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|* '''Contract Value''' - Contract value is the annualized value of all Gartner's subscription based products, recognized at a certain point in time without regard for the length of the contract.||* '''Contract Value''' - Contract value is the annualized value of all Gartner's subscription based products, recognized at a certain point in time without regard for the length of the contract.|
|-||* '''Client Retention Rate''' - Client retention rate measures client satisfaction as a measurement of client renewal of Gartner's products. Client retention is calculated on a percentage basis by dividing Gartner's returning clients from a year ago, by all clients from a year ago.||+||* '''Client Retention Rate''' - Client retention rate measures client renewal of Gartner's products as a measure of client satisfaction. Client retention is calculated on a percentage basis by dividing Gartner's returning clients from a year ago, by all clients from a year ago.|
|* '''Wallet Retention Rate''' - Wallet retention rate measures the amount of contract value retained with clients over the past year. Wallet retention is calculated by dividing the contract value of Gartner's returning clients from a year ago, by the total contract value from a year ago. A higher wallet retention rate than client retention rate implies either the retention of higher-spending clients, increase spending by retained clients, or both.||* '''Wallet Retention Rate''' - Wallet retention rate measures the amount of contract value retained with clients over the past year. Wallet retention is calculated by dividing the contract value of Gartner's returning clients from a year ago, by the total contract value from a year ago. A higher wallet retention rate than client retention rate implies either the retention of higher-spending clients, increase spending by retained clients, or both.|
In 2007, Gartner continued to focus on improving its research business, which has been the company's strategy ever since 2005 following the 3Q 2004 appointment of Eugene Hall, CEO. This past year Gartner attained 18% research revenue growth and 12% total revenue growth with better product differentiation aimed at specific IT roles, a larger and enhanced salesforce, an increase in product pricing, and better client services. 
Gartner's continued focus on its research business is important for several reasons. Research products can be created once and distributed widely, and both its consulting and events businesses use the intellectual capital generated by Gartner research. Gartner's research helps counteract the cyclicality of its consulting businesses. Consulting operates on one-time contracts that are subject to the strength of the IT industry. Gartner's research contracts are typically multi-year, non-cancellable, and paid in advance, which makes them less prone to industry fluctuations.
Gartner is one of the world's largest IT research firms with 10,000 unique client organizations and 400 of the Fortune 500. Gartner supports clients across 75 countries with three products -- research, consulting, and events -- covering topics spanning technology, hardware, software, communications, and related information technology (IT) industries. Gartner earns the majority of its revenues from its research products, which accounted for 57% of the company's total revenue in 2007. Gartner's research and analysis is targeted at strategic IT executives such as chief information officers (CIOs) and senior staff and helps these clients keep abreast of technology trends, industry benchmarking, and best practices.
Since 2005, Gartner has been focused on accelerating the growth of its research business while maintaining the gowth and profitability of its consulting and events businesses. From FY04 to FY07, Gartner increased its research revenue by 40% and increased total revenues by 33% with this strategy. 
Gartner's focus on its research business growth has helped generate total revenue growth of 12%, earnings per share growth of 36%, and a 40% increase in cash flow from operations for 2007 compared to 2006.  Over a similar period, Gartner's research revenue was up 18% with growth across both business segments and geographic regions. This growth has been driven by the company's focus on expanding the reach of its research team and value of its contracts with existing clients. There are a several specific metrics to assess the success of that strategy:
Gartner's research contract value was $752.5 million at December 31, 2007, an increase of 18% from the same time in 2006. Both Gartner's research client retention rate and wallet retention rate are at 82% and 101%, respectively, which exhibits Gartner's focus on increasing higher value sales with its role-based research products.
Gartner has three main product offerings: Research, Consulting, and Events. Gartner's main and most profitable product, research, is the foundation of their business while consulting and events provide Gartner additional entry points with their clients.
