- Gartner’s objectivity was called into question in the NetScout case.
- Gartner controls how information is shared with IT vendors that coerce vendors into paying Gartner.
- Gartner has a massive influence, but its impact on the enterprise software market is largely negative.
Gartner typically has undiscussed control over vendors. Vendors depend upon Gartner’s Magic Quadrants to be considered in software selections. Gartner offers a pay-to-play system to software vendors. This model asks that the vendors bid against one another for supremacy in their various Magic Quadrants. And software vendors fear calling out Gartner or their model, as Gartner can retaliate against vendors. You will learn how Gartner uses this control to extract the maximum amount from software vendors.
Our References for This Article
If you want to see our references for this article and other related Brightwork articles, see this link.
Notice of Lack of Financial Bias: You are reading one of the only independent sources on Gartner. If you look at the information software vendors or consulting firms provide about Gartner, it is exclusively about using Gartner to help them sell software or consulting services. None of these sources care that Gartner is a faux research entity that makes up its findings and has massive financial conflicts. The IT industry is generally petrified of Gartner and only publishes complementary information about them. The article below is very different.
- First, it is published by a research entity, not an unreliable software vendor or consulting firm that has no idea what research is.
- Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services as a vendor or consulting firm that shares their ranking in some Gartner report. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department.
What Gartner Says About Itself
Gartner is the dominant IT analyst firm. In this article, we will review the accuracy of what Gartner says about itself.
“Considering the stakes involved, software buyers do surprisingly little research themselves when making the decision as to which software to purchase. Instead, companies reach out to both consulting companies and IT analyst firms. Due to the lack of resources available internally to perform this research, most information about products to purchase comes from third party entities. As my book Enterprise Software Selection describes, it is very difficult to obtain objective advice on enterprise software because most of the entities providing advice on this topic have conflicts of interests.
The poor quality of this advice is well known among those that work in the industry, but for whatever reason the lack of quality or objectivity is not generally stated in a published form.
Information technology analyst firms primarily sell advice their knowledge of software, hardware and services to those companies that purchase any of these items. They secondarily sell information related to vendors as well as information about clients to vendors. Information technology analyst firms—Gartner chiefly among them—are major influencers, not only on the demand side (that is, with companies that make enterprise software purchasing decisions) but also on the supply side (the software vendors themselves), as meeting the criteria of analysts can influence everything from the strategy that software vendors follow to their ability to raise money.”
Gartner’s History in the Analyst Market
According to Wikipedia, there are over seven hundred and forty industry analyst firms globally.
Of course, only a fraction of these are IT analyst firms. Gartner is so dominant within the IT analyst segment that it receives over forty percent of all IT analyst firm revenues.
Gideon Gartner founded Gartner in 1979 along with his partner David Stein. Before founding Gartner, Gideon had IT and securities analysis experience. Gideon Gartner found other technology research companies, including Soundview Technology Group and Giga Information Group. Gideon severed ties with Gartner in 1993 when it had sales of roughly $120 million—Gartner has grown dramatically since Gideon’s departure. Gartner’s growth was not merely holistic; from the mid-1990s onward, Gartner consistently acquired up-and-coming IT analyst firms as its main competitors.
While Gartner began in the US market, its acquisitions allowed it to become a firm with global reach. During the late 1990s, Gartner became an international IT analyst firm by acquiring companies like the French firm Abigail Engelsman and the Singapore firm Datapro Information Services, Inc.
Considering The Largest IT Analyst Firms: Gartner, IDC & Forrester
Gartner is one of the top mega IT analyst firms in the world. The IT analyst firm IDC (International Data Corporation) is close in terms of influence but generally lower, although still influential in different areas than Gartner. Forrester Research is the third mega IT analyst firm but is roughly twenty percent the size of Gartner. While often compared directly with one another, these three firms do not entirely overlap in their offerings. For instance, IDC is more of a media conglomerate. Like Gartner, IDC sells research, but it is also a publisher of technology magazines. Forrester is known more for projection than vendor comparisons. At one time, Forrester was close to Gartner in their influence, but Gartner has now pulled ahead and is far more frequently quoted than Forrester – (which, of course, is expected as they are over five times as large as Forrester). Finally, Gartner has the broadest offering of the three companies, is the most global, and is the most influential in software selection.
