Is Gartner’s Non-SAM Coverage Due to Vendor Money?

Executive Summary

• Gartner did not cover SAM for a long time, and this brings up the question of why.
• Gartner takes far more money from vendors that stand to lose from SAM than from SAM vendors.

Video Introduction: Is Gartner’s Non-SAM Coverage Due to Vendor Money?

Text Introduction (Skip if You Watched the Video)

 

For a number of years, Gartner had no SAM Magic Quadrant. This seemed peculiar until one considered that the vendors that give the most money to Gartner do not want the SAM Magic Quadrant to exist. When Gartner finally did publish a SAM Magic Quadrant, the largest SAM vendor with the most to pay vendor and with the largest IT analyst team came out on top. You will learn why Gartner did not have a SAM Magic Quadrant and who Gartner responds to when it comes to creating Magic Quadrants.

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. 

How Gartner Hides its Vendor Bias

Gartner poses as a research entity; however, it is paid by the companies that it rates in its Magic Quadrants, Marketscopes, and other rating media output. And then it does not declare these payments per vendor. Gartner makes the argument that it has an internal ombudsman that manages bias. However, this is not actually what the ombudsman does. Most of what the ombudsman seems to do are serve as a PR function to explain why Gartner refuses to declare how much money it gets from each vendor.

The proposal that vendors need to spend money to improve their position with Gartner is openly discussed in the vendor community. This system is commonly referred to as “pay to play,” and the term is extremely well-known in the industry. In fact, in many conversations on this topic with people in vendors and other analysts, the only people I have ever seen dispute it is people that work at Gartner. But curiously, after people leave Gartner, they seem a bit more forthcoming on the topic. I named this heading “public and informed” because it is unclear how many people who read Gartner’s research know that vendors pay Gartner.

Gartner receives roughly 1/3 of its income from software vendors versus buyers and consulting (which is relatively small as a part of overall income). However, the income is far more concentrated than the income that it receives from buyers. And as a great deal of research has shown that compares the influence of disaggregated sources of income like subscribers versus the concentrated sources of income from advertisers in the media industry, that concentration leads to more considerable influence. I cover this topic for those interested in the article The History of Media Entities and Financial Bias.

Understanding Software Asset Management or SAM

SAM is a software category that serves to reduce the license fees paid to other software vendors.

1. SAM determines actual software usage and allows the customer to reduce the amount that it is over licensed, that it pays for licenses that it is not using.
2. When a software vendor comes to audit a company and then brings a claim against the customer, which is usually exaggerated, the customer can use the SAM software output to push back on exaggerated claims on the part of software vendors.
3. SAM software overall can be used continually to plan license use and put the customer in a better position versus software vendors to optimize its usage.
4. SAM software is a category that some software vendors wished did not exist.

In this way, SAM software is defensive software that reduces the license revenue for some software vendors. The word “some” is quite important because most of the audits and claims for extra payments for software licenses are carried out by the largest software vendors. So this list includes Oracle, SAP, IBM, and Microsoft.

Therefore, SAM software as opposed to the interests of software vendors that seek to obtain excessive licenses from customers. And the vendors that habitually seek to obtain excessive license revenue from customers are the largest software vendors. This happens to be the same group of software vendors where SAP receives a disproportionate percentage of their overall software vendor revenue.

In 2016 Gartner received somewhere around $800 million from software vendors. None of it is declared per vendor. Yet, I estimate that Gartner gets roughly $100 million in total payments from SAP. Does SAP want their customers to know about the SAM software category? Well, let us ponder that for a moment. SAM is used to provide useful information to help customers negotiate against what is, in most cases, exaggerated under licensing claims brought by SAP. SAM can help customers know that they are over licensed (a term that is not in SAP’s vocabulary) and can use this knowledge to keep from purchasing more licenses when they already possess SAP shelfware.

I don’t want to lead my readers too much, so I will let the reader conclude how much SAP talks to their customers about acquiring SAM software.

The Lack of Gartner Coverage on SAP Applications

This brings us to the topic of Gartner’s coverage of a category of software that the largest funders of Gartner would prefer that their customers know anything about.

The following experts explain the lack of coverage in the SAP software space.

Here is what Snow Software has to say on the topic.

As business professionals and buyers, we want to know that the products and services we are looking at are going to be right for our organization and its needs. The cost of getting it wrong is at best wasted money and at worst career-limiting.

The classic example is perhaps the Gartner Magic Quadrant. From Enterprise Mobility Management to Enterprise Backup Software and Integrated Appliances, the Magic Quadrant has become the go-to reference point for an increasing number of organizations in the buying cycle for a given solution to validate their purchasing decision.

The appeal is obvious. A single document that reviews the acknowledged leaders in a given solution area, nicely broken down into Leaders, Visionaries, Niche Players and Challengers. One place to quickly assess the strengths and weaknesses of each solution your organization is considering (and maybe a few it wasn’t before).

