Understanding The Brightwork Estimate of The Amount of Money Paid by SAP to Gartner Per Year

Executive Summary

  • Brightwork Research & Analysis estimated the amount of money paid to Gartner every year.
  • We cover how we arrived at our figure.

Introduction

We sometimes are questioned how we came to our estimate that SAP pays roughly $150 million to Gartner every year.

We developed the $150 million estimate that we think SAP pays Gartner back when did my research for the book Gartner and the Magic Quadrant.

Issue #1: The Consensus Estimate

This came from discussing with several vendors about all the different ways that Gartner charges clients. Vendors are constantly being shaken down by Gartner salespeople, and they also know the variety of ways that SAP makes money from vendors — ranging from advisement services to conference bookings, etc. Vendors were very free with this information because many of them want Gartner’s system exposed. Still, none of them can critique Gartner in public for fear of retaliation by Gartner. Gartner can reduce the vendor’s rating, giving Gartner enormous power to keep vendors silent. We covered this topic in the article How to Understand Gartner’s Control Over Vendors. One of the few vendors to call out Gartner is called ZL Technologies. ZL Technologies sued Gartner and asserted that Gartner was both financially biased, that Gartner discriminated against ZL Technologies in their MQ because ZL Technologies would not pay them, and that their ombudsman was a fake position designed to hide its financial bias. We cover this in the article How to Best Understand the Gartner Ombudsman.

Issue #2: The Total Income From Vendors

The upward cap was “reality checked” against Gartner’s overall vendor revenue, which is somewhat less than 1/3 of all revenues, according to Gartner’s financial statements. We cover this in the article. This means they receive (roughly) $1.5 B from vendors alone. The vendor market is highly Paretoed, meaning that the most significant vendors contribute disproportionately to Gartner. There are only a few “mega-vendors,” and they are monopolistic and have enormous financial resources. SAP is over $24 B in revenues. Oracle is $ 40 B. $150 million is easily affordable for them.

Issue #3: Why Vendors Pay Gartner

It has stated to us repeatedly by many vendors that they ONLY pay Gartner because they know its how they can do well in the Magic Quadrants. Gartner has created a coercive business model where many vendors feel they are compelled to pay them.

The cover story from Gartner is that the payments from vendors is for their trenchant advice, and has nothing to do with the positioning in Magic Quadrants. But that is not what vendors tell Brightwork, and that is not what Gartner salespeople tell vendors, where they explicitly tell vendors they need to pay more to compete with other vendors that are also paying.

How Gartner Helped Create SAP

Something often forgotten is that Gartner has been a significant driver for SAP’s growth. Gartner was a considerable proponent against custom development as we cover in the article How to Understand Gartner and the Patent Software System, and in favor of packaged applications (as packaged application vendors could pay them and internal development departments could not) as well as supporting the superiority of ERP systems (without any evidence by the way). Gartner has been a constant cheerleader of SAP and other ERP vendors who have also paid Gartner to propose not only the primary of ERP systems but also that large ERP vendors should be preferenced over best of breed vendors for non-ERP applications.

Advice on Enjoying the Gartner Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

There is no way to guess precisely how much SAP spends on Gartner, which is why we developed a consensus forecast from people with decades of experience working with Gartner on the vendor side and understanding their revenue model very well. This is where the $150 million number came from. The number may be $100 million. But in either case, there is a very substantial amount of money flowing from SAP every year, and its effect is evident in the way that Gartner repeats SAP’s marketing and sales literature. Or, for instance, how they were entirely inaccurate in their analysis around HANA as we cover in the article How Gartner Distributes Press Releases On HANA. And their repeated inaccuracies (always positive by the way) on virtually any SAP application or topic (see another example in the article How Gartner Got SAP Fiori So Wrong).

It is also worth considering that if any normal research context if a research entity refused to declare whether a company that it was researching and rating were paying it. Or how much it was paying, that research would have a challenging time being considered legitimate. In long term research into the IT research field, in every case that we have analyzed, whenever an entity sponsors a research study. This is including but not limited to IDC Takes Money to Publish SAP Provided Sample on S/4HANA, How Accurate Was The Forrester HANA TCO Study?)

That research turned out to not only be false but to be easily found to include massaging from the vendor as well as vendor marketing material. However, this issue of financial bias is nearly never mentioned by companies that have Gartner subscriptions.

The Problem: Thinking that Gartner is Focused on What is True

Gartner is hired by companies who fundamentally don’t understand how Gartner functions. Gartner has virtually no first-hand experience in the technologies that they evaluate and get most of their information from speaking with executives at buyers or executives at vendors and consulting firms. Gartner is also not a research entity. They compare very poorly to real research entities once you dig into the details as we did in the article How Gartner’s Research Compares to Real Research Entities. Gartner serves to direct IT spending to the most expensive solutions as these are the companies that can afford to pay Gartner the most money. Gartner has enormously aggressive internal sales goals that place accuracy far below revenue growth in importance.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Advice on Enjoying the Multimedia Presentations

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

References

Gartner Book

Gartner and the Magic Quadrant: A Guide for Buyers, Vendors, and Investors

Gartner is the most influential IT analyst firm in the world. Their approval can make or break a vendor in an application category, or at the very least control their growth. Gartner has been behind most of the major IT trends for decades. However, many people read Gartner reports without understanding how Gartner works, how it comes to its information, its orientation, or even the details of the methods it uses for its analytical products. All of this and more is explained in this book.

Table of Contents

  • Chapter 1: Introduction
  • Chapter 2: An Overview of Gartner
  • Chapter 3: How Gartner Makes Money
  • Chapter 4: Comparing Gartner to the RAND Corporation, and Academic Research
  • Chapter 5: The Magic Quadrant
  • Chapter 6: Other Analytical Products Offered by Gartner
  • Chapter 7: Gartner’s Future and Cloud Computing
  • Chapter 8: Adjusting the Magic Quadrant
  • Chapter 9: Is Gartner Worth the Investment?
  • Chapter 10: Conclusion
  • Appendix a: How to Use Independent Consultants for Software Selection
  • Appendix b: What Does the History of Media Tell Us About This Topic
  • Appendix c: Disclosure Statements and Code of Ethics