Evaluating Gartner’s Objectivity and the NetScout Case
In the 2014 case against Gartner by NetScout, NetScout made the following allegation:
“Gartner, an information technology research giant, markets itself as an “independent and objective” company offering actionable technology from an “unbiased source.”
In fact, Gartner is not independent, objective or unbiased, and its business model is extortionate by its very nature. Its substantial success is due to the worst kept secret in the IT industry: Gartner has a “pay to play” business model that by its design rewards Gartner clients who spend substantial sums of its various services by ranking them favorably by its influential Magic Quadrant research reports and punishes technology companies that choose not to spend substantial sums on Gartner services.”
How Gartner Pitches to Vendors
This next quote gets to the heart of how Gartner pitches to vendors.
“While Gartner pruports to provide objective and unbiased analysis of technology companies in its Magic Quadrant reports, Gartner sells other services to technology companies, including consulting services, informing companies that, if they pay for Gartner’s “consulting” services, t he companies will enhance thier relationships with Gartner analysts, an obvious means of improving their prospects in the Magic Quadrant Report. This pay to play business model is facilitated by Gartner’s immense influence within the IT industry. A favorable ranking in Gartner’s Magic Quadrant report can “make or break” an IT company. IT companies are pressured into spending substantial sums of Gartner’s “consulting” services to better position themselves in these “magic” reports. As one published article questioning Gartner’s business practices observed: ” failure to get a favorable mention in an analyst report could undermine years of product development. Acceptance, on the other hand, boosts a company’s exposure and is essential for buyers drawing up short lists.”
How the Magic Quadrant is Used by Software Buyers
This quote brings up the question of the use of the Magic Quadrant.
“As a guideline for a bunch of amateurs it’s one thing. But when all your clients live or die on the basis of whether Gartner Group puts you in the upper right hand corner in the — or wherever — that’s really bad news. And when there’s potential tainting of the objectivity of research because you have very large contracts with your vendors, with your customers, people will always come and complain. . . . Today, it is overused, misused and abused, terribly. Gartner was founded by 1979 by prominent Wall Street computer analyst Gideon Gartner. Gideon Gartner has stated that Gartner’s Magic Quadrant reports are “misused and abused” and commented on the “potential tainting” of the “objectivity of the research.”
Gartner’s Similarities to Wall Street
This following quotation brings up how Gartner’s approach is remarkably similar to business practices on Wall Street that have been punished in the past.
“The very same analysts who draft Gartner’s influential Magic Quadrant reports sell “consulting” services to the IT vendors ranked in Gartner’s reports. Through its “consulting” services, Gartner sells access to its analysts. Thus, not only is Gartner issuing purportedly “unbiased” research about its own fee-paying clients, but the very same analysts who draft those reports have direct consulting relationships with the companies that they purport to “independently and objectively” analyze. These conflicts of interest inevitably lead to biased research reports, aggressive cross-selling of Gartner’s research-based consulting services, and less desirable Magic Quadrant rankings for those technology companies who refuse to spend substantial sums on those services. The U.S. Securities and Exchange Commission (“SEC”) has punished similar business practices by financial analysts on Wall Street (as opposed to technology analysts like Gartner), finding that such business practices violate rules requiring the financial analysts to observe just and equitable principles of trade and principles of good business practice.
There, like here, the financial analysts were, on the one hand, publishing analyst reports evaluating companies, while, on the other hand, offering those same companies services for a fee. Indeed, the SEC instituted enforcement actions against ten Wall Street firms, which resulted in an over $1 billion settlement and structural reforms of the entire financial analyst industry. See infra paragraphs 115-116. Those structural reforms were intended to remove the conflicts of interest and unfair and deceptive business practices that led to biased and inaccurate analyst reports. See infra paragraphs 105-118.”
