Gartner, Align Thyself

The duplication of effort and projects at cross-purposes, towhich Stanco refers, were not only a symptom of existingmisalignment during this expansion but also an indicationthat miscommunication may have impaired Gartner's ability tomake sound, strategic acquisition decisions. To catch up inthe Internet space, Gartner bought the TechRepublicprofessional IT services and news website in March 2000. Thedecision was questioned by observers and ultimatelyundermined by its timing. While TechRepublic's content waswithin Gartner's realm of expertise, its business model wasnot. As a research and consulting company, Gartner had noexpertise in fostering a revenue stream by selling onlineadvertising.

In the downturn that followed the acquisition, it would havetaken years to realize TechRepublic's revenuepotential. Gartner ended up selling it for $23 million inApril, after buying it for $80 million and sinking $50million into the site for maintenance and updates, thuslosing about $107 million on the deal. A few weeks afterthat, Gartner experienced a slump in share price – whichdropped from about $18 in March 2000 to about $6 a yearlater – that kicked off a conversion provision for the $300million bond Gartner had used to help fund its aggressiveexpansion strategy. As a result, bond issuer Silver LakePartners became a 36 percent owner of Gartner, diluting thevalue of other investors' shares. Sources familiar with thecompany's plans say Gartner was also in talks to be acquiredby Reuters, but its offer price was too low.

“Investors are a little unhappy,“ CFO Paolilloacknowledges. “Where we wandered off the farm was to say wewere gonna get into the Internet space.“

Digging Out: Better Budgeting

Though Gartner's alignment problems were exacerbated byacquisitions, they had other roots as well, according toStanco. Gartner is organized geographically, with differentexecutives responsible for different countries and regionsand different functional units. That makes communication andenterprise-level thinking a challenge.