Gartner Inc. (IT)
BarCap Global Technology TMT Conference
May 23, 2012 3:15 p.m. ET
Chris Lafond - EVP & CFO
Brian Shipman - IR
Manav Patnaik - Barclays Capital
Manav Patnaik - Barclays Capital
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Hi, good afternoon everybody. My name is Manav Patnaik, I am Barclays information services analyst. I cover Gartner. Given it was a part technology conference, I thought it makes complete sense to have Gartner here as well. I do have a one overweight grading on them. I find the growth opportunity here attractive in the predominant research subscription model which leads to pretty strong free cash flow generation very attractive as well. So that’s sort of my quick pitch. But we have – thank Chris Lafond, CFO to be here as well as Brian Shipman who is the IR in charge there. So without taking any more time, Chris.
Thank you all for spending a little bit of time on Gartner. Let me take you right into the presentation. For those of you that don’t know Gartner, we are the leading provider and the best source of information for our clients in terms of how and where to use both information technology and supply chain management best practices to accomplish your objectives. And I will tell you what that means in terms of our business and the value that we provide to our clients.
What I want to do today is talk about kind of four things that all lead to the fifth thing which is, I will talk a little bit about our value proposition, our market opportunity, the strategy we’ve been executing, the business model we have that takes advantage of those things and finally, if we execute on all of those things well, why we believe we will continue to grow our business at double-digit rates both from a revenue, cash flow, EPS perspective over the long term which -- and I will show you some of the metrics that we have been delivering over the past six or seven years.
So let me start with our value proposition. Our business really has three segments to it. Research which is by far the largest at 70% of the revenues, consulting at 20% and events at 10%. So I want to spend some time on each one of those segments. If we start with the research, our research product is a really highly differentiated product from anybody else in the marketplace. We have the most comprehensive coverage of information technology and supply chain management in the world. We have 810 analysts globally that cover the space broadly and very, very deeply.
Our clients buy access to our analysts, buy access to the content they create, access to talk to our analysts throughout the entire year. Our model is a subscription model. We sell a minimum of one-year subscription. Within any point of time about a third of our contracts are multi-year in length, that being two to three years generally. And we have a role-based focus. What does that mean? It means we have identified who the buyers of our products and services are. We primarily sell to the end users of technology, so the CIO and the CIOs organization, the vendors of technology and investors in technology.
Underneath each of those three segments, we understand the role that somebody plays. So if you are in the CIOs organization, are you the CIO? Are you the head of security? Are you the head of application development? If you are a vendor, are you the head of product development, are you in sales or are you competitive intelligence? We have different products for those different roles. So our products and services are really tied to delivering the value to each of those roles. And we have tremendously broad set of clients we work with. We work with over 12,000 client organizations in 85 countries around the world. And I will talk a little bit more about each of these businesses as we go through.
Our consulting business, which is about 20% of the revenues, the key point here is you should not think of our consulting business as an implementation organization. We do not implement technology solutions. Our consulting organization has three components to it. We have a benchmark organization. So we do benchmarks for IT organizations of how effectively they’re running their IT organization, and we have the largest database of IT benchmarks in the world.
We have a contract optimization business that allows our clients to understand when they are doing a large purchase whether that’s Oracle, IBM et cetera. Are they getting the best price and terms and conditions? And we can help them make sure they are getting that. And then finally our core consulting practice which is about 70% of the consulting business, is really highly strategic engagements for the CIO and the senior IT professionals. We talk about between $250,000, $300,000 average engagement size, six to seven months in length. Things like helping clients decide on their sourcing strategy, helping them look at their enterprise architecture strategy, very strategic high level projects.
And the reason the clients use our consulting practice is we are truly independent, objective. As I said earlier, we do not do implementation. So we don’t make recommendations and then make money on the back end of that by implementing technology solutions. Our clients come to us and we win in situations because of that objectivity and truly independent approach.