Gartner’s Ethical Problems
Here, the damages imposed by Gartner are as follows:
“While Gartner’s business practices are not regulated by the SEC, its business practices are no less unscrupulous or unethical. The unfair and deceptive business practices employed by Gartner have damaged NetScout and its business through, among other things, reputational harm and lost business opportunities. Gartner has further damaged NetScout by forcing it to expend considerable sums of money to counteract Gartner’s false and defamatory statements within the marketplace.”
In this quote, NetScout accuses Gartner of stating that NetScout had outdated technology.
“In a Magic Quadrant report for the Network Performance Monitoring and Diagnostics market (“Magic Quadrant Report for NPMD”), published on March 6, 2014, Gartner did not rank NetScout as a “Leader.” Instead, it ranked NetScout as a “Challenger,” which Gartner defined as, essentially, a technology company that saddles its customers with outdated technology. Gartner stated falsely that NetScout is “currently struggling to deal with new technical demands and rising expectations” and has “architectures, feature sets and pricing structures that require modernization (often in progress) to better compete with those in the Leaders quadrant.”
An Accusation of Defamation Against Gartner
NetScout stated that Gartner defamed them.
“Further, Gartner also made the following false and defamatory statements in its report: I NetScout offers “only a hardware-based deployment model” that “limits [its] ability to address growing software and SaaS solution demand.” I NetScout has a “limited ability to expand beyond its network management heritage.” NetScout is “perceived as a conservative stalwart in the NPMD space, and lacks the reach and mind share that many smaller competitors have.”
17. Gartner ranked three other companies as “Leaders” who spent a significant amount on Gartner’s services and who do not deserve to be ranked ahead of NetScout, by any measure.
18. Upon receiving a pre-publication draft of Gartner’s Magic Quadrant report, NetScout informed Gartner both orally and in writing that the Report contained numerous false and disparaging statements of fact about NetScout. Despite having actual notice of these factual errors, Gartner published the Magic Quadrant Report for NPMD without material alteration and with actual malice, knowledge and/or reckless disregard of the false and defamatory statements of fact regarding NetScout contained within the Report.”
Mindless Use of Gartner’s Magic Quadrant
“Veterans’ Affairs report found that $16 million in purchases were made entirely on the basis of Gartner’s reports (which the Department’s Inspector General found improperly limited competition).
Companies seeking to purchase IT equipment sometimes refuse even to consider making technology purchases from companies that are not Leaders in Gartner’s Magic Quadrant research reports. For example, in certain international technology markets, such as Asia and the Middle East, purchasers often invite product bids only from technology vendors that Gartner has ranked in the “Leaders” quadrant of their Magic Quadrant research reports.”
If Gartner can influence buyers to this degree, then Gartner’s ability to extract money from vendors only increases.
The high ranking is leveraged by including it in advertising, which Gartner also charges for.
How Vendors Advertise Rankings
IT vendors ranked “Leaders” in Gartner’s Magic Quadrant often advertise that ranking on their company websites. Gartner facilitates that advertising by charging IT vendors a fee to allow them to include a link on their website to a licensed copy of the
relevant Magic Quadrant report.
Here, the lawsuit mentions an InformationWeek article on Gartner regarding its influence.
“Gartner’s extraordinary influence in the IT industry is well known and publicly recognized by IT industry observers and participants. How Gartner wields that influence, however, has raised serious questions within the IT industry, and amongst market observers, concerning Gartner’s business practices. In particular, an article in InformationWeek entitled “Credibility Of Analysts” reported on Gartner’s “troubling” business practices and influence within the IT industry.