Gartner isn’t alone in offering this kind of review. Forrester has its Wave, and Ovum its Decision Matrix for example. Given the popularity of Magic Quadrants,Waves and Decision Matrices, it’s no surprise that they are one of the most-requested documents from prospects, partners and our own sales people. In the buying cycle, stage one has become: check the Magic Quadrant!

And therein lies the problem. Not only for Snow, but all other players in the Software Asset Management world. And what is that problem? There is no Magic Quadrant for Software Asset Management solutions! Nor a Wave. Nor any other kind of credible group review by an internationally-recognized analyst firm that you’d care to mention.

By our own estimation (we have to use our own, since there are no analyst figures to rely on!), the Software Asset Management industry will be worth billions of dollars globally by 2019. Okay, that might seem small compared to Gartner’s claim that the enterprise software market is worth around US $326 billion in 2016.

But consider this. In 2013, Gartner announced that it was retiring the Marketscope for IT Asset Management (basically a Magic Quadrant by another name), citing a lack of innovation and market growth as the reason for there being no point in continuing the exercise. Another reason given was that the ITAM market was actually in decline, slipping from $452 million in 2010 to $445 million in 2011. The SAM market is looking far more buoyant. – Snow Software

The Validity of Gartner’s Argument Against Having a SAM Magic Quadrant

Is this proposal by Gartner credible?

Let us take the innovation argument first.

• The Lack of Innovation Argument: Would the level of innovation in a category of enterprise software be a reason to stop coverage of a category? It would merely mean less work for Gartner. That is less work to cover the new “innovations” that are added to the software. It seems unlikely that this is the real reason. Secondly, even if it were true, is this a good reason to stop covering a software category? Is the question of the software’s value how much the SAM software vendors are adding to the software every year (i.e., the degree of “innovation”), or is the question instead of how much the customer can save money and optimize their licenses? Is innovation the reasons software should be purchased, software categories covered, or the software’s value add? Gartner seems to imply that it is the former.
• Is Innovation Gartner’s Primary Focus in First Place?: Gartner’s statement implies a slavish obsession with innovation. Gartner may be overly focused on innovation even at the expense of the value add of the applications they review. So is that true? Does Gartner’s obsession with innovation display itself in Gartner’s Magic Quadrant rankings? Of all the applications reviewed by Brightwork, four have received a perfect score in innovation. This is covered at the MUFI Ratings and Risk link on this site. These vendors are Arena Solution, Planet Together, FinancialForce, and Intacct. However, these are not the vendors that Gartner tends to emphasize. Why not? Well, several, if not all, of those vendors don’t pay Gartner very much money. And several of them don’t pay them at all. Gartner consistently shows a desire to maximize profits. Maximizing profits is not accomplished by providing the top ratings for software vendors that aren’t willing to pay.

This is also inconsistent with Gartner’s statements about SAM in their article titled Cut Software Spending Safety with SAM, where they point out the following:

• “Gartner clients that mature their SAM processes and use tools to focus on license optimizations typically report up to 30% spending reductions in one year.
• With worldwide total vendor software sales of $326 billion in 2016, the savings possible from software license optimizations are just too significant to ignore.
• Plus, savings fall to the bottom line as profit.
• SAP optimizations require that you take into account users, groups, licenses, and transactions. Choosing the proper named user category or pricing type can dramatically increase — or optimize — your SAP landscape costs (for example, SAP employee self-serve software licensed for everybody to manage expense reporting in the business by only deployed in the US, with thousands of unused seats in Europe.”

The second reason given by Gartner is that the size of the SAM market is declining.

• The Size of the SAM Market: Gartner’s evidence is that the market declined by $20 million from one year to the next. This is a 4.4% decline. Is that such a significant decline to justify dropping coverage of the overall software category? Secondly, while Adobe has stopped enforcing audits as it has moved mostly online (but Adobe online monitoring and licensing tends to be simpler than other vendors, so SAM will not necessarily decline even if the significant vendors eventually figure out the Cloud), Oracle audits are still very much in effect. Microsoft has not softened its stance, and SAP has stepped up its efforts to introduce Type 2 indirect access. SAM software is critical in providing customers information to push back on each of these software vendors (and more).

Manufacturing a Story to Not Cover SAM with an MQ or MarketScope

Overall, this sounds like a constructed story on the part of Gartner. And Gartner has a history of misleading readers about its motivations. As I pointed out, it pretends that its vendor contributions have no impact on its ratings while telling vendors that it is trying to sell services a very different story.

• Their sales team consistently promises better outcomes in their Magic Quadrants during sales pitches while stopping just short of saying that they can buy improvements directly.
• When vendors declare that they do not see the value for Gartner’s funding, Gartner will use the strategy of upselling the vendor to a higher level where they will have excellent access to analysts. The ability to influence them that was promised at the lower level.
• This is the exact sales strategy used by the Church of Scientology to keep their devotees investing in Scientology courses, even when the devotees fail to see their courses’ benefits.

