Gartner's Magic Quadrant May Need New Pixie Dust
Apr 15, 2005 5:00 AM PT
The Gartner Group's Magic Quadrant is one of the most referenced research tools in the IT industry. During the boom years of the late 1990s nearly every company that received funding or even hoped to get an IPO completed had to get a Gartner subscription to populate their S1s (S1 is a document you file with the Securities and Exchange Commission to register your intentions to go public) with market statistics to substantiate their market direction and position.
Investors came to expect Gartner's figures in S1s and business plans. These expectations drove many start-ups into subscribing with Gartner and other research firms when they really could not afford it. This dynamic alone helped lift Gartner's Magic Quadrant to Holy-Grail status in the vendor community. IT buyers, however, have propelled the Magic Quadrant to status of most-used information tool for making purchasing decisions.
I've been tracking several analyst and IT research blogs and there's been a flurry of activity on the subject of the Quadrant. Check out one of the most active blogs, GartnerWatch.
Exploring the Quadrants
If you haven't seen one of these, they're best described as a 2x2 table with the X-axis defined as Completeness of Vision and the Y-Axis being Ability to Execute. There four quadrants, with the upper right being Leader status, followed by Challenger at the top left, with Visionary in the bottom right followed by Niche Player in the bottom left. Gartner has dozens of these, each specific to a certain area of IT spending. Vendors are plotted into the quadrants depending on a wide variety of factors including but not limited to:
- Referencability of customers. The higher the numbers of referenceable customers on a global scale the better the placement in the Quadrant. Lack of global customers limits many vendors into Niche Player status.
- Synchronizing product introductions across several geographies at the same time. Gartner likes to see global execution and gives Leader status to companies that have the ability to execute on global product introductions. This is especially true in the hardware arenas of IT.
- Alliances that generate cash. Forget about the alliances that didn't earn a dime; Gartner could care less about them. If you're a vendor and you're bargaining to raise your rating on the Quadrant only stress the ones that really gave your company entrance into an entirely new market or opened up your existing markets more effectively than before.
- Strong financial performance that is verifiable even if you are private. One of the most common questions analysts get is who is viable and who is well capitalized or not. The common techniques analysts use are to look at Dun & Bradstreet ratings, credit reports from Experian and other credit reporting agencies. If you're a vendor coming forward with your financial statements even under NDA, this is an excellent approach to prove viability of your company to analysts. It's clear that as the economy gets tougher and sales opportunities get more and more competitive, your best investment is in an analyst relations program that shows you as a strong and viable privately held company.
- Equally strong distribution of customers by applications. When Gartner collects data for a refresh of their Magic Quadrant they go after very detailed data in this area. If you're selling CRM only a minority of the time for example and want to get to leadership status on call center applications, for example, be sure to get the most accurate count possible and communicate it on the questionnaire back to Gartner.
Why the Quadrant Needs New Pixie DustHere are reasons to consider additional information sources over and above just the Magic Quadrant. IT buyers regrettably sometimes make their entire purchasing decision just on the Quadrant alone, and let me explain why this is lazy at best and dangerous at worst:
- Compare last year's Quadrant to this year's and have Microsoft Word tell you what changed. I have done this on several Quadrants and was disappointed to discover that only the introductory text for the Quadrant changed. The graphics slightly nudged, and M&A activities were shown -- but that was it. A quick search on Google could have given me more. Gartner analysts may be getting lazy when it comes to writing about what has changed; I found several examples of the front matter changing to reflect a new year and that was it.
- Some Quadrants need to be discontinued. On other Quadrants you can see that Niche Players are the companies in any given sector that are on life support from their investors. Why put a vendor on a Quadrant if they are either embroiled in litigation with the SEC and nearly bankrupt? I can understand wanting to fill out the graphic but listing vendors nearly gone is of no value to anyone.
- Completeness of vision and ability to execute don't intersect profitability. This is a major problem and the reason that any IT buyer needs to use the Quadrant as just one of the research items in a new search of applications. There are vendors today in Quadrants in the Challengers segment -- the second best place in this Quadrant relative to Leader -- who are nearly bankrupt and about to be taken over by investors.
- Tends to reward large vendors rather than those with agility. It's fairly common to see the industry's largest IT companies in the Leader Quadrant, and that's because these firms with the most resources have the ability to execute on a global scale. But what is lost in the Quadrant are the vendors with agility, responsiveness and close alignment with their customers' needs.
Introducing the Beer QuadrantWhen you're an analyst, you hear about the Magic Quadrants constantly, especially when you're on the road visiting clients and prospects, even if you don't work for Gartner. During one trip a few years ago one of the AMR Research sales reps and I were having drinks and we thought -- let's create our own Beer Quadrant! So, after defining the methodology with the help of the bartender and after exhaustive primary research, we arrived at the Beer Quadrant shown here.
Bottom line: Don't rely solely on the Magic Quadrant in your IT buying decisions. Spend time with analysts who have actually used the applications you are considering buying -- that is incredibly valuable.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He recently completed the book Getting Results from Your Analyst Relations Strategies, which is available on Amazon.com.