In that article, InformationWeek publicized what many IT vendors had long known, but were reluctant to state publicly for fear of reprisal: Gartner’s business model is inherently biased and favors those IT vendors who are high-paying Gartner clients. As InformationWeek reported regarding Gartner’s business model: [T]hey . . . rake in millions providing services to the very same companies they monitor, heavyweights like Cisco, IBM, Microsoft, and Oracle. Which leads to a question that continues to dog the research firms: How much influence do technology vendors have over their work?”
How Information Is Not Shared with IT Vendors
Keeping information away from non-paying IT vendors.
“The concerns expressed in the InformationWeek article about Gartner’s business practices are widespread amongst persons who work in the IT industry. One person noted how his experience with one of Gartner’s research analysts led him to conclude that “you need to be paying to play.”
As that person stated: When with a previous employer, in one MQ interview I did it was suggested by, the Gartner analyst that we were “not visionary enough” for that part of the quadrant. When I asked what was visionary I was told that to get that information we needed to be clients. So I concluded that you had to pay to know what was visionary and then re-work that into your vision in a nice circular process. So I do not know what the cost is but it seems to me you need to be paying to play.”
The circularity of the process that Gartner is laying out is evident. Gartner defines the criteria, Gartner keeps the criteria private, and Gartner charges for access to the criteria.
“Another person recounted how insiders at web content management firms have indicated to him that “you need to shell out” money to Gartner to be included in Gartner’s Magic Quadrant reports: I don’t put much stake in their magic quadrants simply because I’ve got contacts at a number of [web content management] firms who’ve been told in a nutshell that they have to shell out [money to Gartner] to be included. I will not mention names but I trust them. While [Gartner] may not come right out and say they charge a fee, they certainly aren’t going to give you something for nothing. It’s all based on how much you do or might spend Ion Gartner], as far as I’m concerned.”
The Pay to Play Model
“Yet another person has recounted his own personal experience with Gartner’s “pay-to-play” business practices while employed at an IT vendor: I have had personal experience via a company I worked for that we were only included in an M[agic] Quadrant] when we became a Gartner customer, and when we stopped being a customer we weren’t invited to participate in the MQ again.
On October 8, 2009, a Gartner Vice President and research analyst felt the need to “rant a little” about the commonly held belief that Gartner engages in “pay-to-play” business practices “and can be bought.” Numerous IT industry commentators responded to the Gartner analyst’s “rant” by raising further questions concerning the propriety of Gartner’s business practices. One commentator recounted how, as an IT vendor, he has been told by Gartner sales people that they “must pay between 30 and 50K$” to “enter the Magic Quadrant.” As that commentator wrote, responding to the proposition that Gartner does not engage in a pay-to-play scheme: Surely you’re kidding.
Yet another commentator questioned Gartner’s practice of cross-selling “consulting” services to the subjects of its research reports: To eliminate any concerns about vendor bias, how about Gartner eliminate consulting contracts and payments from vendors?
I assume this is a naive question.
However, such a move would provide the strongest possible financial incentive[s] and align with end users interest.
Dennis Howlett further elaborated on the IT industry complaints about Gartner’s “pay-to-play” business practices: I would not repeat what I am told if it was one off or obvious sour grapes but I can say that some vendors I’ve spoken with see ‘pay to play’ (and not just Gartner but the analyst community as a whole) as an irritant to the point where I can immediately think of at least a handful that have voted with their wallets and said ‘no more’ after many years of engagement.
Gartner placed NetScout competitors Riverbed, JDSU-Network Instruments, and Fluke Networks in the “Leaders” quadrant. Riverbed, JDSU-Network Instruments, and Fluke Networks spent a significant amount on Gartner’s “consulting” services. NetScout’s failure to pay a sufficient amount for Gartner’s services, or otherwise purchase enough access to Gartner’s analysts to achieve the requisite “healthy mix” of interaction, was a substantial contributing factor in NetScout not being ranked in the “Leaders” quadrant of the Magic Quadrant Report for NPMD. As one Gartner analyst had previously told NetScout’s President and Chief Executive Officer, “NetScout is not going anywhere because it does not spend enough on marketing.” NetScout’s CEO reasonably understood this statement to mean that NetScout should spend more money on Gartner’s services.