Gartner’s sales tactics are so strikingly similar to those employed by Scientology. They have covered in the article Gartner and Scientology: Similarities in Sales Strategy. Gartner presents itself as a research entity. However, after many years of researching other research entities, I can’t find another example of a real research entity that behaves the way Gartner behaves. That should be a concern to those that read Gartner’s output.

This is just one example, Gartner’s connection to the truth tends to be quite tenuous, and Gartner has established no history that would make its statements reliable guides to what are its real motivations. What we do know about Gartner is that they are profit-maximizing. So the question is, is creating a Magic Quadrant or Marketscope for SAM applications is profit-maximizing?

• Would it be worth it to Gartner to alienate some of the most prominent software vendors to provide coverage to a software category that generally reduces their ability to extract excessive licenses from their customers?
• Gartner’s personal little pay to play playground, can the SAM vendors like Voquz, Flexera, and Snow afford to compensate Gartner sufficiently to make it worth Gartner’s while and blowback from their largest vendor customers?
• If the answer is “No,” then some excuse can always be developed to why Gartner will not cover the software category. And virtually any excuse will do. (the category is too small, the sales went down one year, there is not enough innovation, the people that work in the SAM vendors aren’t sufficiently attractive, etc..)

ITAM, a very credible source on the topic of SAM, has this to say on the topic.

“Disconnect in ITAM Tools Coverage: I felt there was a bit of a disconnect in Gartner tool coverage. 90% of the content from the summit and exhibitors were focussed on SAM, yet Patricia Adams provided a 90′s view of Asset Repositories. She referred to SAM tools as an ‘emerging’ category (emphasis added) which I felt was a bit of an insult to the tools and partners in the exhibitors hall and not an accurate reflection of the market. Gartner have no SAM tool analysis on the horizon and when asked, Patricia Adams stated some Gartner company spiel about category size. Big enough a category for two international conferences but not for tool analysis? An opportunity missed.

Well, if Gartner has decided not to cover the category, then it begins to make sense to undermine the overall category, perhaps emphasizing that it is immature.

Who benefits the most from the impression being created that the SAP market is immature or emerging? That would be software vendors in the other software categories and the largest software vendors. Therefore, Gartner’s “professional opinion” always seems to line up how it makes money perfectly. The problem with entities that are still profit maximizing is that they only are interested in relaying truthful information when it maximizes profits. When it doesn’t, they prefer to hide accurate information. In the study of information control, it is well known that the most effective way to engage in propaganda is not to lie but instead to emphasize things that one wants to be observed by one’s audience while obscuring or simply ignoring other things. This is generally a problem with private profit-maximizing companies and bias. But it is mainly a problem when a company is posing as a research entity and whose statements are taken as independent, when in fact, they are yet another profit-maximizing entity. It also why profit-oriented entities have such a poor history of performing unbiased research.

ITAM continues…

My fear is that Gartner will, based on these spiralling scores, withdrawal their ‘MarketScope’ citing insufficient interest which would be inaccurate and send the wrong signals to the market. You could argue they did they same by taking their eye off the ball with the withdrawal of ITSM tools and subsequent ‘lipstick on a pig’ ITSSMrehash.

I also believe it is a case of misguided marketing. This is flagship promotional marketing content for Gartner which is sending the message they focus on big ole Asset Repositories when the focus of their events, clients enquiries and research focus on audit defence, contract negotiation and licensing.” – ITAM

As stated in the Snow Software quotation, Gartner later did retire the MarketScope for ITAM (which is the software category within which SAM resides)

Gartner is about profit-maximizing. And covering a controversial software category that reduces the ability of the largest software vendors to extract excessive licenses from its customers will not give Gartner a positive payoff (most likely).

Gartner does not exist to provide accurate information. It provides information to profit maximize. Gartner is the biggest IT analyst because, throughout its history, it consistently focused on profit-maximizing over research integrity. And this is the problem when the analysts like Gartner and like Forrester that concentrate the most on profit maximization and the least on following research rules grow to be the largest IT analysts. When Gartner acquired other IT analyst firms, I found several analysts who left Gartner soon after the acquisition. When I interviewed them, they told me they left because Gartner’s business model was simple, too mercenary, and anti-research in orientation.

Conclusion

• Gartner is a faux research entity that received funding from both buyers and software vendors. Gartner takes advantage of the fact that the vast majority of people who read their reports don’t dig below the surface and don’t have any research background to know what to look for or know the research rules.
• Gartner is entirely designed around maximizing how much it extracts from each side. It can wring out $2.5 billion in yearly revenues for activities that should no more than $300 million to perform through marketing and negotiation. (if you recall, the Internet was supposed to lower the cost of distributing analytical information)
• As covered in the article, Gartner and the Devil Wears Prada, Gartner, in many ways, has much in common with a fashion magazine. It tells executives what is “in fashion” what they should buy. Gartner’s projections have low accuracy as what they declare as in fashion has little to do with the software’s ROI or benefit to companies that implement the software categories they recommend.
• Anyone who tries to understand Garter as a research entity will never understand its behavior or its media output.