Is it True Gartner Charges Software Vendors Only For Valuable Services Unrelated to the MQ?

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Executive Summary

Gartner proposes that they charge software vendors for value-added services, and these charges are not buying positions in the MQ.
We review this claim.

Introduction

Gartner proposes that no vendor buys their way into the Magic Quadrant.

Our References for This Article

If you want to see our references for this article and other Brightwork related 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 Frames the Payments It Receives from Software Vendors

Gartner receives around 1/3 of its income from vendors. One of the ways that Gartner is able to extract more income than any other IT analyst is because Gartner publishes the most influential software vendor rating research product in the world. However, to whitewash that Gartner is charging vendors for being showcased in the various MQs, Gartner proposes that it only charges software vendors for value-added or advisory services.

How Gartner generally explains this to software vendors is paraphrased as follows.

We want to give the best advice to our clients about available solutions. And we will give them a better advice if you pay us.

One person responded to this comment as follows.

I think there is more to it than that. I believe the fee has some sort of value assigned to it. That is, I assume the fee is for their time to do a detailed analysis of your product. Unfortunately, small vendors and startups cannot afford the fee. It’s an unfair practice if this is how it works.

Why The Claims About Only Gaining Access to Analysts Cannot be True

Gartner claims that they provide great value to the vendors and that charge is for providing things like marketing feedback to vendors. The idea is that Gartner knows what sells, and they can share this information with vendors while Gartner learns about the vendor’s product.

That is their story.

Area of Evidence #1: What Vendors Tell Me About Gartner’s Advice

The problem is that after discussions with many vendors, I have never spoken to a vendor who agreed with this characterization provided by Gartner. Instead, Gartners have told me repeatedly that they know they are paying for being presented in the MQ. I have heard that Gartner does have some insights, but when I ask..

Would you pay them if it weren’t connected to the MQ?

I am told

Absolutely not.

Area of Evidence #2: The High Charges for The Advisory

These charges are very high — they could not be justified based on what Gartner says they are. For example, I have a strong understanding of several software areas, where many vendors do not have knowledge. I also know much more than Gartner analysts do. I don’t have access to executives like Gartner does, but executives are not where the knowledge comes from, so access to buyer executives is not relevant. However, in these areas, I receive zero business or income the type of services that Gartner says it is selling. And I am unaware of any analyst firm capable of charging anywhere near these prices to software vendors for advisory services. I did receive a design project for forecasting software. However, that was a small project and is not the type of advisory that Gartner sells. These budgets that Gartner requests that run in the hundreds of thousands of dollars could only arise from MQ positioning.

I would like it if vendors would tell me exactly what they paid — but they don’t do that. They don’t ever want me to know how much they have paid Gartner — partially because it is incriminating — and there is no upside for them to tell me. However, they do exhale over the phone, pause, and use phrases like..

“It was costly.”

We can tell from their annual report how much they pull from vendors overall, and last time I checked, it was over $1 billion. The only reason we know this is it a financial reporting requirement. If it were up to Gartner, this would be a secret. It is never mentioned in any Gartner MQ that any vendors have paid to be in any MQs. Gartner is utterly silent on this point.

Area of Evidence #3: Gartner Sells Advisory Services to Software Vendors

The second area of evidence is whether companies hire Gartner and pay Gartner for this supposed service without being included in an MQ.

The answer is no.

Gartner presents the arrangements as the more you pay, the more analyst time you get, and the better your potential to do well in the MQ. It’s very wink wink – nod nod. They have to set up some logical construct whereby the vendors are not paying to influence the MQ.

Area of Evidence #4: Vendors Do Not Generally Respect Gartner’s Knowledge

The comments I hear frequently call into question the knowledge of the Gartner analysts. In fact, even vendors that do very well in an MQ will still talk about how rigged the process is and how frustrating it is dealing with Gartner analysts and other Gartner resources. Vendor resources do not enjoy the process of interacting with Gartner, and it also happens to consume a great deal of time from the vendor — which is an additional cost over and above the money paid to Gartner.

Area of Evidence #5: Vendor’s Overconfidence

The proposal around using Gartner for advice seems to miss because vendors normally overestimate their knowledge in multiple areas.

Even if you know much more than vendor resources in a topic area, they generally like to try to level against you so that they can appear dominant.
Vendors tend to look at any outside assistance as extremely transactional. If you have the knowledge they want — they want to pull IP out of an outside party and pay the minimum to do so. Vendors often employ highly persuasive individuals that will sweet talk you to try to get free information — which is why I have the rules for contacting me listed in my LinkedIn profile that communicate to vendors not to attempt this with me.
Vendor marketing organizations are filled with individuals who consider themselves extreme experts and are presenting themselves as extreme experts in all facets of software marketing. Even if Gartner did offer valuable advisory services and deep insights, there are very few resources in a vendor that would ever admit that they needed Gartner’s or anyone else’s help. A major reason for this is that admitting you don’t know diminishes those individuals’ position in the company. For example, competitive intelligence is such a bad business because any outside competitive intelligence will threaten any vendor’s competitive intelligence group.

What Vendors Want from IT Analysts

In my experience, vendors are primarily willing to pay for one thing from IT analysts — and that is marketing collateral that the vendor cannot produce. A vendor cannot create a credible research product that shows them at the top of a list of vendors. That is what Gartner can do that no vendor can do for itself.

Conclusion

Software vendors do not pay a large amount of money to Gartner for Gartner’s advice. They pay it for the potential of scoring well in a Magic Quadrant, which they can then use for marketing collateral.
Gartner’s predominant reason for its ability to charge so much to vendors is that the vendors believe they can improve their position in the Gartner MQs, which leads directly to higher sales — if the vendor can get into the Leader category.