Forrester Research (FORR) is facing challenges as it transitions to its new Forrester Decisions platform, which offers a unified approach to research, tools, and insights. 

Despite the platform’s long-term promise, the shift has caused short-term disruptions, leading to a 70% stock drop and declining sales as some clients resist the higher cost. 

Economic pressures and budget cuts in tech sectors have further impacted the company’s consulting business. 

However, Forrester is optimistic that stabilizing market conditions and growing demand for AI research will boost its growth and profitability by 2026, though investors should remain cautious for now.

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Economic ups and downs, new technologies, and shifting customer needs make it tough for companies to keep up and they rely on research firms for insights that help them make smart decisions.

These firms provide the information companies need to understand market trends and plan their next steps.

During market volatility, solid, independent advice can be crucial. It helps businesses avoid mistakes and find the best path forward.

But even the firms offering this guidance are feeling the pressure to adapt, and find new ways to meet their clients’ needs.

Forrester Research (FORR) has long been a go-to source for insights, helping companies make sense of market trends and plan for the future.

However, the last two years have been tough for the firm, as it navigates economic headwinds and a significant transition in its business model.

Forrester has seen its stock fall nearly 70% over the past two years, as both sales and profits have taken a hit.

The company is going through a major shift as it moves clients to its new Forrester Decisions platform.

This change, while promising in the long term, has caused short-term disruptions, especially as many clients are hesitant to switch to a service that costs about 20% more than the older offerings.

Forrester Decisions is designed to be a one-stop platform where clients can access all of Forrester’s research, tools, and insights.

The company believes that once the migration is complete, this unified approach will lead to better efficiency and profitability. So far, about 70% of clients have switched over, with a goal to reach 80% by the end of the year.

One of the biggest reasons for the decline in sales is that some clients haven’t seen enough value in Forrester Decisions to justify the price increase, leading to some churn. As clients drop off, it’s been hard for Forrester to keep its revenues steady.

Additionally, issues like budget cuts in the tech, where many of Forrester’s clients are based, have made it even more challenging.

The company’s consulting business has also been affected, seeing a 27% drop in Q1 2024 sales compared to the prior year. Most of these consulting sales come from existing research clients, so as research clients leave, consulting revenues follow suit.

Forrester also stopped selling consulting services to clients who don’t subscribe to its research, which has added to the pressure.

Despite these challenges, the company is banking on Forrester Decisions to drive future growth once the transition is complete.

The platform, which includes new tools from the 2019 SiriusDecisions acquisition, offers more value, especially for businesses needing deeper insights into sales, marketing, and customer experience.

If the company can hold onto its core clients and attract new ones, it could see better results by 2026.

Recently, there are signs that the economy might be stabilizing, with rate cuts on the horizon that could ease some of the uncertainty.

As businesses start to regain confidence, they are once again looking to invest in research to guide their strategies, especially in AI.

Developments in AI, particularly generative AI are driving a growing need for specialized research and insights.

In 2024, it’s expected that about 15% to 20% of research demand will be focused on AI and generative AI, areas that are quickly evolving and full of opportunities.

This shift is a significant advantage for Forrester, which tends to thrive when new areas of study emerge.

With all services now integrated into a single platform, the company will be better positioned to capture this demand and boost its profitability, making it more efficient and valuable to its clients.

But for now, investors should remain cautious, and wait to see if the company can overcome its short-term hurdles and deliver on its long-term promise.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research