy. Level One clients participate in a kickoff meeting, two advisory days, four advisory calls or meetings, and two strategy workshops, while Level Two clients receive one less advisory day, one less advisory call or meeting, and one less workshop. Finally, Forrester's eBusiness TechRankings assessment tool evaluates emerging technologies for clients.

Forrester got its start in 1983 when, after a five-year stint at rival Yankee Group conducting telecommunications and office automation market research, Harvard University graduate George Forrester Colony decided to open his own market research firm. The new company, operated out of Colony's basement, first focused on telecommunications market research. Forrester eventually moved into the PC and networking markets. According to an October 1996 article in Marketing Computers, "Colony, credited with coining the term 'client/server' practically defined the course of network technology in the late '80s and '90s, and led many through its dark alleyways as the technology developed." The need for market research grew as new technology continued to emerge, and by the mid-1990s Forrester had evolved into a "leading prognosticator on Internet computing, having recognized early the effects that the Internet would have on business." Employees Mary Modahl and Bill Bluestein recognized the Internet's importance in 1993. Within two years, they convinced Colony to create the New Media Research Group to devote resources to analyzing Web site operations, new Internet-based technologies, and the demographics of Web surfers.

In 1996 Forrester was focused on three markets: strategic management; corporate information technology (IT); and new media research, which included the Internet. Sales grew 71 percent to roughly $25 million, and clients exceeded the 1,000 mark. By then, the firm had expanded domestically into both the Midwest and the West Coast. Internationally, it served both the United Kingdom and Australia. Worldwide employees totaled 135. Business Week ranked Forrester 13th on its "Hot Growth" list.

Forrester set itself apart from competitors by making bold predictions about emerging technologies. For example, the firm accurately predicted the integral role intranets would come to play for corporations. That willingness to make proclamations about the future of technology was not without risk, however. For example, Forrester incorrectly favored IBM Corp.'s OS/2 operating system over Windows NT, which later emerged as the clear winner in the networking industry. In the early 1990s, Forrester also forecasted the success of the System 10 database developed by Sybase Inc., which turned out to fare poorly. After much speculation about whether or not the firm would succeed if it were required to answer to shareholders, who might want to tone down predictions in the interest of profits, Forrester conducted its initial public offering in November of 1996.

Earnings in 1998 grew to $7.5 million on sales of $61.6 million. Forrester launched its PowerRankings service, which listed the best e-commerce sites among different categories of online retailers, the following year. To compile its list, Forrester surveyed nearly 20,000 online customers and also conducted its own anonymous shopping tests at the busiest Web sites in the following categories: airline; apparel; books, music, and video; brokerage; computer hardware and software; educational; general merchandise; healthcare; flowers; and toys and games. The e-tailers were evaluated for six different criteria: cost, customer service, delivery, features, transacting, and usability. Forrester eventually listed these rankings, as well as information about each category it surveyed, on a separate Web site. However, this site was later discontinued. In November, to bolster its international operations, Forrester acquired London, England-based Fletcher Research, a two-year-old market analysis firm covering Internet usage in the United Kingdom.

Forrester teamed up with Information Resources Inc. in June of 2000 to create Netquity, a brand marketing research service targeting brand managers selling products on the Internet. A few months later, BuyerZone.com and Forrester began offering market analysis reports to small and medium-sized businesses. In November, the firm began working with the National Association of Purchasing Management to monitor the utilization of Internet-based procurement by various businesses. Also that year, Forrester developed its eBusiness TechRankings. Sales grew from $87.3 million to $157.1 million, and net income nearly doubled from $11 million to $21.6 million. European research centers were located in London, England; Frankfurt, Germany; and Amsterdam, the Netherlands.

Despite the widespread downturn among Internet-related ventures at the end of the century, Forrester continued to grow. In the first quarter of 2001, both sales and earnings grew nearly 40 percent. The firm's latest service, Business Technographics, analyzed the purchasing behaviors of major corporations. According to CEO George Colony, the product was particularly helpful to firms undergoing cost cutting. "It helps our vendors focus their limited marketing and sales resources on the right places," he explained. It was during the second quarter of the year, when sales growth slowed to 21 percent, that Forrester started to feel the effects of the economic slowdown. As a result, the firm eliminated 111 jobs in July, which amounted to roughly 15 percent of its workforce. Forrester also divested Internet AdWatch, the online marketing tracking tool it had acquired via its purchase of Fletcher Research.