By placing NetScout in the less desirable “Challengers” quadrant, Gartner effectively punished NetScout for failing to purchase a sufficient amount of Gartner’s services. Gartner has attempted to use its influence to force NetScout to purchase additional Gartner services sufficient to move NetScout to the “Leaders” quadrant, or suffer continued harm to its business and reputation in the industry. Reduced to essentials, NetScout must now either “pay-to-play” with Gartner, or continue to suffer lost business opportunities, and damage to its reputation as a result of being ranked as a “Challenger” in Gartner’s influential Magic Quadrant report.”
How Gartner Uses Both The Carrot and the Stick to Maximize Profits
“Gartner’s business model seeks to leverage its “most valuable clients” by “cross-selling” its services, including its “consulting” services. The term “cross-selling,” as used by Gartner, amounts to a euphemism for its practice of pressuring its research clients to pay for additional services or risk negative treatment in its influential research reports. What Gartner refers to as “cross-selling,” is really a “carrot-and-stick” approach to getting its IT vendor clients to purchase additional Gartner services.”
How Much Does it Cost to be Included in the Magic Quadrant?
“One employee at an IT vendor covered by Gartner analysts recounted his own experience with Gartner’s “cross-selling” of its services in a post entitled “How much does it cost to be included in Gartner Magic Quadrant?” As that employee stated: I received [the] following email from [a] Gartner sales rep: your biggest competitor [in] SF just came onboard this quarter and took advantage of our flexibility. Also they are in the process of filling out the BI MQ questionnaire which they are not guaranteed to be included but are working with the analysts to get more coverage in 2011. I want to give you a heads up because if you see that they are included and you are not, being a client will give you a good vehicle to plead your case.”
The Hidden Methodology
“The purported analysis in Gartner’s Magic Quadrant reports is founded upon a large quantity of undisclosed facts and data that Gartner compiles during its research process and knowingly withholds from publication.
Gartner’s withholding of facts and data from its Magic Quadrant reports allows it to market or “cross- sell” those undisclosed facts and data as part of its purportedly “fact-based” consulting services. In so doing, Gartner implies to its audience that the assertions made in its Magic Quadrant reports are supported by undisclosed facts known only to Gartner and which the audience is unable to evaluate.”
Thus, Gartner creates the impression that the research and analysis in its Magic Quadrant reports are based on an undisclosed wealth of objective facts underlying its “fact-based” analysis.
On the “Research and Methodologies” page of its website, Gartner references its “access” to a “vast network of facts” that provides Gartner with the “facts, opinions, and projections to help clients make better decisions.”
Only a Tiny Percentage of the Information in the Report?
In a post on Gartner’s website entitled “How not to use a Magic Quadrant,” Gartner explained how a Magic Quadrant report reflects only a “tiny percentage” of what a Gartner analyst “actually knows” about a vendor. Gartner also revealed that the vendor-specific bullet points in Gartner’s Magic Quadrant reports are based on “a pile of qualitative data.” As
“An MQ [or Magic Quadrant Report] reflects only a tiny percentage of what an analyst actually knows about the vendor. Its beauty is that it reduces a ton of quantified specific ratings (nearly 5 dozen, in the case of my upcoming MQ) to a point on a graph, and a pile of qualitative data to somewhere between six and ten one-or-two-sentence bullet points about a vendor. Through these statements and disclosures, as well as others, Gartner intentionally sought to create, and did create, the impression that the statements in its Magic Quadrant reports were supported by a bevy of undisclosed objective facts and data. Gartner uses the deliberate non-disclosure of the facts and data underlying its Magic Quadrant reports to lure its vendor-clients into purchasing “consulting” services from the same analysts who draft the Magic Quadrant report and who purport to have direct access to the undisclosed facts and data.
