Some thoughts on Gartner

I sometimes flatter myself by thinking this blog offers interesting insights when in fact I know a key reason that many of you subscribe is to save time:

You could spend dozens of hours talking to management and combing through annual reports, proxies, and transcripts, or I can just do it and share what I’ve learned.  If the average scuttleblurb write-up requires 50 hours of work and I do 24 of them a year, then each of you save 1,200 hours of time for $210.  Even if only half my posts resonate, that’s still a pretty good deal.  This arrangement works for me too because I can sell the same write-up an unlimited number of times.

Gartner shares some similar features. The company decides which topics across IT, logistics, HR, marketing, sales, and finance to explore based on client feedback, session attendance, popularity of search terms on its site, etc. and has its analysts gather intelligence on product/market landscape and cobble together digestible reports that can be sold countless times.  Gartner’s $200k average annual contract value¹ is inexpensive relative to the $50mn+ IT budget of most of its clients, who reference the company’s research before making high stakes decisions. 

So a Chief Security Officer might peruse some Gartner research and arrange a half hour call with one of Gartner’s security experts before explaining Zero Trust to her Board.  Or the Chief Technology Officer of a large insurance carrier might consult Gartner as she deliberates on a disruptive and consequential undertaking whose failure could cost her job, like whether to adopt a modern core processor and which one.  The IT staff may deride Gartner as a vendor PR, part of the vacuous dog-and-pony spectacle stipulated by the suits…after all, it’s not like Gartner is hands-on-the-wheel installing the firewalls or running the container instances on different clouds and then tailoring a set of recommendations.  But this is beside the point since an executive is looking for more than technical feedback…he wants customer feedback and a detailed understanding of the state of the market, including each vendor’s product roadmap and ecosystem support, details that may be elusive to someone narrowly focused on specs.

Moreover, myopically focusing on the technical merits of a Gartner opinion also ignores another important job to be done.  A corporate executive might pay for Gartner’s advice to cover his ass on a mission critical IT decision, much as a CEO might pay Goldman Sachs for a fairness opinion on an M&A transaction he already knows he’s going to do.  In the same way that Moody’s ratings have become a standard way of assessing relative credit risk, the Gartner Magic Quadrant (GMQ) has become a succinct standardized way of mapping the relative strengths of different vendors (public cloud providers, HCM, ERP, core processors, No-SQL databases, etc.), which comes with a nice reflexive advantage: the more CIOs who rely on Gartner to validate their decisions, the more likely Gartner is to get hired by the next CIO, further entrenching the company’s reputation as the “go to” source for informing (or even justifying) IT decisions. 

So executives depend on Gartner for both the objective quality of its research and the social proof/downside protection it affords.  Like, I’m sure IT buyers and managers are genuinely seeking product/vendor guidance and want a trusted third party to help them sort things out and whatever, but they also want to minimize career risk while doing so (you are less likely to be fired for failing conventionally).  These two things aren’t as neatly segregated as I’ve described – if Gartner starts publishing shitty work and consistently gets things wrong, the brand reputation it has cultivated over the last 40 years will deteriorate – but it’s almost certainly true that no CIO of a F2000 company would give scuttleblurb (scuttleblurb who?) a second look, even if I produced evaluative IT research superior to Gartner’s.

But this can’t be the whole story.  Forrester and CEB have also developed well-established brand names over decades and yet neither has created nearly as much enterprise value as Gartner. 

So then what about operational excellence?  Business analysts usually draw a sharp distinction between operational excellence and competitive advantage because the former is something that can, in theory, be replicated by any organization willing to change the way it does things.  But we know in the real world that the reason two companies in the same industry with access to the same moats often deliver radically different results often comes down to differences in organizational structure and behavior.  Rather than dismiss this variance as something that is supposed to be competed away, perhaps we should accept operational excellence as a symptom of culture…and sometimes differences in culture give rise to organizational postures that then help create enduring advantages in industries where you might least expect…for instance, Old Dominion, Fastenal, and Ryanair’s culture of cost discipline accelerates local scale economies that allow each company to trounce its less disciplined rivals in logistics, distribution, and airlines, respectively.

Gartner is an example of this.  Its reputation as a trusted advisor for enterprise executives is sustained by something distinctly unmoaty: a durable sales apparatus that for whatever reason its competitors seem unable to replicate.  I am not referring to Gartner’s salespeople, 20%-25% of whom churn off every year (vs. ~5% for research analysts), but rather the system of recruitment and training, the best practices sales playbook that every sales rep imbibes during their first 6 to 8 weeks of training. 

[Fwiw, a Twitter friend recently shared an illuminating anecdote with me.  A friend of his works as a salesperson at Gartner.  During her 2 months of training, she and a class of fellow recruits were isolated in a Florida hotel, where they were split into teams that competed against one another in intense, high pressure sales games every day (“people were crying”).  Around 10% of her class was fired within the first 2 weeks, but the others who made it through bonded over the shared trauma and became part of an elite cohesive sales organization whose members are highly coveted by other firms.]

Sales is Gartner’s overriding priority for good reason.  Some enterprise products, like an ERP system or a firewall, are taken for granted as necessary, to be RFP’ed and evaluated in the normal course of business.  Consulting engagements are more ad hoc but similar to most other enterprise products in that by the time you think to call McKinsey or BCG, there is little confusion about the problem you are trying to solve.