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Wed, Oct 21, 2009 16:36 EDT

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Posted by: Thomas Wailgum in News Topic: ApplicationsBlog: Enterprise Software Unplugged
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When I was little, my parents would give me a dose of the straight talk when they felt I was listening to too much of one friend's youthful advice, or going along too easily with the peer pressure emanating from one of the "cool" kids.
The wisdom they used to convey that I might want to consider a more measured decision-making strategy in my life is pretty much standard operating procedure for parents everywhere: "Well, if Johnny told you to jump off a bridge, would you?"
Like most kids, I always countered with the "But, he said that..." nonsense, knowing I would ultimately be proven wrong again. I never did leap from that bridge—or get that earring, sneak into Fenway Park in the dead of winter, or put peroxide in my hair.
At the time, however, these kids in my life had tremendous influence, no matter how foolish that seems today. They could "move markets," so to speak, and upset the social structures and daily happenings both inside and outside of school. What were their motives? I hadn't a clue.
But these kids had power.
For a very long time Gartner has had wielded enormous power among technology vendors and IT buyers. Its Magic Quadrant has become: a trusted buyers' guide for many companies; a cause for angst (or joy) for vendors unhappy with (or thrilled by) their dot's location on the MQ; and a reliable revenue stream for the analyst firm.
It is the cumulative influence of Gartner's 1,200 or analysts and the well-known subjectivity (a.k.a. "opinion") of the Magic Quadrant that is at the heart of an interesting lawsuit filed in May by ZL Technologies, a San Jose-based vendor that sells e-mail and document storage software. ZL claims in a statement that "Gartner's use of their proprietary Magic Quadrant is misleading and favors large vendors with large sales and marketing budgets over smaller innovators such as ZL that have developed higher performing products."
In addition, ZL's complaint alleges "defamation; trade libel; false advertising; unfair competition; and negligent interference with prospective economic advantage." (Gartner has responded to ZL's claims and filed a motion dismiss ZL's complaint. A hearing is scheduled for Oct. 23.)
Which gets us back to the notion of influence. Does Gartner have influence? Surely. Does Gartner offer opinions on tech topics more than facts? Yes. But has all that become so powerful that a U.S. court must interfere? I doubt it. Think about it: A company, person or brand becomes influential not by force but by the fact that people find value in whatever that company, person or brand offers. And they give that entity their money or attention.
Looking at Gartner's revenues during the last five years I see a company whose revenues and profitability have been on the steady rise. Revenues: '04 $868 million; '05 $964 million; '06 $1 billion; '07 $1.2 billion; '08 $1.3 billion. (Despite a net income loss in 2005, Gartner has grown its profitability over those years as well.)
Now, the rather hefty elephant in this blog is the fact that Gartner receives substantial revenues from the vendors it covers and opines about in its MQ and other research materials. (It's derisively referred to by many as "pay for play," and it irritates most, if not all, analysts, including one of Gartner's own.)
Just letting that sink in....
The court may intervene in this matter if it thinks that Gartner's opinion and influence unbalance the market or provide him with an extraordinary participation in the market. I'm not sure if this is the case exactly. People obviously follow his advice and opinion and trust him.
You should've gotten the earring!
The principal thesis you propound is that market forces will take of the problem, i.e., if Gartner kept providing poor advice, it would eventually lose influence and market power. Your logic works ... but only if Gartner remains one in a pack of alternative vendors. When its influence builds beyond a certain point, however, the competitive landscape devolves into monopolistic distortions. Our entire system of antitrust, in the U.S. and around the world, is based on this assumption.
To draw a parallel, if your logic held true at all levels of market power, then IBM must have been doing all the "right" things ... since customers flocked to it in the 1960s. And the goverment shouldn't have interfered. And IBM should rightfully be presiding over all things IT by now. Does anyone believe the IT world would have been better served by that outcome?
The more pertinent question to ask is: In the market of influencing enterprise purchases of IT, has Gartner power expanded into antitrust territory? How often have you seen a corporate purchaser cite a Forrester or IDC report over Gartner's? If you hear Gartner cited most of the time, it calls for a different set of rules of competition ... and within antitrust jurisdiction.
All this is about keeping a critical mindset like those great guys from CSI (http://www.csicop.org/) is always a good idea. Don't trust on authority arguments, but check the decision making process and the facts presented.
Many people only look at the top right corner of the quadrant figure and don't read the accompanying white paper.
And always distrust people that find their defence in lawsuits (like those chiropractors against Simon Singh).
It's a pay to play game with Gartner and other firms. I think ZL has a legitimate gripe! Generally, it's only the large public and VC-funded companies who are, effectively, buying legitimacy and access via the Slight-of-hand quadrant, wind-blown water or whatever other method of being anointed that exists. Jumping off the bridge is requisite if one hopes to realize the promises they've been told.