Following the collapse of technology stocks in the 1990s and early-2000s, it came to light that research analysts at some of Wall Street’s largest investment banks had prepared favorable research reports on companies that were also clients of the investment banks. Many Wall Street investment banks employ research analysts that issue research reports on the financial performance of corporations. Those analysts are commonly referred to as financial analysts or research analysts. Much like Gartner today, at the time, those same investment banks purported to employ analysts and issue research reports that were independent, objective and free from bias. However, in 2003, the SEC filed complaints against ten of the largest Wall Street investment banking firms, in which it accused these firms and their analysts of engaging in practices substantially similar to those that Gartner and its analysts currently practice. The SEC alleged that six of these firms improperly “aligned” their research analysts with their investment banking divisions in order to leverage their limited research resources, generate new clientele, and/or offset the cost of research.”
How Gartner Uses Its Influence to Cross Sell Consulting Services
“Similarly, Gartner improperly markets and cross-sells its “consulting” services to IT vendors that are the subject of its analysts’ research. Gartner’s business model openly seeks to: (1) “facilitate increased client spending on [its] research, consulting services and events;” (2) “identify relationships with the greatest sales potential and expand those relationships by offering strategically relevant research and advice;” and (4) deepen “relationships with . . . Research clients . . . through custom consulting engagements.” Gartner further disclosed that the foregoing initiatives “created additional revenue streams through more effective packaging, campaigning and cross-selling of [its] products and services.” The SEC alleged that research analysts at all ten of the firms participated in investment banking marketing efforts, including working with investment bankers to compile “pitch” materials and attendance at industry “road shows.”
Likewise, Gartner research analysts are involved in the “packaging, campaigning and cross-selling of Gartner’s products and services” to the same IT vendors that are the subject of Gartner’s research reports. Gartner analysts also attend “Gartner Symposium/ITxpo events and Gartner Summit events” that “offer current, relevant and actionable technology sessions led by Gartner analysts to clients and non-clients.” Gartner clients and non-clients spend thousands of dollars to attend and participate in these events in order to achieve a more favorable ranking in Gartner’s research reports, including its Magic Quadrant reports. The SEC alleged that, at eight of the ten firms, research analyst conflicts of interest resulted in analysts publishing research that was exaggerated, unwarranted, and/or inaccurate.”
What is an Inquiry Seat?
“To obtain the most basic level of access to Gartner’s analysts, vendors must purchase what Gartner refers to as an “inquiry seat.” An “inquiry seat,” which costs $50,000, may only be used by one designated individual at the vendor for a 12-month period. An “inquiry seat” entitles the vendor-designated individual access to Gartner’s research reports relating to a specific discipline, and access to Gartner analysts in the form of analyst “inquiries.”
If a vendor does not have an inquiry seat, it cannot participate in calls with analysts. Analyst “inquiries” — available only to Gartner client seat holders — are conference calls that typically last 30 minutes or less and that are generally related “only to the interpretation or application of Gartner research.” On its website, Gartner describes analyst “inquiries” as follows: “During inquiries, the flow of information is mostly from analyst to vendor and can be highly interactive.” “Seat” holders, however, are not entitled to “extensive analysis or additional research by the analyst” during the inquiries.”
What Are Vendor Briefings?
“Both client seat holders and non-client seat holders may participate in “vendor briefings,” during which vendors may “present their product, business plans and strategies to Gartner analysts.” “Vendor briefings” are one-way, meaning that “the flow of information is strictly from vendor to analysts and is not an interactive analyst feedback session.” Thus, vendors do not receive a Gartner analyst’s “perspective” during “vendor briefings.” Gartner refers to this one-way flow of information from IT vendors to Gartner analysts as “outbound” “analyst relations” strategy. A purely “outbound” “analyst relations” strategy can be achieved through “vendor briefings,” for which IT vendors are not required to pay. Gartner describes the “outbound” analyst relations strategy as providing the lowest amount of “strategic value.”
