FORRESTER RESEARCH: SASSY, QUIRKY, AND RICH
A cultlike initiation rite awaits the analysts who make it through Forrester Research Inc.'s notoriously tough hiring process. After novices write their first reports, they are led blindfolded into a candlelit conference room. Their most controversial opinions are read aloud to the cheers and jeers of 80 fellow analysts. The brainy ritual climaxes when the rookie's forehead is emblazoned with a check mark--the symbol atop Forrester's reports.
With its reputation for taking controversial stands and its quirky culture, Forrester often seems more like a fraternity of smart alecks than one of the nation's most influential technology research firms. ''We all gave our third-grade teachers a lot of trouble,'' says Chairman, CEO, and President George F. Colony. Yet behind the sassy veneer lies a trusted adviser. While companies spend $600 billion a year on computers, software, and network products, they spend just $600 million learning how to integrate information technology into their business strategies. ''That kind of imbalance is driving our business,'' says Colony, 43.
And what a drive it's been. The Cambridge, Mass.-based company's revenues rose 71% in 1996, to $25 million, while pro forma profits more than doubled, to $2.8 million. That helped propel Forrester to the No. 13 spot on BUSINESS WEEK's Hot Growth list. Analyst Victor E. Mandel of Goldman, Sachs & Co. thinks Forrester's earnings will rise another 89%, to $5.3 million this year, on sales up 46%.
Colony, the son of a textile mill owner, got a taste of market research while writing his Harvard undergraduate thesis on political polls. After working as a paralegal and hating it, Colony spent four years at technology consultant Yankee Group Inc. In 1983, Colony decided to go it alone, founding Forrester--his middle name--with $10,000 in savings. Today, Forrester's 890 clients, including such heavyweights as General Electric Co. and IBM, pay up to $130,000 a year for help navigating the technology maze.
What sets Forrester apart from other rivals, including the much larger Stamford (Conn.)-based Gartner Group, is its willingness to take strong positions on the importance of new technologies. ''Forrester gives us opinions,'' says Colin Crook, chief technical officer of Citibank. ''They don't weasel-word their way out of it.''
WILD RIDE. Forrester was among the first, for example, to predict the rise of intranets. It also was an early believer in push technology, which brings targeted information directly to a PC. Still, the company does occasionally get it wrong. Colony advised his clients to buy IBM's disappointing OS/2 operating systems and in 1992 said that Sybase Inc.'s System 10 database would be a huge hit. Instead, says Colony, ''it was a disaster.''
Clients don't seem worried: Last year, Forrester's retention rate rose from 71% to 74%. And fees it earned for the 700-odd surveys it does a year--on topics ranging from Internet home banking to the best corporate finance software--grew 68%, to $30 million.
Despite its success, investors have had a wild ride since last November, when Forrester went public at $16 a share. Though the stock nearly doubled, to 29, by late January, it got caught in the technology sector's sharp sell-off in February and now trades around 21. That affects both Colony, who owns 72% of the shares, and his analysts, since he says the IPO's primary purpose was to give them a stake. Watching the ticker may become one more shared ritual that helps bond his outspoken team.
By Paul C. Judge in Cambridge, Mass.
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.