Gartner's research business is its main product and focus as well as the foundation for its consulting and events businesses. Gartner's 650 analysts create IT industry briefings and reports to help CIOs and other IT professionals make strategic IT purchase, implementation, and investment decisions. Gartner's research revenue is largely subscription based, often for multi-year subscriptions, and distributed via via published reports and briefings, access to analysts, as well as peer networking and membership services. As an example, Gartner Executive Programs provide CIOs direct access to Gartner analysts and member- and peer-only communities for collaboration and advice.
In 2007, Research revenue reached $673.3 million, which was a 18% or $102.1 million increase from 2006. Contract value, which represents the value attributable to all subscription-related research products, increased 18% to $725.5 million in 2007, up from $640.3 for 2006. The research client retention rate for 2007 was 82% while wallet retention reached 101%.
For more examples of the various topics covered by Gartner Research, see the following articles:
Gartner Consulting provides consulting, measurement engagements and strategic advisory services for cost assessments, performance measurement, and quality assessments in the IT industry. Consulting revenue for 2007 reached $325.0 million, an increase of 6% or $19.8 million. Gartner actually reduced its billable headcount by 9%, largely due to an exit from consulting in Asia. A combination of both optimized contracts and better utilization rates drove the segment's revenue growth. Average annualized revenue per billable headcount was up 5%, and consultant utilization rates was 69% in 2007 as compared to 64% in 2006. Consulting backlog, which represents future revenues to be recognized from in-process contracts, increased 11% to $121.4 million in 2007.
In our Consulting business we continue to focus on achieving maximum profitability by targeting the most profitable accounts and geographies. Revenue from our Consulting business was up 6% in 2007, to $325.0 million, despite lower headcount. Consulting backlog at December 31, 2007 was $121.4 million, up 11% from the $109.6 at December 31, 2006. The consultant utilization rate increased 5 points in 2007, to 69% from 64% in the prior year, reflecting improved engagement management and reduced headcount. The hourly billing rate remained above $350 per hour while the average annualized revenue per billable headcount was up approximately 5% from the prior year. Billable headcount was 472 at December 31, 2007, down about 10% year-over-year, primarily due to the exit from our Asian consulting operations.
Gartner held 78 events in 2007, compared to 74 events in 2006. Gartner events consist of various symposia, conferences, and exhibitions centered around IT. Gartner's most notable event circuit is their SymoposiumITxpo series. Events revenue in 2007 reached $180.8 million, an increase of 7% or $11.4 million. Gartner increased the number of events, attendee volume, and tickets prices in 2007.
Gartner's events business has been consistently profitable; however, a switch to smaller events in 2007 was not well received by the industry and has since been changed.
While IT has become increasingly important to the strategic decisions of non-technical businesses, IT spending is still susceptible to economic cycles. In particular, Gartner's consulting revenue is the most susceptible to economic cycles. Consulting operates on one-time contracts that are subject to the strength of the IT industry. Gartner's research contracts are typically multi-year, non-cancellable, and paid in advance, which makes them less prone to industry fluctuations.
A recent IT marketplace survey by ChangeWave of 1,947 respondents involved with IT spending predicts grim IT spending over the next quarter with 29% saying their company's IT spending will decrease (or there will be no spending at all) in the 4th Quarter with only 13% of respondents predicting IT spending increases over a similar period. 
Despite this, Gartner's own research report predicts an 8% increase in worldwide IT spending due to emerging regions, the replacement of obsolete systems, and technology shifts. 
Gartner has a global presence with operations in 75 countries and 43% of total revenues coming from outside the U.S. in 2007. As a result, both Gartner's costs and revenues are susceptible to exchange rate fluctuations.
Gartner's cost of services and product development increased 8%, or $39.9 million, in 2007 compared to 2006 to a total of $545.3 million. Without the unfavorable effects of foreign currency translation, which added $17.0 million in additional expenses, Gartner's costs would have increased by only 4%. 
Gartner's currency exchange rates similarly boosted revenues. From 2006 to 2007, total revenues increased 12% to $1,189.2 million; however, excluding foreign currency effects, revenues would have increased only 9% over 2006.