What is a Strategic Briefing?
“A two-way consultative relationship whereby analysts advise you on your go-to-market strategies and growth plans Face-to-face strategic sessions with analysts, which you can use to prepare for shareholder meetings, conduct business planning or get feedback on our ideas.
According to Gartner, the highest amount of “strategic value,” or “maximum value,” is achieved through an “inbound” “analyst relations” strategy. Gartner depicted its recommended best practices for “analyst relations” strategy in the following slide: An “inbound” strategy requires “[a] two-way consultative relationship” involving “[f]ace-to-face strategic sessions with analysts.” This “analyst relations strategy” requires IT vendors to spend substantial sums of money to purchase both a “seat,” which entitles the holder to analyst “inquiries,” and to pay for Gartner’s “consulting” services, also referred to as Gartner’s Strategic Advisory Services (“SAS”). Gartner instructs that if an IT vendor’s “inbound” interactions with analysts are twice its “outbound” interactions, “your mix is healthy.”
Gartner actively and openly cross-sells its “consulting” services to IT vendors that pay for its subscription-based research services. The analysts who provide those “consulting” services are the same Gartner analysts who determine where an IT vendor is placed in the Magic Quadrant.
What is a Healthy Relationship with Gartner for a Vendor?
“The more a vendor spends on Gartner “consulting” services, the “healthier” its relationship will be with the analysts who determine where that vendor will place in Gartner’s Magic Quadrant. By purchasing access to the analysts through Gartner’s “consulting” services, the IT vendor can achieve the requisite “healthy mix” of interaction with Gartner analysts that is a substantial contributing factor to achieving favorable placement in Gartner’s Magic Quadrant reports.”
Gartner’s Massive Influence
Gartner is indisputably influential. However, they have acquired their way into a position of monopoly power. This monopoly power would not exist if decision-makers had more critical thinking skills. But the fact is that by and large, they don’t. Therefore, they tend to believe that Gartner writes even though Gartner is not a research entity. That topic is covered in the book.
One of Gartner’s primary ways to violate research standards is to solicit and accept funding from software companies while rating them. It is pretty clear that this funding affects outcomes, and the most prominent software vendors tend to be preferred in Gartner’s rankings. Furthermore, Gartner does not publish the math of their rankings, which allows Gartner to move the rankings around without validating Gartner’s measurements. Gartner explains that they do not follow research standards by arguing that they have an ombudsman. This is a false argument addressed in the article Is Gartner’s Ombudsman for Real?
How Gartner Receives Money
Gartner not only receives money from software vendors, but they also collect information. Software vendors must regularly update Gartner on their offerings and pay to do so. While Gartner tends to be quite impressed with itself, software vendors primarily are not impressed with Gartner’s knowledge of technology. Gartner analysts often do not retain what they are told and may not know the subject area very well. But, and here is the kicker: software vendors do not have much choice because Gartner is virtually the only “game in town” that matters. A high ranking on Gartner’s Magic Quadrant translates to sales and vice versa. Therefore, software vendors are obligated (except those who choose not to participate) to continue to pay to provide information to Gartner. Gartner then turns around and charges buyers to learn of this information from Gartner. Gartner then turned around and offered some of this information to vendors.
In this case, the problem to be solved is the Magic Quadrant’s existence in the vendor’s area, and the vendors need to score well on the Magic Quadrant. This artifact did not exist before Gartner created it. Gartner is solely in control of the Magic Quadrant and communicates to software vendors through its sales force that buying more services from vendors (called advisory services) will help software vendors score better on the Magic Quadrant. They make it sound like the vendor is buying access to Gartner and that Gartner can help them understand the market and improve their marketing. However, the real reason vendors buy advisory services is to improve their score in the Magic Quadrant.
Background on Gartner
What is quite interesting is how little diversity there is in analyst opinions on the enterprise software market. One source that can be considered to influence executive decision-makers concerning enterprise software purchases is Gartner. I was aware that Gartner had purchased AMR, an analyst group focusing on supply chain software with a poor record for prediction, which software vendors repeatedly deceived, one of the most elementary topics. However, I was unaware of how many firms Gartner had acquired throughout its history. This listing is available on Gartner’s website (I assume it is comprehensive, but it may not be) and can be found at this link.
What Gartner’s Analysis Means for Information on Software Selection
Gartner’s position as a single source of information that executives rely upon (some people bring up Aberdeen, Forrester, IDC, or other sources, but none of them are close to as influential as Gartner) means that Gartner has a monopoly on analyst-based influence for a tremendous amount of enterprise software purchases per year. Gartner has over 5,000 employees with an enormous breadth of coverage. However, they drown out competing views, and Gartner has a problem with bias as it takes the most money from the most prominent software vendors, for which it slants its reviews (obviously).
This means that Gartner, an information monopoly, increases monopoly concentration in the enterprise software market by its recommendations. Industry insiders, at the best-of-breed vendors, inherently understand how the game is played. Gartner wants to be paid annually to provide coverage of vendors and actively prospect vendors. Some vendors can afford to pay, and some can’t. Generally, vendors do not read Gartner’s research, hoping to learn anything they don’t already know, but read it to understand what executive decision-makers will digest. Many companies are naive and do not understand that vendors pay Gartner and actively solicit vendors for more business.
Gartner has also shown to be quite biased towards prominent vendors in my exposure to them. I wrote this article in response to an article that Gartner produced, which contained numerous falsehoods and was just a warmed-over press release from SAP with Gartner’s name on it. Most of Gartner’s articles are nowhere near this brazen, but their bias shows in many ways.
I once attended the CSCMP conference. A presentation entitled “SAP Versus Best of Breed Solutions” was given at this conference. The presenters were a representative from SAP, a Gartner representative, and a representative from an implementing company. That was it, no representative from any best of breed vendor. Most of the presentation was spent with the SAP rep, who turned out to be some SAP salesperson, talking up SAP’s new release of Transportation Manager (TM) and its success. I spent much of the presentation looking up at the ceiling, as almost everything the SAP representative said during the presentation was false. SAP TM is a joke in the APO consulting community and has been anything but successful. The Gartner representative did not know enough about the SAP product to be embarrassed about what the SAP representative talked about. Anyone with a modicum of interest in balance would have required at least one best-of-breed vendor present.
Software Selection Using Gartner as a Guide
This makes the prominent vendors seem much more competitive than they are, even when the offering is quite competitive. This undermines companies’ software selection efforts to get the best solutions for their needs.
Gartner has grown through acquisition to be the most influential analyst covering enterprise software. However, they routinely throw their weight behind the most significant vendors’ solutions, which strongly influences executive decision-makers. Gartner backs the more significant vendor even when, the more substantial vendor’s solution is far weaker than smaller vendors. In my view, this is because prominent vendors pay Gartner so much more than smaller vendors. Gartner points to an ombudsman that ostensibly prevents money’s influence on analyst writings. However, this excuse holds up quite poorly historically. Companies that are paid by specific interests gradually come to reflect these interests. This is as true of magazines and their advertisers as bond rating agencies and Congress members. Therefore, while Gartner’s ombudsman is a friendly-sounding fascia, every organization with similar conflicts of interest makes the same claim. The weight of history supports the fact that money buys influence. If it did not, it would not be given. If SAP or Oracle thought they could get the same rosy coverage out of Gartner that they do with their current financial contributions, they would stop making contributions tomorrow.
Gartner is collecting money from software vendors that, in my discussions with many software vendors, the software vendor is not interested in paying. They are also not interested in speaking with Gartner, but they must communicate with them, get on their radar, and stay on their radar. Software vendors that pay into Gartner also fear not paying as they often believe this will negatively affect their rating in their Magic Quadrant.